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Banks to recoup loans by ‘hook or crook’

Banks must find a way to recoup loans granted to insolvent developers once ‘trapped’ properties are released to home buyers, Interior Minister Socrates Hasikos said following a joint session of the House interior and finance committees.

BANKS must “by hook or crook” find a way to recoup loans given to insolvent developers once ‘trapped’ properties are finally released to home buyers, Interior Minister Socrates Hasikos said on Thursday.

“Back when they were dishing out loans like there was no tomorrow, what were they thinking? Now let them work it out with the developers,” Hasikos said.

He was speaking to the Cyprus Mail after a joint session of the House interior and finance committees discussing a bill aimed at releasing house buyers from developers’ obligations to lenders.

The bill is meant to sort out the mess created by the failure to issue title deeds to people who paid for the property, either because the property was mortgaged by the developer, or the state could not go ahead with the transfer because of outstanding taxes.

Since developers’ land and buildings are counted as assets that need to be offset against their debt to banks, this gives lenders a claim on people’s properties that had been mortgaged by developers.

The bill grants the head of the land registry department the authority to exempt, eliminate, transfer, and cancel mortgages and or other encumbrances, depending on the case and under certain conditions.

It covers the period up until December 31, 2014. For transactions after that date, Hasikos said a separate bill would be submitted.

Banks object to the proposed legislation, arguing that lenders will take a hit once such ‘trapped’ properties are released.

Some 48,000 immovable properties lack a title deed, and another 30,000 do possess a deed but have not been transferred to their owners, according to the Department of Lands and Surveys.

Speaking in parliament, Hasikos differentiated between the two categories, explaining that a deed may be issued to buyers making regular payments toward their house, provided the property is ‘clean’, as in all the paperwork – such as town-planning permits – is in order.

Someone who made a down-payment of €1000 and has been paying €1000 a month in instalments would be protected under the new bill, he said by way of example.

For those with a title deed but where the property has yet to be transferred to them, the transfer could be completed within “approximately three months” of the owner applying to the Department of Lands and Surveys.

The banks association argued that the bill grants the Department of Lands and Surveys excessive discretionary powers.

Demetra Valianti Plati, a senior officer with the association, proposed that for complex cases the director of the Department of Lands and Surveys should assign the analysis of the data to a professional arbitrator, who will then decide the fate of the property.

For his part, Attorney-general Costas Clerides acknowledged the bill’s shortcomings, particularly the potential legal pitfalls.

“It is fair that buyers are protected by the law so that they can take possession of what they are entitled to. At the same time, this might interfere with the agreements between the banks and the developers.”

However, he added, the bill does give the option to transfer the mortgage from one developer’s property to another, so that the bank does not lose the security for the loan.

AKEL MP Yiannis Lamaris highlighted another drawback. The bill, he said, covers primarily those who have paid up in full for their residential unit or can settle the outstanding amount within 15 days.

But people who do not fall into this category would run the risk of having their homes repossessed.

Under an earlier deal struck between the government and the legislature, ‘trapped’ properties are to be exempted from foreclosure until September 5.

That is also the date by which the trapped properties bill must pass, so that Cyprus complies with the terms of its bailout programme and is eligible for the next loan tranche from its international lenders.

An extraordinary session of the House plenary is planned for next Thursday, September 3, to push the bill through.

Opposition MPs called for more time to discuss the legislation to get it right, even if it meant the €500m loan tranche is delayed by a few weeks.

But Hasikos sounded upbeat that a consensus can be reached by the September 3 date.

Asked by the Mail what would happen to developers’ obligations to the banks once a property is released to the buyer, Hasikos said the liabilities would not be written off.

“The developer’s obligation to the bank will remain. So the security for a developer’s loan for one building project could be transferred onto another asset.

“And if the developer has no other immovable assets, the bank will go for their liquid assets, cash, whatever,” he added.

“Let the banks find the money, by hook or crook. It’s on them,” he commented.

On the possible impact on the lenders, Hasikos said only that the Central Bank has done some number-crunching and “is OK with it.”

Readers' comments

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  • Xi Jinping says:

    Do it fast! Billons of investor are coming to this country.

  • 王力横 says:

    This bill will save Cyprus in the future. Do not let few developer destroy Cyprus.

  • 金明 says:

    Good job! Mr Hasikos.

  • Aggis Demetriou says:

    The past governments are to blame for This title deeds mess. Government planning inspectors should carry out inspections just like they do in England, once a building is completed it gets a final approval certificate within days, then it’s passed to the land registry with the site plan for title.

    But here in corrupt Cyprus the banks make millions a year selling bank guarantees until title is issued, it’s not in the banks interest if properties get titles.

    The banks should take the loss and so should the government for negligence, but you really have to remember most government employees were potato pickers
    Some 25 years ago, even now 2015 90% of the staff can’t use a computer.

    As Christofias said; this is a banana republic !

  • UBoat says:

    Well…… Well…..Well….
    lets see what happens after Sept 5th I’m sure going by the past it wont be all good and there will be some below deck manoeuvring going on to protect Developers and banks alike over genuine purchasers who have paid or are paying in full.

    But I do hope Im wrong…….

    If I get caught up in the fallout and my fully paid for property gets taken by the banks to bulk up their coffers, then I will appear with a JCB and demolish it…… the pile of rubble wont be worth selling…..

    Have a nice Day !

  • Rosemarie says:

    I hope in parallel, the crooks involved in the property debacle will be hooked and that means going after the lawyers.

  • Deanna says:

    Until such time as this Law is passed – 3rd Sept or whenever, the bank accounts of implicated Developers should be frozen. Otherwise, come the time when banks are relocating assets from property to ‘other’, the slippery-stuff will have left the country.

  • Steve R says:

    The banks are trying their utmost to recoup the money handed out to developers and purchasers. The first step was the soft targets, purchasers who bought off plan and live in another country within the EU. If there is a slight chance that they may have assets in the home country then the banks are sending threatening letters and making the same threats by phone. Alpha Bank have installed a representative in the offices of Morton Smith, a large firm of solicitors in the UK. These people are just as ruthless in their demands.

    The next step would be to target Russian and Chinese purchasers but I cant imagine they will have the same results as they have with EU clients.

    I don’t think for 1 minute that the banks will take any notice of Hasikos. Surely it would be easier to target people that live in Cyprus who seem to be left alone at the minute. WHY !!!!. Make your own mind up on that one. It now emerges that certain solicitors in Cyprus are offering their services to represent people who are in trouble with the banks. These are the same people who misrepresented you when all these deals went wrong. This is Cyprus so anything goes here.

  • Frank says:

    These Interior Ministers do like their metaphors. Can we hope that Socrates Hasikos “by hook or crook” will carry more weight than Neoclis Sylikiotis’s oft-repeated but undelivered promise to “solve the Gordian Knot”.

    I prefer the “crook” solution; as many Buyers will have suitable names which would qualify as a “crook”. Let them pay!

  • @embapaphos on 2015/08/28 at 11:26 am – One of the problems the Land Registry has is that until the Title Deeds are in the process of being issued, they cannot assess what percentage of a mortgage taken out on the land applies to each of the properties.

    Once the deeds have been issued, the Land Registry matches up and/or divides any mortgages over the newly created properties. It has to determine what percentage/portion/fraction of any existing debt is to be assigned to each of the new properties to ensure that all existing debts are correctly assigned.

    Currently there is a law that prevents ‘trapped’ properties from being foreclosed. This law expires on 5th September. Hopefully parliament will extend it.

  • Gary says:

    Here’s hoping the 3rd of September delivers what is required to protect the rights of all the people who bought property on the island of Cyprus. Let the debt move onto other assets of developers and allow the banks to focus solely on rightfully pursuing the people they actually loaned the money to. Clear up this mess and the banks might actually be able to sell some of the developers assets in the future e.g. land, unsold properties to recover part of the debt. Otherwise it is one giant stagnant mess with only misery for all involved including the banks.

  • embapaphos says:

    Clock seems to be ticking, MPs are squirming, so are the supporters of the banks ie Pap & co

    Lets see what next week brings?

    For the 30,000 that do possess a deed but have not been transferred to their owners, sounds like will be a joyous time for these persons if all goes well they get deeds max 6 months time (without the need to actually have paid developers debts to state/bank).

    But what happens to the 48,000 immovable properties that lack a title deed, will buyers be stuffed so to speak when their deeds are issued? ie will they be obliged as it currently stands to pay off developer debts to free deeds? or would this bill cater for them too….?

    Was not at all clear from TV reports last night what happens in the case of the 48,000.

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