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Limitation time bomb awaits British home buyers

Under a new Cypriot limitation law that came into force in July 2012, time is running out for people who fail to address their foreign currency mortgage predicament within the six year limitation period.

Foreign currency mortgage Cyprus time bombIN A MOVE which has gone largely unnoticed in Cyprus, a new limitation law “The Limitations Law (66(1) 2012)” came into force in the Republic of Cyprus on 1st July 2012.

The awkward drafting of the act has had Cypriot lawyers scratching their heads to work out the interim provisions, but essentially the new act has stated that any party wishing to bring an action for a breach of contract (including a counterclaim) must do so within 6 years of the contract (the primary limitation period).

As many foreign currency loans were entered into from 2006, some even before that, people who have not tackled their foreign currency predicament by issuing proceedings will find the door closed to them after the expiry of six years. Likewise people who are “waiting” in the hope that a solution will come about through existing litigation will lose their rights even if some remedy does arise subsequently.

The change in law – which some cynics might suggest was prompted by a desire to stem the flow claims currently flooding the Cypriot courts – is bound to give rise to human rights issues for those who will find themselves shut out. However the laws of most countries require a party to bring an action as soon as it comes to their attention, and litigants who delay in bringing actions may find themselves locked out in the cold.

Moreover as the law applies to counterclaims, it means that people waiting for banks to bring claims first before doing something will find themselves in dire straits. The law does not apply to a bank bringing a claim on a running bank account – so the banks could wait until a party is “beyond limitation” before bringing their claim, safe in the knowledge that under the new law, the borrower will not be able to bring a counterclaim or defend.

The advice of Christofi Law to anyone who thinks they are approaching limitation is to issue proceedings as soon as possible to preserve their position, and in any event within the six year limitation.

About the author

Chris Christofi is a solicitor of the Senior Courts of England and Wales and a partner in the law firm of Christofi Wells Strong, which operates from Temple which is in the traditional legal and business sector of London – often referred to as “the City”.

Editor’s note

To avoid possible confusion, the law does not seek to prevent claims being made in actions which had not been started before the law was passed.  For this reason the limitation period will not expire before July 2013 in any case.  Effectively, a one year grace period was given when the law came into effect last year.

Furthermore, the time period runs from the date the cause of action arose, which is not necessarily the date the contract was entered in many cases.

Readers' comments

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  • john f says:

    Consider if someone entered into a contract 6 years ago to buy a property. In the agreement the builder was due to finish the property at the end of the 6 years. The property is now 2 years late (sound familiar!!) The builder is now in breach of contract. The buyer cannot sue because the statue of limitations states that the contract is 8 years old. Surely the time will run from when the breach occurred. This was only 2 years ago.

  • @Mike – I have also been speaking with a lawyer and there are some points that need clarification – I hope to get them this evening.

    It is my understanding (at the moment) that the provisions of the new law will not come into force until 1st July this year – so there is no need to panic.

    I’ll post an update on the situation when I have the information to hand.

  • Mike says:

    Nigel, thanks. I did contact a lawyer and indeed they confirmed it was a matter of tort, so 6 years it is.

    Do you anticipate people filing defensive/precautionary claims prior to their own particular claim deadline, just to maintain their legal rights? Is there a cheap way to do this without harming your future legal prospects (i.e. do you have to go in all guns blazing at the start, or can you file an abbreviated claim to start with and amend it to something more substantial if and when things proceed)? Do you know if Cypriot law provides for “cooling off” periods for negotiating settlements? In filing a claim, do you risk becoming liable for the banks’ legal costs if you later withdraw your claim? I suppose all these sorts of issues crop up when thinking about filing defensive actions prior to any deadline.

  • @Mike – you’ll need to speak with a lawyer, but I believe this would be an action on tort, where the alleged behaviour of a bank has caused the borrower to suffer loss or harm unfairly.

    I believe an action concerning a mortgage would be brought by the mortgagee (lender) against the mortgagor (borrower).

    But you will need to check with a lawyer.

  • Mike says:

    Are not most foreign currency bank loans in Cyprus securitised by immovable properties, in which case doesn’t that constitute a mortgage? If so, isn’t the limitation period with respect to mortgages 12 years according to the new legislation?

  • Janner says:

    Nigel,

    Isn’t this legislation to do with any breach of contract? Therefore, in relation to the alleged breaches of EU directives Cyprus knows that the vast majority waiting for the test cases to wind their way through the system will be too late. Even if the ECHR does judge that it was unlawful not to tell consumers that the land already had debt secured against it prior to the building of their property etc then most will be over the 6 years anyway.

    All Cyprus has to do is drag it out a bit longer and they know that most purchasers will have timed out. Also, if the legislation is aimed at breaches of contract then surely omissions are a different kettle if fish. You can’t breach something that wasn’t in the contract in the first place (such as developer debt).

    Am I missing something here.? Where do we stand on the EU directives then?

  • @Janner – it’s not up to the banks in Cyprus or the government to state that the law has been broken – it’s up to a court of law to decide.

    Anyone who considers they may have been mis-sold a mortgage needs to take legal advice and then act on that advice accordingly.

    I have published several articles on the subject and UK newspapers including the Times, Guardian, Daily Telegraph, Daily Mail have also published articles.

    And I’m quite sure that those whose mortgage repayments have doubled (sometimes more) must know that something is wrong. But the decision whether they wish to do anything about it is theirs.

  • Janner says:

    Using UK PPI scandal as an example a man in the know stated;

    Which? chief executive Peter Vicary-Smith said: ‘A time limit cut-off already exists for Payment Protection Insurance (PPI) claims. Consumers have the longer of either six years from when they were sold the product or three years from when they first became aware that they might have cause for complaint.

    The property problems in Cyprus are numerous and as far as I know neither the banks in Cyprus or the government has stated the law has been broken. Therefore, how does the layman even know they have cause for complaint. My understanding regarding PPI is that the banks lost in court and on a specific date they were ordered to pay compensation to those eligible and to even contact every customer who had ever taken out PPI!

    There has been a widespread media campaign and I can understand stipulating a time limit under these circumstances.

    However, the Cyprus issue is miles away from PPI. If it was as simple as just bringing in limitation legislation then why has PPI been such a problem. The bank elite would have discussed it with their public school boy, Bullingdon Club, friends at Westminster and the legislation would have been put in place. I presume this never happened because they knew they couldn’t get away with it legally.

    Therefore, my point is that we (the lay people) won’t know we have cause for complaint until something official happens in the courts.

    Maybe I am just naive but I really do not want to believe Cyprus can do this and that the ECHR would support it.

  • @Fighting For Justice – The Limitations Act of 1980, which only applies to civil claims, is not the same as a Statute of Limitations as these also apply to criminal causes.

  • Fighting For Justice says:

    On the contrary Nigel, Britain has a Statute of Limitations Act, and for a contract it is 6 years in which to bring action.

    The Limitation Act 1980 is what governs time limitations for all actions.

  • Janner says:

    Nigel,

    If that is the case then all Cyprus has to do is make sure their limitation legislation prevents any redress and they can block all EU legislation. I thought if a country’s primary legislation was challenged then the ECHR would be asked to make a judgement and that that judgement would be binding on that country and all other member states. If this was not the case then Abu Qatada would have left the UK years ago!

    There is also the issue of whether these acts were criminal and there should not be a statutory time limit on criminal acts. To me, the all important issue is that the clock starts ticking when it is confirmed whether Cyprus broke the EU directives or not. If they already have it in the bag so to speak, due to their limitation legislation, then we may as well give up now!

  • Janner says:

    Another thought. Similar to PPI. People won’t necessarily know they have been wronged until someone wins a court case and the banks are forced to put it right. As far as I know, the legislation I stated above (the ones we all know so well) has not seen the inside of the European court yet. Therefore, until a judgement is made in Europe the clock does not start ticking in my opinion.

  • @Janner – many countries have a Statute of Limitations that define the maximum time after an event that legal proceedings may be started.

    In the USA for example, the Statute of Limitations is five years, but there are exceptions for specific types of crimes and their seriousness. E.g. there is no Statute of Limitations for crimes punishable by death.

    One of the reasons for a Statute of Limitations is that that plaintiff should pursue his case with reasonable diligence – six years is more than adequate.

    Britain is unique in Europe in that it has no Statute of Limitations.

  • Janner says:

    Surely this cannot be legal in relation to legitimate legal challenge to the many problems encountered by purchasers, as mentioned on this site frequently. It is blatantly aimed at trying to close the law regarding legitimate redress. So which law takes precedent?

    Is it the;

    The Limitations Law (66(1) 2012) which came into force in the Republic of Cyprus on 1st July 2012?

    The Unfair Terms in Consumer Contracts Directive (UTCD). This law was transposed into Cyprus law (law 93(I) of 1996 on November 8th 1996?

    Or the Unfair Commercial Practices Directive (UCPD) since its transposition into individual member states’ law in December 2007?

    This just sounds like a pathetic attempt to increase the time it takes to exhaust all legal redress in Cyprus before taking the case to Europe. They must know they don’t have a leg to stand on under European law and that is, in my opinion, what all this is about. The new government will be fully aware of the problems surrounding property. Hopefully the new president will be asked to set out his stall regarding this and we will all know where we stand!

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