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Banks more aggressive over CHF loans

Banks more aggressive over CHF loansCYPRIOT banks are still pursuing UK-based property buyers over the Swiss Franc loan saga and if anything they are adopting a more aggressive approach, says a leading UK legal advisor – although there are fresh hopes following a Cyprus Supreme Court ruling.

In the first few weeks of the year, they continue to serve Writs of Summons on clients at their UK residences for defaulting on their obligations against loan agreements taken out for the purchase of property in Cyprus, particularly Swiss Franc loans, says Judicare Group.

The group is representing clients who alleged miss-selling of Swiss Franc loans that caused monthly mortgage payments to treble from £400 to up to £1,200 due to currency fluctuations.

“There appears to also have been a more aggressive approach being adopted by the Cyprus banks, this is evident in the allotted time frames in which purchasers must formally file a Notice of Appearance against the writs,” says Chief Executive Officer, Neil Heaney.

“This required filing of a Notice of Appearance gives the client anywhere between 10 and 30 days (although the 10 day period is more prevalent) to make legal representation in the Cyprus Court of issue, this period starts to run from the receipt of the Writs of Summons in the UK.

“This is quite understandably causing panic for UK clients who invariably have no knowledge of how to address the situation and in most cases we are seeing clients simply ignoring the service to them, in the hope matters will be dealt with in Cyprus and the problem will eventually be forgotten.

“Regrettably, once the client fails to make the filing in the Cyprus Court acknowledging the service to him/her, they will lose the opportunity to defend any claim thereafter and the bank will be awarded a judgement in default – the Cyprus Court deeming the client in agreement with the claims made within the Writ and so awarding judgement to the bank.”

With the judgement in hand the banks are now actively seeking the enforcement of the judgements via European Enforcement Orders and will seek such execution against the UK assets of clients.

“This is now happening more frequently as clients (for various reasons) are leaving the Writs of Summons undefended in Cyprus – with all of the consequences and procedures above being sought by the Cyprus banks thereafter.”

Judicare Chief Executive Officer, Neil Heaney, tells OPP.Today that the Limitation Law(66(1)2012) in Cyprus was amended again for a fourth time in late December 2015; however, some confusion over its amendment still remains.

Judicare claims that the law is being used in some quarters as a scaremongering tactic to encourage potential claimants to “sign up” to various legal groups to prevent clients and their potential claims from being time barred under this statutory provision. There is also considerable discussion across various forums and websites which is adding to the confusion.

There is a statutory limit of six years for raising claims under the law 66(1) 2012 related to breach of contract and it is this six year timeframe which is being pushed as the deadline for anyone to make a claim against a bank in Cyprus; particularly in relation to Swiss Franc Loans, says Judicare.

“In any event, the Limitation Law is not – and never was – a blanket provision which affects every individual who has a Swiss Franc Loan, as the deadline under the law (six years) in which a client may make a claim – should they have one – against a bank in Cyprus, starts to ‘run’ from the date a dispute arises in relation to that loan and not from the date they sign the loan. There are clients who signed loans in 2005 and others who signed in 2010, for example.

“In reality it has had little effect on how the bank(s) in Cyprus are dealing with loans which are in default and are continuing to issue proceedings in Cyprus court(s) against clients who are not paying loans taken out for the purchase of immovable properties in Cyprus; in fact we have been contacted by two new clients who have been served this week with writs from Cyprus banks at their UK homes for their defaults on their Swiss Franc loans.

“The writs task the clients to file an appearance in the Cyprus court of issue within 14 days of the said service to them in the UK. Of course if an individual feels he or she has a potential claim in relation to the loan and/or against the bank he or she should raise it at the earliest opportunity and not because of any limitation period.

“Notwithstanding the fact that the banks in Cyprus will continue to pursue clients who are in default of their loans – the next step in relation to our clients will likely be the first of the trials before Cyprus courts in relation to these issues. We are awaiting the dates for these trials to be finally set-firm by the Cyprus courts and these we expect to be in the coming months.”

However, a recent Cyprus Supreme Court ruling has brought fresh hope to those have encountered problems when buying property in Cyprus have through foreign currency loans. The ruling concerns the validity of power of attorney documents (POAs) used, among other things, in transactions related to the purchase of immovable properties in Cyprus.

While this practice is legal, in this precedent-setting case, the Supreme Court ruled that if the relevant process under Cyprus law is not followed then any incorrectly drafted POA would be invalid, rendering any agreement signed through its use invalid also. This is significant as in the large majority of cases involving loans and purchase contracts of property in Cyprus, POAs were used and in most cases these were not legally drafted.

The ramifications of this ruling on similar cases may be substantial, and could see thousands of Britons successful in their claims against Cyprus banks related to Swiss Franc loans, says Judicare Group, which is currently representing more than 250 individuals in Cyprus and has played a leading role in the development of the POA strategy.

Neil Heaney expalins,“As we come closer to bringing our clients’ cases to trial before Cyprus courts, this ruling is extremely welcome news. This is because it proves that, if due legal process was not followed during the initial purchases, then the foreign currency loans can be declared void with the appropriate evidence.”

Prior to 2007 property in Cyprus seemed like a sensible investment, but not only were people being encouraged by the Cyprus banks to take out big loans in Swiss Francs, but these loans were being drawn down from the banks by developers in Cyprus often even before their property had been built – a structure unique to property purchases in Cyprus. When the Swiss Franc appreciated sharply against the Euro and GBP, people’s monthly repayments sky-rocketed even though in some cases, the property hadn’t been built and never would be.

“Both the scale and the severity of the situation in Cyprus remains unclear but could affect as many as 25,000 people with foreign currency loans in Swiss Francs,” Mr Heaney concludes. “I would urge anyone who is concerned about their situation in Cyprus to seek legal advice, particularly in light of this Supreme Court ruling.”

© OPP Ventures 2014