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29th March 2024
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HomeNewsProperty buyers at risk as second developer collapses

Property buyers at risk as second developer collapses

facing-evictionLAST month, Lucie Robson reported on the plight of mainly British buyers who bought properties from developer Yiannis Liasides in Paphos who declared himself bankrupt. We have learnt that more home buyers without Title Deeds are now at risk following the collapse of a second property development company in Cyprus. Charles Charalambous reports:

The liquidation of A&G Property Wise Development Ltd (A&G), a company operating the Froiber brand in Cyprus, was executed officially on 18 September, leaving “at the mercy of the banks” any owner of A&G-built property who does not have a secure claim to a Title Deed.

A&G’s 2003 accounts, which in June of this year were the most recent ones lodged with the Companies Registry, show that its long-term loans and bank overdrafts were secured by C£10.07 million (around €17.1 million) in mortgages on land and buildings, C£2.04 million (around €3.5 million) in assigned sales contracts, and a further C£2.02 million (around €3.45 million) in current charges and guarantees. Some C£8 million or €13.6 million of the total debt was held by Universal Bank alone.

A senior source in Universal Bank – now renamed USB Bank – told the Sunday Mail that “property-owners are exposed if they don’t have any documentary basis for claiming Title”, adding: “Basically, they are at the mercy of the banks, who have to take care of the debt on their books.

The liquidation order had been requested on 4 May 2007 by the Social Security Fund (SSF) for repeated failure by A&G to make employer’s social security contributions. It was issued on 19 November 2008, with effect on 18 May 2009, but execution of the order was postponed twice at A&G’s request, each time for two months.

The USB source said that once the court issues its compulsory winding-up order and a liquidator is elected by the creditors, then the liquidation of assets can proceed. Where the main creditors are banks, which accept they cannot demand recovery of 100% of the debt, “a compromise will be reached between them to find an acceptable settlement, depending on the priority of rights and what mortgages or other financial charges on the available assets exist”.

He said that where a property offered as security has been bought by a third party, then how the liquidation is handled will depend on whether that person has lodged documents with the Land Registry which establish some claim to Title.

If not, “although one bank may want to be understanding, peer pressure between the banks or pressure on one bank’s liquidity due to the economic crisis can force the issue”, he added.

Maria (real name withheld at her request) is in a better position than her neighbours, but is still not sure that her right of ownership will be recognised.

She signed an agreement with A&G in April 2000 to buy a property in a Froiber block of nine flats, and took possession in August 2000. Maria has an official statement of account proving that all outstanding amounts had been paid. After years of waiting for A&G Director and company owner Georgios Andreou to settle the part of his debts that would allow her to receive a Title Deed, she consulted a lawyer in December 2008.

After making further payments against claims from A&G which in her lawyer’s view were excessive, in February 2009 Maria received a written commitment from Andreou that the company would transfer the Title Deed of her flat to her within three weeks.

Her lawyer obtained an execution order from Nicosia Court on the basis of Andreou’s written commitment, to be carried out on April 3. A&G failed to attend the Land Registry on the date set by the court, so Maria sued Andreou for non-performance of his various commitments. The writ was registered with Nicosia Court in May, and was heard on 17 September. As this was one day before the last grace period for the liquidation order against A&G was due to run out, A&G’s lawyer successfully argued that Maria’s execution order should be postponed until 14 October.

Maria told the Sunday Mail last week: “Lodging the writ means that the bank or any other creditor can’t seize my flat. But I was the only one out of nine flat-owners in my block to do so.

A&G’s official winding-up means that the Official Receiver has automatically replaced A&G in the case brought by Maria, as it is now responsible for ensuring that the interests of the defunct company are represented. As the Official Receiver’s Office comes under the Interior Ministry, Maria and her husband now want to meet Interior Minister Neoclis Silikiotis, to ask him what the government will do to help them and others in the same situation.

Maria’s husband told us that Maria had bought her flat with a refugee loan. He added: “My wife’s family lost its property once in 1974 to the Turks. Will the government now just stand by and let her property be lost to the developers?

Banks to blame

Maria’s husband is convinced the banks should not have approved loans against land containing property which Andreou no longer owned, and that they were aware of his financial limitations: “They are to blame for lending him such large amounts. Did they not know that sales contracts had been lodged with the Land Registry showing that people had bought the flats?” He added: “Our lawyer told us that Andreou was charged 1% for one loan, much more than the going rate at the time.

At this stage, it is not clear to what extent customers of other companies owned and run by Andreou might be affected by A&G’s bankruptcy. A&G’s 2003 accounts demonstrate a direct financial link with companies such as Froiber Land Developments Ltd, Froiber Estates Ltd and Froiber Marisa Developers Ltd. There is also a clear commercial link between A&G and Froiber Estates Agents Ltd.

The Official Receiver’s office said that when companies include the assets of affiliated or related companies in their official accounts, each case is decided on its own merits. The process starts with identifying any contractual arrangement between the bankrupt company and the other companies.

According to the Companies Registry website, Froiber Marisa Developers Ltd is “under receivership” as from 16 September 2009, but four other Froiber companies – Froiber Estates Agents Ltd, Froiber Estates Ltd, Froiber Land Developers Ltd and Froiber Ltd – are still active.

When contacted last week, Froiber Estates Agents said that they did not have any new flats for sale in Nicosia.

The USB source said: “Regardless of specific cases, we are keeping an eye on most of our customers in the property development sector. Unfortunately, we are one of the big creditors of A&G. These situations are never black and white, it depends on the interested parties. But it is a nasty case for us.

© Cyprus Mail 2009

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