IT SEEMS like it was only yesterday that we were preparing ourselves for Christmas and New Year celebrations. But here we are once again approaching the end of another year with a brief summary of significant events that have taken place over the past twelve months.
Probably the most significant event that has taken place this year was the ousting of the Communist government led by Demetris Christofias and its replacement with a government led by Nicos Anastasiades of the right-wing Democratic Rally Party.
One of the first tasks the new Cyprus government undertook was to sign a Memorandum of Understanding (MoU) with the Troika for a €10 billion bailout contingent on it raising €5.8 billion from a bank deposit levy.
The previous government, under the leadership of Christofias, kept the country solvent by borrowing €2.5 billion from Russia. This enabled Christofias to avoid signing any bailout agreement – preferring instead to leave it to the incoming government to take the blame for the country’s economic collapse. The agreement was eventually signed almost a year after the Communist Christofias government had approached the EU for a bailout, by which time its terms had got significantly harsher!
The Troika recognised that Cyprus needed to resolve ‘issues’ with its property market and the MoU contains a number of targets that Cyprus must achieve to secure tranches of bailout funding.
The first of these targets, which the government achieved, was to ensure additional revenues from property taxation of at least €75 million – and our article on how to get a discount on your Immovable Property Tax bill was the most read editorial piece of the year.
The most worrying concern for many home buyers is the treatment of developer bankruptcies, which are on the increase, and non-performing loans.
People of all nationalities have been deceived – and are possibly still being deceived – into buying property built on land that developers had previously used as collateral to secure mortgages from their bank. Some of these developers have filed/been forced into bankruptcy and liquidators have been appointed by the courts to sell off the companies’ assets to repay their creditors. In a number of cases these assets include homes that people have purchased and paid for in full.
Although selling off peoples’ homes to repay defunct developer’s creditors may be legally ‘acceptable’, it is morally reprehensible – and I know from the worried and angry people who have contacted me, many would rather torch their homes than give in to the shameful demands of liquidators. As a consequence of the virtual collapse of the Cyprus property market, it is likely that more bankruptcies and liquidations will follow next year.
Non-performing loans are another worry. Last month Politis, a Greek-language newspaper, published the names of a number of well-known developers with risky loans with the Bank of Cyprus that had been refinanced even though it should have become obvious to the bank that these loans had become toxic (the technical term for this is ‘extend and pretend’). I would not be surprised if the ‘extend and pretend’ principle has been applied by some of the other banks to developers’ loans.
If the seizure and sale of non-performing loan collateral takes place within 1.5 years or 2.5 years in the case of primary residences (as required by MoU) many more people face the prospect of losing their homes even though they may have paid for them in full. As legislation needs to be in place by the end of 2014, property seizures will not start until mid-2015.
The government and the Troika will have to work out a solution to this problem otherwise the island’s property market will never recover if people have their homes seized and sold to repay their developers’ creditors or if they are forced to repay some of the developer’s debts to keep their homes.
The MoU also requires Cyprus to eliminate the title deed issuance backlog to less than 2,000 cases of immovable property sales contracts with title deed issuance pending for more than one year; progress is slow!
Property sales continued to fall during 2013, with the total number sold during the first 11 months of the year standing at 3,338; the lowest number on record.
Meanwhile prices have also continued their downward trend with the average price of a residential apartment falling by 14.6% and the price of an average house falling by 11.1% over the 12 months to the end of Q3.
Prospects for 2014
What are the prospects for 2014? They are not encouraging. The downturn in the island’s economy, much stricter borrowing criteria (based on an ability to repay rather than the value of collateral), a weakening demand from homebuyers and investors does not bode for the coming year.
We may take some comfort from the fact that the Troika has recognised that Cyprus needs to resolve problems with its property market. Perhaps we can cautiously look forward to some encouraging news in the New Year on how Cyprus intends to meet its bailout obligations without seizing the homes of those who have paid for them in full.
Whoah (and NOT “Wooooh”, as us ghosts have a habit of saying. Involuntary impulse, I guess)!
Lots of opprobrium (understandably so) on both sides. People are having a right old go at Mr Iacovides, but what he is actually saying is essentially correct. Liquidators are never going to be anyone’s best friends as their job is to step into a bad situation (a failed company, which by very definition, is unlikely to have enough money to pay off all its creditors) and try to raise whatever he can to then pay people off. There is a strict order of precedence to which he has to adhere as to who gets paid and us ATMs are pretty near the bottom of it.
In Cyprus, that “list†is thus:
1) Costs of the winding-up (i.e. his FEES!)
2) Preferential debts (taxes, some loans, you know, important stuff)
3) Any amount secured by a floating charge (more loans, overdrafts etc.)
4) Unsecured ordinary creditors (US!)
5) Deferred debts (i.e. sums due to members in respect of dividends declared but not paid)
6) Share capital (respective rankings for different classes of shares).
However, who’s he going to get any money from to pay “the list†(especially if the developer has squirrelled away all the assets he can. Which he has. I KNOW this!)?
Not 1), nor 2), not even 3). You guessed it, from 4)!
We’re the ones who, rightly or wrongly, after being: lied to/ misled/ ripped off/ gullible/ naive/ trusting (delete as appropriate) are in the position to sweeten the deal (i.e. pay off nos. 1) to 3)) and if he didn’t at least try, then he wouldn’t be doing his job. We can go on about the moral reprehensibility of his job, but hey, I was a banker for chrissake (and thus used to help with the squirrelling), so I can hardly do the finger pointing!
The ONLY reason he’s attempting to do it is cos he believes there is a chance he’ll be successful. If there is even a SINGLE one of us who, looking at the figures for their own particular case, is ready to say: “I know that, collectively, we should all STAND FIRM, SHOULDER TO SHOULDER and NOT PAY A PENNY MORE so we resist this blackmail, but what they’re asking for me isn’t that much so I’ll just pay it to get MY deeds. Jackâ€Â, then successful in securing extra funds (and paying creditor no. 1)!!) he will be.
Mr Iacovides KNOWS this.
Mr Iacovidees
Why do you regard home-owners many who have paid in full for their homes as investors ?
Surely you be able to explain this not only to people on this forum but to EU MEPs.
Mr Iacovides goes on about how he will not tolerate this and that but what about the victims in all this? Does he not appreciate we’ve all had enough of being robbed of our health and happiness as well as everything we’ve worked hard for? If the day ever dawns when Cyprus plays fair with those who’ve brought billions into the country it will only be because the rest of us won’t tolerate any more scams perpetrated by an uncaring regime with laws made by those who benefit from the continued rape of the innocents.
Chris Iacovides.
After reading your invective, you’re obviously part of the problem and certainly not part of the solution.
“I do not make the Law in Cyprus, I did not have a role to play when banks were lending (recklessly, in my opinion), the developers money.”
No doubt Mr Iacovides will say that he is only followig orders. Now where did we hear that one before. Yet even he aggrees that his paymasters lent money “(recklessly, in my opinion)”.
I have sneaking feeling that (someone) is testing the water with these indignations!
Remember:
“The deeds you do may be the only sermon some persons will hear todayâ€Â
― St. Francis of Assisi
@ Decency and honesty
Just a quote from Mr Iacovides’ written “Report to Buyers” – this was sent to most of the Liasides buyers.
“2.6.ii Do nothing and Alpha will proceed with the sale of the land by auction.
If the purchasers decide they do not want to try to complete the development by working together with my office (and each other), Alpha will proceed with the sale of the property by auction, provided the application to the Land Registry is successful.
Due to the level of secured debt, it is unlikely that there will be a surplus available from the sale proceeds to compensate any of the purchasers.”
No threats there then!
Mr Iacovides also states in his outburst below that he does not make the law in Cyprus. However, given that most of these properties are still illegal by virtue of having no completion or building permits it would appear that he has no problem operating outside of the law in order to make a ‘living’.
Finally, any decent human being would have no truck with this conspiracy of deceit between the banks and developers – so his final threat of ‘throwing his dummy out of the pram’ by leaving the buyers to deal with the authorities and bank directly might be the only decent thing he could do.
PS: wonder what the EU Commission’s response will be in respect of Daniel Hannan’s EU Parliamentary question on this situation will be?
PPS : Mr Iacovides please don’t bang your head when you crawl back under the stone!
In the case of the Liasides debacle, Alpha bank appear to have been negligent in their lending, their interpretation of the NPLs, their lack of action toward the developers debt, their failure to pursue the guarantors of the loans and a host of false information (I stop short of calling it lies) given to various buyers.
Mr Iacovides said if he found the bank had been negligent and there was a case to answer he was duty bound to sue them but as he also acts for the bank as their receiver he would resign as liquidator.
We wait with baited breath Mr Iacovides but of course, much would depend on the outcome of a fully transparent investigation which must include input from the victims.
“I ask the investors if they want to, to consider contributing an amount (which is determined by the secured lender), in order for the lender to lift the charge and “clear the path†for the titles to be transferred. If the buyers do not wish to pay, then I cannot transfer the title deeds,”
Sounds like a threat to me Mr Iacovides but what happens when we all tell you that we will not give your banks a single euro towards the debts of their developer chums?
@Nigel. Yes indeed, the term ‘investors’ used by Mr Iacovides in referring to the individual home buyers affected smacks of sophistry. He is trying to suggest that they did not really buy their properties to live in as a home but purely as an investment. Evidence Mr Iacovides, evidence!
While not suggesting in any way that Mr Iacovides is a monster as I am sure he is not, nevertheless he appears not to have grasped some of the potential analogies. Imagine a commandant of a concentration camp portraying his unfortunate prisoners as ‘holiday makers’ who willingly and in full knowledge of the consequences just decided one day to turn up of their own accord to enjoy a wonderful holiday! He then adds insult to injury by telling the inmates that their incarceration will be good for them! Remember the cynical slogan over the camp gates ‘Arbeit macht frei’?
The cynical slogan of the current scam is ‘Pay all the developer’s debts and tax liabilities and it will be good for you’. Really Mr Iacovides! Please stop treating the general public as if we are idiots.
“…..I did not have a role to play when banks were lending (recklessly, in my opinion), the developers money. I do not agree with the way the Inland Revenue Department demands buyers to pay company debts, I am just the Receiver/Liquidator”.
Well said Chris Iacovides, a Director CRI Group Ltd.
Also may I add as a qualified Credit Manager (by examination) that the Banks were not just negligent in their lending, they were also negligent in their interpretation of NPL, and further negligent in their lack of action in chasing the developer’s debt.
If the banks had been more proactive the developer’s debt would not exist today, and we wouldn’t be having these conversations. Cyprus wouldn’t have a poor name overseas, and people who had paid for their homes would have their title deeds.
There is an old saying in the UK credit management circle. “An old debt is a bad debt”. So may I ask what provision the banks made to write these debts off? Because I would like to know.
Or are the banks now expecting the developer’s victims (because that is what they are victims) to pay off the loans in part or in full so that banks don’t suffer because of their poor performance.
May I also add that as a retired police officer that any threats or intimidation by any person to get the developer’s victims to pay off, in part or in full the developer’s debts, amounts to blackmail. But I presume that as a receiver you are already aware of this fact. So I have no doubt you will be acting with the utmost integrity towards all parties.
Peter Davis. Chartered MICPD. MICM(Grad). (retired).
As Mr Iacovides also works for the bank as their receiver, would he not put their interest first?
He does mention ‘reckless lending’ which must surely put the banks at fault so why should guiltless buyers pay for the mistakes, greed and corruption at the bank?
Put in simple terms; my wife goes into a shop to buy a jumper; she pays her money, gets her receipt and the deal is done. If the shop hasn’t paid the manufacturer does that mean the knitwear company can ask for the jumper back or do they take it up with the shop?
In the case of Liasides Developers, Alpha bank made a series of loans, none of which were repaid but instead of the bank asking the guarantors for the money, or selling their collateral (there was collateral wasn’t there?) the bank have targeted innocent pensioners.
The whole situation cries out for an investigation but Mr Iacovides refuses to probe the goings on between Alpha bank and Liasides. I would suggest that in the event of his continued refusal to carry out a FULL AND OPEN INVESTIGATION, Mr Iacovides steps aside and makes way for someone who will.
I also note that the unfortunate people in this predicament are referred to as ‘investors’.
Many of those who contacted me about the liquidations taking place, including those being handled by other companies in Larnaca, Paphos and Limassol, are retired and have sunk their life savings into buying homes here. These can hardly be referred to as ‘investors’. Furthermore, many have no money to pay their developer’s debt or take their cases through the courts.
If the liquidation of any other assets the company may have is insufficient to satisfy the banks and the other secured creditors, people who purchased homes built by companies in liquidation and who have yet to receive their Title Deeds will have to (a) put their hands in their pockets and come to an agreement with the bank or (b) take a loan from the bank to repay the debt or (c) face the consequences. (That’s assuming developers mortgaged the land on which they were building before contracts were deposited).
And there may be other creditors that all of these people will have to satisfy including the Inland Revenue.
Bearing in mind that these homes have been paid for in full, why should people who have paid for their homes be held accountable for the nefarious actions of the banks, developers, lawyers and estate agents? It’s disgusting, it’s morally reprehensible!
This situation also adds weight to the argument that people should only consider buying property in Cyprus that has a full and unencumbered Title Deed (by full I mean that the dwelling is included on the deed).
@Chris Iacovides.Such righteous indignation! I can see that as a paragon of virtue you really are caught between a rock and a hard place. However, one particular passage in your response deserves close examination:
“I ask the investors if they want to, to consider contributing an amount (which is determined by the secured lender), in order for the lender to lift the charge and “clear the path†for the titles to be transferred. If the buyers do not wish to pay, then I cannot transfer the title deeds, I HAVE NEVER TOLD ANYONE THAT HE/SHE MUST PAY or I will take their home away”
I ask everyone to read this passage slowly a couple of times and consider what it actually reveals. Mr Iacovides, with such an approach you don’t HAVE to tell them explicitly ‘pay up or else’. The threat is implicit in your statement “If the buyers do not wish to pay, then I cannot transfer the title deeds”.
Can you honestly say that in every case you have always pursued first and vigorously the personal assets of the developer whose company took out the mortgages and, as necessary, the personal assets of his guarantors?
Whichever way you cut it, even if you are indeed a paragon of virtue you have one helluva PR, image and reputation disaster on your hands!!
Dear Mr Howarth,
I refer to your comment with regard to the “shameful demands of liquidators†and more particularly your article entitled “Cyprus Title Deeds bank extortion†and I am astounded by its inaccuracies and its cavalier tone. You are making misleading and groundless statements and you are fueling hostility amongst investors, this I cannot and will not tolerate.
You allege that “Receiver’s acting for Alpha Bank are threatening to sell the homes of people who purchased property from a defunct developer to pay off the developers’ defaulted mortgages, their taxes and other creditors†and that “Liquidators have received permission from the court to commence proceedings to recover the assets of a bankrupt property developer in the Larnaca areaâ€Â.
What a load of nonsense!!!
It is clear you are referring to me as liquidator of Liasides and the two SNK companies. I have not made any threats to repossesses anybody’s home, in all cases which involve property developers that I am acting for, my position is the same; I make all necessary efforts to clear all obstacles with a view to being able to secure Title Deeds for the Investors. In order for them to have a chance to get either shares of the land or Title Deeds, the secured lender that enjoys the benefit of a mortgage, ahead of the buyers purchase contracts (usually a bank or a co-operative society) will need to be paid in order to lift their mortgage.
I find myself acting as a broker between the secured creditor and the investors (so do not shoot the messenger); I ask the investors if they want to, to consider contributing an amount (which is determined by the secured lender), in order for the lender to lift the charge and “clear the path†for the titles to be transferred. If the buyers do not wish to pay, then I cannot transfer the title deeds, I HAVE NEVER TOLD ANYONE THAT HE/SHE MUST PAY or I will take their home away.
The mortgagee has a legal right to apply to the Land Registry for possession, this is an application instigated by the bank and processed by the Land Registry and the Liquidator/Receiver has no role to play in this and/or any involvement. I suggest you look into the procedures followed in England when a loan is not serviced by a borrower and how quickly the lender can obtain possession orders. You could argue this applies to the borrower, NOT THE BUYERS, nevertheless, surely you can see the effect this would have on the buyers if the banks’ applications were processed more quickly in Cyprus, in any event, to date it has not been banking practice to “throw people out of their homesâ€Â, however, all this is likely to change in light of the Memorandum of Understanding entered into with Troika!
I do not make the Law in Cyprus, I did not have a role to play when banks were lending (recklessly, in my opinion), the developers money. I do not agree with the way the Inland Revenue Department demands buyers to pay company debts, I am just the Receiver/Liquidator that everyone directs their frustrations at who is trying to assist and please everyone (obviously this is proving to be “mission impossible†and to add insult to injury, no one appreciates the efforts of the office holder). It is not amongst the duties of either a Receiver or Liquidator to do all the above; soon, if the hostility towards me continues, I will leave the purchasers to deal with the banks and the authorities directly.
I respectfully suggest that in the future you obtain your information from reliable sources and refrain from making groundless and misleading comments.
Chris Iacovides
Director
CRI Group Ltd
Andrew
“Let us all hope that common sense, fairness and reason will prevail in 2014.” I fear that the hope you express is a forelorn one.
As a Cypriot who would wish to see the right thing done no amount of pressure on any authority will change the mindset. It has been the case for millennia so what chance is there now? Unfortunately Cyprus has always managed to resurrect itself following major disasters so the need or will to change is non existent. From Copper & other minerals to Tourism to Property and in time Gas & Oil something has always popped up to save the Island from disaster. Unfortunately that probably means that reasoned, moral and ethical arguments will be totally ignored in favour of the existing chaotic shambles which has served the system, and ruling elite, so well in the past. Obviously to our cost.
I for one will not be holding my breath in expectation of changes to favour the consumer, Cypriot or otherwise, but we can live in hope and expectation especially in this coming season of goodwill.
The laws should be changed to make it unconditionally not lawful to seize a persons home to repay a developers debt. These new laws should be retrospective and should protect all buyers if they have paid for their property in full, or if they have a mortgage which they are currently repaying.
As Nigel says this situation is morally reprehensible. If the law can be interpreted to allow seizure of an innocent buyers property, then that law is wrong and unjust.
Thanks for the round up and your insight Nigel. Let us all hope that common sense, fairness and reason will prevail in 2014.