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Castles Built on Sand: A lasting solution

Dr Alan Waring looks in more detail at some of the issues relevant to a lasting solution to the Cyprus property problem in a follow-up article to his ‘Castles Built on Sand’ that we published in June.

ANYONE genuinely seeking to improve Cyprus’ lot in this world (and that includes me) wants the new legislation on Title Deeds to work, assuming that it overcomes current opposition and delays in Parliament and ever gets enacted.

However, the problem is that the new legislation will neither correct the Title Deeds problem per se nor all its inter-related problems because it cannot do so, owing to its limited scope and inherent defects. It is, in effect, simply another planning amnesty designed to protect developers who have failed to obtain proper planning permission. In particular, the new legislation as announced so far will not address the following critical factors:

  1. The developer mortgage debt bubble hanging over Cyprus, estimated from Central Bank data at €5.9 billion in March 2009 (see passim) and now probably €7 billion which, under the present flat market conditions and at least one-third drop in property prices, will deter the authorities, banks and developers from closing existing mortgages and issuing long overdue Title Deeds.
  2. Compliance by developers will be essentially voluntary with no enforcement mechanism and minimal or no penalties for non-compliance i.e. the legislation will be unenforceable.
  3. The banks will not be barred from continuing their practices of issuing or extending developer mortgages against properties that have already been sold; property buyers without a bank guarantee will still be expected to indemnify the bank if the developer goes bust; there is no automatic protection against errant banks that collude and connive with errant developers and their lawyers.
  4. The issue of rogue and negligent lawyers and the ineffectiveness of the Cyprus Bar Association in (a) setting and policing strict property conveyance standards and (b) disciplining and removing errant members.
  5. Perversities in the justice system, with the police generally barred by the Attorney General from investigating and treating as criminal allegations of property fraud (a recent rare exception reported by the police being the K&M Famagusta case where Cypriot rather than foreign buyers were the alleged victims).
  6. The tardy and ineffective justice system in which alleged property fraud victims are forced to take long-winded and costly civil cases against alleged perpetrators.
  7. The long-standing gross inefficiency of the numerous government departments and municipal functions involved in the processing of all the many stages required before Title Deeds are issued; a system clogged with new applications and a huge pre-existing backlog may prove to be the main practical downfall of the new legislation.
  8. No obvious anti-corruption mechanisms are included.
  9. The legislation will not be retrospective; therefore the current backlog of buyers of 130,000+ properties (including some 40,000 foreigners) still awaiting their Title Deeds typically 5-15 years, will receive no protection; if a developer mortgage exists on the land and the developer goes bust or is unable to service his mortgage debt, the buyer could be subject to bank repossession.
  10. The new proposed tiered system of Title Deeds is doomed to failure; for example, since only a fool would buy a property that did not have full, clean and unconditional Title Deeds, how will developers be able to sell their properties including their huge glut of unsold properties? This will put extra pressure on their borrowings and liquidity and in turn the banks’ position. Also, many buyers who bought in good faith some years ago may suddenly find that their property has been devalued owing to the issue of an imperfect Title Deed. Who would want to buy a re-sale property with such a curse on it?

Thus, any buyer protection will still be virtual, not real. Regardless of the new legislation, there are also a number of relevant EU Directives where compliance is minimal. What is needed so desperately is the restoration of buyer trust and confidence in the Cyprus market and the new government legislation will do little on that score.

Perhaps the crucial reason why so many property buyers in Cyprus have bought properties only to find out later that the land was already mortgaged is that developers, agents and lawyers fail to mention this material fact prior to contract signature (and often for a long time after, if at all; it usually comes to light when the buyer wants to sell on at a later date and/or investigates why his Title Deeds have not been issued). A recent on-line poll conducted by the Cyprus Property News Magazine found that 1,012 (98%) of the 1,036 people who voted would not have bought a property in Cyprus had they known that the land on which it was built was still mortgaged.

Standards and Enforcement

A vital missing element in the protection system in Cyprus, for both the individual buyer and the market itself, is the public declaration of standards of conduct and their rigorous enforcement by the relevant bodies. Codes of conduct full of motherhood-and-apple-pie platitudes and insincerity are worthless. Transparency, openness and commitment to standards are essential, both to deter corruption and raise public trust and confidence.

In the wake of the Beaumont & Sims case, the Cyprus Bar Association (CBS) has apparently instructed its members to advise clients buying property of the risks if the developer goes bust. However, ‘the risks’ of the conveyance are open to very wide interpretation. Is the advice simply ‘Be on your guard’ or does it include, for example, anything about the financial stability, probity and integrity of the developer? Who, indeed, would be responsible for obtaining such a due diligence report and at what cost? Reliance on credit reference agency reports and banker references is unlikely to be sufficient. Should the CBA also instruct its members to insist on bank guarantees for client purchases or a bank waiver where mortgaged property has been purchased?

The CBA Disciplinary Board does not appear to actively pursue allegations of member misconduct unless provoked by media attention. Even then, it’s all very softly, softly. Public trust and confidence in Cyprus lawyers and the courts would be improved if, for example, the Bar Association openly published statements on its property conveyance standards and on its response to all allegations of misconduct against named members. A published summary of disciplinary cases and disbarment statistics would be both illuminating and a sign of the CBA’s integrity.

The Cyprus Land and Developers Association represents only some 100 companies out of 3,500 developers in Cyprus. However, it could take a lead to act more like a professional body rather than just a trade association. It would be a significant advance if there were a compulsory national code of conduct covering all developers with a set of principles, such as:

A developer must not sell and/or continue to sell properties where the land is mortgaged unless he supplies a bank guarantee to each buyer; any relevant mortgages must be openly declared in writing in advance to prospective buyers.

  • A developer must not at any time engage in ‘double selling’.
  • A developer must not at any time inflate IPT or other charges.
  • A developer must neither insist on nor recommend a single joint lawyer for conveyancing.

Of course, it would have to be backed up by disciplinary measures against transgressors, including expulsion where appropriate. Realistically, therefore, perhaps an independent government body should regulate them according to the code.

The first developer to publicly warrant in his brochures, advertisements and websites that ‘all his properties are sold completely free of mortgages/encumbrances’ and include such a warranty in the sales contract will probably sell more properties in the first year than all the other developers put together. Beyond that, we need to see the first developer to publicly warrant that Title Deeds will be issued immediately on completion of contract but with the present Title Deed issuance shambles that could be years away, if ever.

High Profile Cases – An Update

As a recent Financial Mirror editorial noted, the authorities suddenly and belatedly bringing to the fore a handful of alleged property fraud cases does not make the source problem go away. Most of the high profile cases have in fact only become so as a result of publicity raised by the alleged victims, civil actions taken by them and ensuing media attention e.g. the Conor O’Dwyer cases, the Beaumont & Sims case, the Froiber collapse, the Lane Homes case and the S&J Penney case.

A more ominous development for errant developers is the recent emergence of significant numbers of individual property investors collaborating in taking legal action. One group of some 30 foreign investors (not retirees but younger professional persons) allege that they have been bilked by Cyprus developers. Another two groups involve around 40 buyers in each. Clearly, if such large groups of plaintiffs each take individual actions of a similar or identical nature against developers and/or the banks or others involved, the defendants are going to find it hard if not impossible to fight off. Of course, the publicity that will surround all this would compound the existing PR disaster for Cyprus and more so if other investor groups follow suit.


Civil compensation after many years of court battles should not be the only ‘answer’ available to tackling criminal elements in the Cyprus property market. The continuing laisser-faire of the authorities, developers and Bar Association on the Title Deeds-cum-fraud issues continues to kill the market and invites clichés such as ‘fiddling while Rome burns’. Others liken it to the officers of a doomed Cyprus Titanic rearranging the deckchairs, tuning the orchestra and trying to appease a mutinous crew of MPs, developers and lawyers.

Dr Alan Waring is an international risk management consultant with extensive experience in Europe, Asia and the Middle East with industrial, commercial and governmental clients. Contact

©2010 Alan Waring

Readers' comments

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  • Matt says:

    I bet the land registry will make things difficult if the current documents are in the deceased name.

    Without Title Deed – Probate becomes very very messy !

    With Title Deed – Probate is very straight forward in any country.

  • @Matt – your rights to the property are part of your estate which are distributes according to the terms of your Will.

  • Matt says:

    Steve – you say, buyers should walk away from the title deed game..

    Do you mean they should sit back and do nothing?

    What happens when a house buyer dies? What happens with the Probate? How can you pass on the deceased estate if there is no legal title deed?

    Who becomes the new owner of the Cypriot property?

    Intestate ?

  • Andrew McC says:

    Matt. This was a complaint to the CBA I brought myself some 15 months ago against a lawyer whom I now believe seems to be well protected in Cyprus. My case is slightly different from the majority of other developer debt victims because mine involved forgery which, as Alan has mentioned in his article, is of no interest to the Police as it involves property and I am not Cypriot!! I therefore need a CBA determination before I can do anything. I can’t go to court quite simply until The Attorney General rules in my favour through a CBA hearing. Am I stuffed or what?

    Not to cause any problems for Nigel I will not name her but I understand that she had within the last few years been convicted of driving offences and then pardoned. It was her who had to appear before The Bar to respond to my complaint and called in sick. What can you do if they simply do not turn up except wait for another date 15 months away when she will probably phone in sick again. To be honest I was not surprised.

    Still happy to contribute to any fund if anyone knows how to organise it

  • Steve says:

    It is pretty clear that, apart from the poor buyers who have been fleeced by the property system in Cyprus, the other players in the game are satisfied and happy with things as they are and therefore not inclined to change. They include the developers, the lawyers, the banks and, of course, the government.

    For any meaningful change to happen, this feeling of satisfaction has to change and that means buyers have to walk away and refuse to play the title deed game. The demise of the UK pound sterling has helped in respect of UK buyers, but unfortunately, the developers and the government have gone out and invited new buyers from other countries. These buyers are probably not so familiar with the problems and risks involved in buying property here, so the challenge will be to inform every potential buyer about them.

  • Matt says:

    oh… might be best to use more than one local Cypriot lawyer, just in case he/she phones in sick :-)

    Play them and beat them at there own dirty little game.

  • Matt says:

    Andrew McC – as you’ve experienced, you can not put 100% trust in a Cypriot lawyer! I’m sure there are a few good Cypriot unbiased lawyers out there who are willing to help non Cypriots, but I’m afraid it really depends on your individual case and who you’re trying to bring to court.

    As I’ve stated in so many previous articles, It would be better to appoint a UK Greek Barrister team. Let the UK team hold the case paperwork and take control. They might also appoint a local Cypriot lawyer to do the local running around for them. Cyprus is a full EU member and I don’t see why this setup can’t work? Unless there is a legal requirement for only Cypriot lawyers to enter Cypriot courts.

    Any how – you best use a top UK Greek Barrister so you know the local Cypriot system isn’t cheating you !!!

    Of course this will cost the action group, but if enough of you club together you will have enough funds to challenge anyone in court.

    Imagine 100 people waiting for title deeds and other issues to be sorted. 100 houses @ approx €100,000 per house = €10 million

    That’s a big investment

    If you each invest £1000.00 you can afford the TOP Barristers in the land !

    The other alternative… a local Cypriot lawyer €1000.00, wait 15yrs and then you’re told, tuff, you’ve lost !!

  • paul ruse says:

    Put my name to a war chest.

    I have been saying the same thing for along time.

    Conner should not have to fund his case on his own.
    Hopefully the out come will have a positive effect on all of us.

    They also need to up date their court system. They wont though it’s done to wear you and your money out. To leave you in your underwear without a roof over your head.

  • Andrew McC says:

    Another good article Alan.

    I too would gladly contribute to any fund but our efforts do need to be co-ordinated rather than individuals, including myself, trying to fight in the dark.

    My solicitor who was due before The CBA earlier this month called in sick and after 15 months I am back to square one.

    Cyprus will not, in my opinion, ever resolve the true title deed problem of the outstanding developer mortgages and less they are forced to do so and a strong active and vocal Group would be needed to pursue this.


  • Matt says:

    Peter – you’re right. If I has house in Cyprus with no title deed and at risk of losing it because of an incompetent dodgy developer, I would gladly join forces with others to build a war chest big enough to take on ANY developer, lawyer and Government.

    Maybe Cherie Booth QC might want to fight a cause as great as this?

  • Andrew says:

    That seems to sum it up nicely.

    Of course any improvements should be retrospective and existing home owners should be the first to benefit. The government need to immediately issue assurances that they will not allow Banks to force the sale of homes that have been paid for in good faith.

    @ Peter. I for one would give to that war chest. Let us make it €100 each, but who would represent us?

  • Peter says:

    Is it not time to start a ‘War Chest’ and collect money from people who have no title deeds, at €10 each we would have a war chest in excess of €1300,000 sufficient to put Cyprus on the map of sham and dishonest dealers – where their words is their bond.

    We need to break this vicious cycle by bankrupting dealers one by one, and ensuring that overseas buyers stay away from developers and the housing market.

    We need to expose and kill this snake once and for all.

    Buy in Cyprus and you will lose your home.

  • The views expressed in readers' comments are not necessarily shared by the Cyprus Property News.


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