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Could Spanish nightmare happen in Cyprus?

Could a nightmare case in which a couple may lose their UK home as a consequence of missing their mortgage repayments on a flat in Spain happen in Cyprus?

A COUPLE could be forced to sell their £300,000 cottage in Wiltshire to repay a £145,000 mortgage they took out to buy a holiday flat in Spain. Their nightmare case was reported yesterday in the MailOnline website.

Last year, when repayments became difficult, the couple contacted the bank and offered to return the apartment to them. But the bank refused to accept it and instigated efforts to seize their home in the UK.

Banco de Sabadell, the bank that loaned the couple a £145,000 mortgage to buy a holiday flat, is using a European Enforcement Order (EEO) to take control of their three-bedroom home near Chippenham in Wiltshire, where the couple have lived for 20 years.

An EEO is intended to be used for uncontested claims in civil cases across EU borders. However, evidence has come to light that Spanish officials have stretched the meaning of ‘uncontested’ to enable banks to fast-track claims on UK property.

The couple first learnt about the bank’s plan when they received an ‘interim charging order’ from a county court. An interim charging order is the first step in registering an interest in someone else’s property, usually because of a bad debt, and it could lead to the possible forced sale of the couple’s home.

According to an EC spokesman, the bank was under no obligation to notify debtors and that, in principle, no appeal is possible against the issuing of an EEO. Their financial crisis means that they cannot afford this.

The couple have been advised that they cannot appeal against the order in the UK. European law allows them to challenge it, but only in a Spanish court.

The couple are naturally devastated – there could be many thousands of Brits in a similar position to themselves. On Tuesday, the county court at Trowbridge is due to make the interim charging order on their property absolute, after which Banco de Sabadell may force the sale at any time.

Readers' comments

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  • Andrew says:

    I wonder if the banks in Cyprus will go after Developers, who fail to repay their loans, with the same vigour. Or will they go for the soft option and target the unfortunate buyers who have already paid for their homes in full and are still without Title Deeds. After all there is 100% equity in these homes.

    The EU seems to be unconcerned at the moment. Maybe they will start to take notice when homes get taken by force.

  • Hector says:

    See https://www.news.cyprus-property-buyers.com/2009/04/28/eu-court-rules-orams-must-demolish-cyprus-house/id=001218

    The ECJ ruled that a legal judgement in one EU country i.e.Cyprus can be enforced in any other EU country i.e. the UK. Thus a mortgage arrears judgement in Cyprus can be pursued against the debtors assets i.e. home, in the UK courts as happened to David & Linda Oram.

  • Cyprus Expat says:

    The financial scenario could happen in Cyprus too. If the case in the UK goes ahead unhindered, it will be used as a test case, and set precedent.

    If people in Cyprus are in financial problems, and cannot pay off their mortgage, then the rules will apply in Cyprus too. The only difference is the title deeds situation.

  • Tom says:

    The answer to the original question is most likely YES.

    Lets not judge this couple lightly, we do not know the true situation.

    I would like to know what security the bank used for the loan. Was it their house in the UK? was it the property in Spain?

    Either way the easiest route is to come after the property in the UK as we have the only justice system which works, good or bad.

    The bank should stick by it’s valuation of the Spanish property, if it had one, and at least try to recover some money in Spain first, then enter into meaningful discussions with the couple as to the shortfall.

  • @George – I have to agree with you analysis – it looks as if the couple have been living way above their means.

  • Peter says:

    @ Philip,

    You’re spot on. You cannot cancel the contract and walk away from the debt it will follow you.

    What I would say is don’t hand the keys back to the lender and tell them to sell it to mitigate YOUR loss. sell the property yourself because a lender will charge you extra for their time and effort in selling, together with interest in between.

    Explain to the lender you are in trouble and see if they will do a deal where they charge interest only. Then mitigate your losses by selling the property yourself paying off as much of the toxic debt you can, then at least you know where you stand.

    If you throw the keys back to the lender you have no idea how much they sold it for, or if it were sold to a cousin at a ‘basement price’.

  • George says:

    This couple have owned a cottage for 20 years which is now worth £300k and their mortgage on it is ……..£250k? Why so much after so long? They should have a lot of equity, surely? On top of this, they borrow £145k from a Spanish bank. As paramedics (?) they earn what – £60/£70k a year together (a guess)? And they took on £395k in mortgages!

    On the surface this appears to be a simple case of a couple living in financial cloud-cuckoo land. Now they are defaulting on their Spanish mortgage, which nowadays is probably a lot bigger than the value of the property concerned.

    Nobody wants to see hard working families loosing their homes but regardless of the Spanish bank underhandedly bending the law I would think that – unless I have missed a crucial point here – they appear to have got themselves in way above their heads.

  • Philip B Wood says:

    I’m not quite sure why this is such a surprise. This couple borrowed money which they used to buy a flat. They are as legally obliged to repay that money as to pay for their groceries, their council tax or their petrol. The fact that the money was used to buy the flat does not in any way restrict the lender to that asset only.

    The lender has a number of options for getting paid and is entitled to pursue any of them. It is not possible, other than by way of mutual agreement, to avoid liability by returning the flat – the terms of the loan when entered into required repayment in money, not property – I am sure the couple would not have been quite so keen if the flat had doubled in value during their period of ownership.

    The fact that the debt was incurred in Spain is rightly of no consequence, exactly the same scenario would apply if the flat had been in the UK with the loan being provided by a UK lender. There is no rule bending going on here, just an enforcement of a legally binding agreement.

    Sorry to appear harsh, but I’m sure at the time of purchase this couple were highly delighted to receive the loan.

  • Bob Briggs says:

    In the last resort. Just give this bank the keys to the Spanish flat tell them to auction it. Then fight like like hell to keep their British home with whatever means are available, ( ie a Luger? )

  • jon frazer says:

    @Peter Greg and Nigel, thank you for your responses to my post. I do appreciate what you are saying, and do not wish to appear unsympathetic either to people here or in Spain who have found themselves saddled with an impossible mortgage and then have to deal with a greedy bank that is bending the rules to breaking point.

    I felt that a distinction needed to be made between the systemic fraud here in Cyprus of the banks, developers and lawyers, which would be criminal in any other country, and what the bank in Spain seems to trying to do. The latter appears to be a rule-bending rather than criminal operation.

  • Peter says:

    @ jon frazer

    Jon I can’t agree with you. There must be many people who have bought holiday homes in Cyprus and cannot now afford to repay two mortgages, one in the UK and one in Cyprus.

    Times have changed over the years, many will have lost their jobs many others may be on the brink of doing so and sterling has dropped in value.

    This shows the banks are in a ‘win win’ situation. Paying the mortgage on your home in Cyprus has nothing to do with title deeds, by signing a ‘formal contract’ you are tied into the repayments….end of story.

    using the banks irresponsible lending or lack of title deeds or the unfeeling attitude of Cypriots towards animals as an excuse to unilaterally withdraw from a legal binding contract is a non-starter.

    The only hope you have in law is that both sides are under a legal obligation to ‘minimize their losses’ so it could be argued that the bank should sell the house and sue for the difference, but then if selling the house was an option, (in these times?) then the couple should have done that themselves and transferred the outstanding amount into a repayment loan.

  • Greg Gregory says:

    Jon, there are similarities in that sharp immoral practice is at work. Expect anything from Greek Banks that have allowed for already sold properties to me mortgaged time and time again by the ‘developers’. Make no mistake, if the banks can exploit this they will.

  • @jon

    Unfortunately I get quite a few emails from people who are having problems making their mortgage repayments – in particular those who were persuaded to take mortgages in Swiss Francs.

  • jon frazer says:

    This couple seriously over-extended themselves financially. The Spanish bank was irresponsible in its lending. Bad timing, bad judgement and bad luck have caused this result. I do not see any similarities with the scams being pulled on unsuspecting buyers here in Cyprus.

    Here, people who have worked all their lives and saved for their retirement have ended up with no title to their property, having paid in full. A completely different story.

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