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BBC Money Box: Cyprus property troubles

Earlier today, the BBC Radio 4 program ‘Money Box’ reported on the problems faced by many British people who purchased property in Cyprus with loans denominated in Swiss Francs.

HUNDREDS of British people who bought properties in Cyprus are hoping that a court case on the island later this month will see their liabilities written off.

They are in dispute with the property developer and Cypriot banks about mortgages taken out to buy homes between 2005 and 2008. The mortgages were in Swiss Francs and their debts and repayments have doubled – mainly due to currency changes.

In the program, Money Box reporter Bob Howard talks to ‘Tim’ who was tempted to buy off-plan in a Cyprus development after he was cold-called by a salesman in 2005.

Tim bought two 2-bedroom apartments in the development that were priced at CYP 109,000 (approximately £120,000) each. The developers recommended a local lawyer to ‘Tim’ who they said knew the Cypriot legal system – but instead of taking out a mortgage in Cypriot Pounds, ‘Tim’ was told that the most affordable option was to take one out in Swiss Francs.

But when the Swiss Franc strengthened against Sterling ‘Tim’, alongside hundreds of other British investors, found himself in trouble. But he only discovered to what extent when, in 2009, he visited Cyprus to see the newly-built apartments.

Last year, after taking further legal advice, he was told to stop making the payments in order to take court action for alleged mis-selling against his Cypriot lawyer and the banks which had lent him the money.

The banks cancelled his loan and have promised legal action of their own. And the money they say Tim owes keeps rising. The banks want an immediate payment of half a million Swiss Francs (approximately £380,000).

Money Box presenter Paul Lewis talks to Neil Heaney (CEO of Judicare) and John Howell (editor of the Overseas Property Professional magazine).

Listen to the Money Box report – Cyprus property troubles:

Readers' comments

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  • @aj – If you receive a writ from the Bank in Cyprus for the non-payment of a housing loan/mortgage or a termination notice, it is essential that you seek legal advice from Cypriot counsel to respond within the stated deadline.

    The worst thing you can do is bury your head in the sand in the hope that the problem will go away.

  • Denton Mackrell says:

    @aj, Russ and all those who have received these latest ‘pay up or else’ letters from Laiki/BoC, how does this behavior by the banks square with today’s CM article announcing that the Central Bank sent all the banks on 9 Sept a clear warning that they would be liable to sanctions if they failed to offer loan rescheduling wherever possible??

    The fines on the banks can range from Eur 1,000 to 500,000. The directive tells to banks to ‘adopt a constructive approach to the restructuring of debt with a view to agreeing fair and sustainable solutions’.

    Oi, you there Demetriades at the back! Wake up and start applying those sanctions now to the banks who clearly are ignoring your directive. While you are at it, direct the banks also to recover NPL debts from the developers as mortgage holders and their guarantors and not bypass them to go after individual property buyers who never had a mortgage with the bank in the first place. Of course, it all depends whether you and the government seriously want the Cyprus property market to recover or not. New foreign buyers will never come back as long as you keep on punishing existing innocent foreign buyers.

    BTW, is the Chief Exec of BoC also slumbering and unaware that his officials are thumbing their nose at the CBC directive? Or perhaps it is he who has instructed them to do so!

  • aj says:

    Just noticed letter dated 18th September, received today, so 21 days up. Brilliant didn’t even get chance to try and send money if I had it. Typical screwed by the bank in every respect. Just have to wait now until they take my home in UK off me. Don’t think so, no point in waiting for my life to be ruined and over ill end it my way. At least I’ll have the final say. Bye

  • aj says:

    I’ve also just received a letter from the Laiki bank demanding full payment. Giving me 21 days to pay or face legal action. They are also changing loan from CHF to Euro and increasing rate to 14%. They had already over 5 years increased the interest rate 5 times times.

  • Russ says:

    I have just received a final demand from the Bank of Cyprus to pay the loan in full or start paying the payments at the hugely uncompetitive interest rates. Given the libor rates the banks could be accused of profiteering. To re finance will incur large costs crystallising a debt made unmanageable by the Swiss franc scam but may be my only option.

    My lawyer tells me I have few options the bank now run by a board made up from 10 Cypriots and 6 Russians are playing tough ie no negotiation the full amount or legal action.

    Is there a chance that exchange rate will return to more favourable rates anytime soon, who knows. Is there any chance the Swiss franc will fall off the cliff ?

    I do not want to suffer illness so it may be best to take the pragmatic decision and sell my UK home and pay off the debt and start again at 50 not a great idea.

  • Lynette Guy says:

    I too am caught up in this sorry mess that is a complete set up by the developers, lawyers and the bank!

    Shame on all of them for creating this horrid situation for everyone.

    And I may add I asked all the right questions and did my due diligence and made a point of visiting before purchasing and still got caught out… I feel so sorry for people who have lost everything.

  • Hector says:

    I wonder if all articles like these and the comments, should, as a service to mankind, be translated into as many languages as possible i.e Russian and Chinese, to ensure that the warnings are truly global. Just a thought.

  • Denis King says:

    After 10 years our title deeds are still not available but the old Immovable Property Tax that you pay until you buy the deeds keeps going up.We are being penalised for either the fault of the developer or the Land registery`s reluctance to release the deeds.

  • Rob Byers says:

    This is even more corrupt than the miss selling of PPI, and potentially much more devastating for those miss sold to!! I believe there already has been at least one suicide devastating an honest, hardworking, loving family! I believe there may be more feeling just as desperate, including families that have broken down, separated and divorced through the huge stresses and threats from the frauds carried out by banks, lawyers and developers to entrap victims in this con!!

    I understand new buyers are being told that there are bargains to be had in Cyprus, but again they are not being told that there properties have several mortgages on the land, the banks have the developers in receivership, and they may never be able to get their title deeds and that the properties have not been built to a standard that they can receive a licence that allows them to be rented out. All of this information was fraudulently given to the original buyers, but nothing has changed in Cyprus to fix this. I also believe that the government now is taxing homes on the island and the government will if you have savings probably go down the road of the Greek government and take your savings too!

  • Mike says:

    One can only feel for the plight of those seduced by the sales patter and words designed to deceive as appears to be the common language from the large developers and their lawyers.

    Cyprus is now beginning to pay the price as it’s construction industry is grinding to a halt. No consolation for those who have lost their savings as the fight will be a long drawn out affair and I am not convinced that even if judgement is passed down in favour of the victims, because that’s what they are, they will see or receive any benefit. This must serve as a warning to all potential buyers but still we see foreigners entering into sales agreements without any meaningful research or protection from the risk of losing their life savings.

    Why do we leave our brains at the departure airport I wonder and accept what we would never do in our home countries without independent legal confirmation and advice. I assume we naively believe the rhetoric that legal systems are similar in spite of the obvious glaring facts proving they are not. I wish all those involved in the action well and hope common justice will prevail.

  • Denton Mackrell says:

    I could have put this post on any one of the current articles on this site. It would appear that developers and banks are STILL engaged in out-and-out crookery against foreign buyers. The following was reported to me yesterday by an acquaintance (not from an EU country) who 5 years ago bought an apartment in Oroklini from a local developer and took out a mortgage from Laiki Bank. She and her husband used a local legal ‘consultant’ and I am unclear as to whether this was a genuine independent lawyer or someone introduced by the developer/bank.

    All went well until this year when, after a few months abroad, the wife returned to the apartment recently only to find that the locks had been changed by the developer. His argument was that they had stopped paying their mortgage and the bank had foreclosed on them. He claimed that the bank had sent them a letter abroad about the matter (which she denies receiving). Now running out of money, the couple cannot afford to appoint a proper lawyer to take up their case with the developer and Bank of Cyprus (which took over Laiki’s affairs after the latter’s collapse in March). Out of ‘sympathy’, the developer has apparently offered them Eur 15,000 to ‘go away’, which he has now dropped to Eur 5,000.

    A few observations:

    1. She reports that Laiki had sufficient funds in their a/c and was supposed to pay monthly direct debits for their mortgage. What happened to that money and set-up? We have only the developer’s word that the bank sent a notice to their home address abroad. Could it be that the non-payments resulted from Laiki’s collapse and not from their inaction?

    2. What exactly is the developer doing acting as the bank’s bailiff and apparent partner in this matter?

    3. What right has the developer to evict the buyer without a court order and due legal process to which the buyer should have been properly and fully informed and given the opportunity to challenge the allegations and be legally represented?

    4. Why has the BoC not acted with proper integrity and good governance in this case to ensure that it’s name is not, once again, dragged through the mud by accusations of moral delinquency if not complicity in property fraud by a developer?

    This developer perhaps imagines that he has pulled off a fantastic fraud and can now sell the property again, thus vastly increasing his profit. While that may be his short-term gain, unfortunately for him details of this case have already spread like wildfire in the couple’s home country with a clear message: DO NOT UNDER ANY CIRCUMSTANCES BUY PROPERTY IN FROM THIS OR ANY OTHER DEVELOPER IN CYPRUS.

  • Robert Briggs says:

    More free publicity for my Cyprus real estate friends and their mates eh?

    Also by the way, did the Developers have covert loans on these properties, which was not mentioned in the sales contract and not disclosed to the buyers, with the buyers solicitors wilfully not finding out in their searches.

    If that is the case, according to CPAG’s Reports in July 2012 & January 2013, the sales contracts and loan agreements (the banks should have checked all this out before granting the mortgages!) legally should be deemed invalid and the Banks, Developers & Sales Agents etc, responsible for this disgrace be instructed to “go forth and multiply.” RB.

  • Costas Apacket says:

    Another Nail.

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

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