SINCE my comments concerning the draft bill designed to protect ‘trapped buyers’ from losing their homes despite having paid for them were published in the Sunday Mail, it appears that Interior Minister Socrates Hasikos has had a change of heart.
The draft bill, which enabled Title Deeds to be issued to property buyers who purchased property from nefarious developers who had built and sold homes on land that they had previously mortgaged to the bank and who are now unable or unwilling to repay the debt, contained a flaw; it only applied to around 30,000 properties that had been issued with their Title Deed.
This left the buyers of a further 48,000 homes, which have not had their Title Deeds issued, at risk of foreclosure.
It appears that this ‘hole’ in the bill has been resolved. At yesterday’s joint meeting of the House Finance and Interior committees, Socrates Hasikos announced that the buyers of these 48,000 properties would also be protected from foreclosure.
The draft bill will be discussed by a special plenary session of parliament on Thursday (3rd September) – and there may be some changes to the draft discussed and agreed before a majority of MPs vote it into law – and then President Anastasiades has to give his assent.
Demetra Valianti Plati from the Association of Cyprus Banks has complained that the bill will leave the banks exposed, but Mr Hasikos has invited the media to speak with the presidents of the Cyprus Banks to see if they are concerned.
Although it may be possible for a bank to submit an objection to the issue of a Title Deed to a ‘trapped’ buyer, a representative from the Central Bank reported that if the banks knew about the sale of the property or gave a loan guarantee, their objection would be rejected.
However, there are a small number of cases (between 5% and 10%) where the bank will be entitled to object as it did not know about the sale. These cases would include cash buyers who did not require a loan from the bank. But even if the banks raise objections in these cases, there is no guarantee that they will be successful.
(On the last point, the banks must have known when monies from the sale of property were deposited in the developer’s bank account?)
But, what if, the developer deposited the money with another bank? Do the banks then have a valid excuse? Probably, however, the bank is negligent.
(Editor’s comment: It doesn’t matter in which bank the money was deposited. If you can prove that you have paid for the property you should be OK.
The Greek-language media reported today that Land Registries have started to receive applications. It may be worthwhile paying them a visit (unfortunately I haven’t been able to locate the application forms)).
All,
Still plenty of time for the establishment to change their minds on the approval of this proposed law. In reality if the banks are supposed to take the hit on NPLs, mortgages that are outstanding from the so call developers. Then it would appear that will have to get ready for the next round of hair cuts to balance to books.
I bet the banks are pooing their pants now and thinking up ways of pressurising parliament to either delay the vote or not hold them responsible or carrying the can.
So far so good Minister Hasikos!
@Embapaphos
According to the Cyprus Weekly tonight, the LR have stated that new procedures have already begun, or will begin soon, to allow the 48,000 to be issued deeds apart from 2000 who were given licences but were never built.
Perhaps this was what was referred to on the news item.
Let’s hope for once that something positive is done about the whole sorry mess…and further progress made going forward….enough of this anybody who had a plot of land could become a developer business…more stringent laws on who can do the job. Listening to the news tonight the land reg said around 2,000 of the 48,000 non deed holders will NOT be protected…didn’t really clarify why? Neither has the query on cash buyers been clarified, have the MPs agreed to take on the bankers’ association’s claims that they don’t foot the bill as they didn’t know a sale had been made by developer? although Nigel’s last point is a valid point.
(Editor’s comment: I’ll have to wait until the bill has been debated and voted on Thursday before commenting on what’s in and out of the bill.)
Nigel would that include those who’ve voted for or against the various bits in the bill?
I’m wondering if there might be some MPs with a bit to lose IF they do the right thing; it would be nice to know who voted for what so we could perhaps see if they put the state or people before themselves.
(Editor’s comment: I don’t know, we’ll have to wait until the news breaks late Thursday or Friday.)
Hi Nigel – I have done searches (a few in fact) and they show that the Laiki mortgage was on the land before our purchase.
I just wondered if the banks can plead ignorance because they did not issue that developer mortgage.
Laiki actually went under after our developer and so inherited their debt later.
I wondered if you knew whether they were “legally obliged” to have made their own checks before issuing my mortgage.
Especially as my loan agreement names the developer as guarantor.
(Editor’s comment: The only organisation that can advise you of the developer’s outstanding debt is the bank that loaned the money – and this information is confidential between the bank and its client. (However if you offered to repay the developer’s debt I’m sure they would let you know how much you needed to pay.)
There is no obligation on any bank to carry out checks – but any bank that doesn’t check before loaning money is negligent and/or stupid and/or ignorant. I suggest you take a look at the PIMCO report “Independent Due Diligence of the Banking System of Cyprus“.)
@Nigel – My developer has an unpaid mortgage that was issued by the now defunct Laiki Bank but my mortgage is with the B.O.C.
Could this allow B.O.C. to claim that they had no knowledge of the unpaid developer mortgage on our land and are therefore not liable?
I do know that he has other large unpaid mortgages with the B.O.C for other projects but I think they came about after our project.
The liquidator has said that B.O.C. is the largest creditor of the company at this time but will not or cannot reveal if developer was indebted to B.O.C when I purchased.
I feel this maybe difficult to prove.
(Editor’s comment: Although the liquidator will not tell you, it is easy to find out whether the defunct developer had a mortgage on the land before you purchased. You can request the Land Registry to carry out a Title Search – see New title search procedures in Cyprus for a guide and the necessary forms.
I doubt that the Bank of Cyprus could claim it did not know about any unpaid mortgage on the land – it took over what was left of the Laiki and will have this information on record.)
Bearing in mind the importance of this ‘discussion’ on Thursday, how nice it might be to have the proceedings openly reported.
(Editor’s comment: Even if the discussion is held behind closed doors, assuming the bill – plus any amendments – is passed, it will be in the public domain shortly after.)
A buyer whether cash, or one requiring a loan, would not necessarily have any dealings with the same bank that made a loan to a dodgy developer. For example, Alpha Bank lends to a developer yet a buyer could obtain a mortgage from the Bank of Cyprus.
In all instances lawyers should have informed their clients of any encumbrance.
So far so good Minister Hasikos!
(Editor’s comment: A bank would not normally (i.e. unless was completely bonkers) grant a loan to purchase a property from a developer unless it had a ‘superior claim’ on the property enabling it to repossess the property if the buyer defaulted on the loan.)