THE LIMASSOL and Paphos District Courts in Cyprus have both ruled that specific articles of the Entrapped Purchaser’s Law were unconstitutional, cancelling therefore, the decision of the Director of the Land Registry to transfer the Title Deeds into the names of the purchasers.
In both cases, the bank filed an appeal regarding the decision of the Director of the Land Registry, to transfer the Title Deeds of the properties into the names of the purchasers.
It needs to be reminded, that the Transfer and Mortgage Law 9/65, was amended in 2015 by introducing Articles 44IH-44KZ and the main purpose was to protect the entrapped purchasers. The amendment was introduced by the Government, to satisfy Troika’s requirement to transfer title deeds into the names of the purchasers.
Several appeal reasons were introduced by the bank’s lawyers in both cases when submitting their appeals asking from the Court to judge that the decision of the Director of the Land Registry was wrong and illegal. The bank’s lawyers claimed that their client (the bank) suffered unreasonably and irreversibly by these decisions. Further, the bank claimed that the amended Law violated the bank’s constitutional rights as per Articles 23 and 26 of the Constitution.
Article 23 of the Constitution protects the right to freely possess and enjoy property in Cyprus and Article 26 of the constitution provides for the right of contractual freedom.
The Courts found that the decision of the Director of the Land Registry to transfer the property into the names of the purchasers violated the above articles, as these decisions were taken without the consent of the bank.
Further, it was stated that the protection of third parties is not reason enough to justify altering, by law, agreements between parties and as such affecting the rights of the contractual parties.
As such, articles 44IH – 44KZ were deemed unconstitutional.
It remains to be seen, whether the losing side will file an appeal at the Supreme Court or not.
These rulings are in relation to applications in which objections/appeals were filed by the bank. Therefore, it is assumed that for those entrapped purchaser’s applicants, whose applications were not appealed by the banks, this ruling doesn’t affect them at the moment.
Marina Massoura
Lawyer
L.G. Zambartas LLC
@Andrew, very true, however reading through all the posts it is clear that the developers & banks & even state had a hand in things….prime example is one as cited on this site I think?.
A certain bank lending money to a developer & not seeing a dime back for a couple of years BUT bank persists in lending money to buyers to buy property from that same developer who was failing to payback his dues to the bank!!!!why?????why not ask the developer for some of those proceeds back? why carry on lending unsuspecting buyers and all the time have the knowledge that they are buying into someone else’s debts in essence?greed, zero moral standing, and the siga siga mentality that things will work themselves out!
The main wrong doers in this disgraceful situation are all of the lawyers who failed in their duty to protect their clients. Any buyer would expect a lawyer to check for encumbrances. All lawyers should have completed proper searches in order to protect their clients.
The House Standing Committee on Legal Affairs should work very hard indeed to find a proper and final solution to this fiasco. Trapped buyers and the reputation of Cyprus have suffered enough. They deserve better.
Give people the homes they have bought or refund all of their money, plus compensation.
@ED – “A bank will not grant a home loan unless it has ‘first claim’ on the property through the developer’s mortgage. So if you try to get a home loan from Bank ‘B’ you will fail unless the developer has mortgaged the land to Bank ‘B’.”
So this means that any bank granting a loan in Cyprus for a property is (or was) necessarily informed that the property is (or was) mortgaged or not.
Ed: Yes.
Further update of the situation.
Today the House Standing Committee on Legal Affairs will meet to find a solution to the problem resulting from the court decisions.
It will focus on achieving the same result – protecting trapped buyers – and maintaining the validity of transfers that have already taken place.
@sky and everyone, will see what Mr. Socratous says with the Attorney General later today, this is more than just a farce, some 2000 deeds have been issued thus far via the law according the news last night. I don’t like it one bit that ‘they’ are looking to amend the law as it can only mean one thing, the duped punter gets lumbered with other peoples debts…..
In my case developer was not 100% the issue but for, he was above water, his land (that my property was built on too) secured the loans of the other buyers on the same plot, and it is these other buyers who were failing to service their loans thus the bank having a noticed of forced sale of the properties after I did a an N50 check…despite bank telling me they would not come after me for not servicing a third parties loan i.e my neighbours! they never gave me a waiver although they said they would.
@scruffy and Embapafos
thanks, I understand better as it reminds me some story the locals told me…
we are in 2009, the banker lends money to his cousin developer
the cousin doesn’t have any money, but the banker tells him not to worry, the money he lends him will be guaranteed by the value of the land the developers builds on. (mortgage)
this is not legal but it’s not really a problem, as the developer is “sure” to sell the said property.
In 2012, no more buyers, the developer can’t sell, so he can’t pay the bank back, so he goes bankrupt. The bank asks for the land to get its money back. The problem is that now a buyer (mr.X) is living on a house built on this land…
…but that’s not the end of the story, as Mr.X also had a cousin banker, who lent him money to buy the house, and this loan is guaranteed by a plot belonging to Mr.X ,on which some developer has built a house promising Mr.X that he will for “sure” sell it with a huge profit…
…to be continued…:D what a mess… I wonder how this will be sorted out in the end… As it seems like there are lots of developers, cousins and Mr.Xs in this island…
@petedavis – How could the Bank of Cyprus know that property “x” was mortgaged, if it was mortgaged by another bank?
When I’ve bought my property , ok without a loan, but my bank didn’t have any contact with the seller…
The issue is rather at the land registry, in my view… at the moment of the sale, only the seller of the property is allowed to sign for the transfer of the deeds…so how could a developer sell a property, if he shows up at the land registry without the titles?? As when a property is mortgaged, the title deeds are in the possession of the bank.
Ed: A bank will not grant a home loan unless it has ‘first claim’ on the property through the developer’s mortgage. So if you try to get a home loan from Bank ‘B’ you will fail unless the developer has mortgaged the land to Bank ‘B’.
Note, when a property is mortgaged its Title Deed IS NOT in the possession of the banks. The Title Deed is in the possession of the developer – that bank has a charge (a lien) on the property. If the Bank was in possession of the Title Deeds, the developer would not be its legal owner and therefore the sale transaction would be illegal.
@ Sky … “They’ve just got a client asking for a loan and a seller selling his property. So they (the bank) are acting in good faith…..”
To lend against one property which is sold without mention of a mortgage is unfortunate. To lend against two such properties is somewhat negligent. to lend against three or more smacks of poor management and recklessness, if not criminal intent.
Let me put it another way. I watch my car being sold to a third party without raising an objection, only after money has changed hands do I ask for my car back. Now that is a criminal conspiracy. In failing to take action I forfeit any right to reclaim the vehicle.
The banks were well aware that the properties would be sold on to unsuspecting buyers.
Doesn’t that amount to a conspiracy? It certainly amounts to negligence on the part of the bank, who are now proclaiming themselves as the victims.
The real victims are the people who bought the houses.
Ed: Of course the banks knew what was going on. They watched as money flowed into the developers’ accounts but did nothing to recover the debt.
I have two questions.
1. How can we find out if the bank has filed an objection/appeal against our property?
2. Part of the bailout agreement was that these outstanding debts were to be scrapped and the Deeds were to be transferred to the rightful owners – US! Surely the Troika are going to look extremely weak by letting Cyprus take the money and run. Will they ask for their bailout money back? If not, why not? Is there a formal petition that I can add my name to which can be taken to the Troika?
Okay, that was more than 2 questions!
Ed: If the bank has filed an objection at court against you – you will receive a notice from the court. The bailout was a loan that Cyprus will have to repay regardless of this judgement.
The troika are aware of the problem – I sent my contact in the European Commission details of the judgements and the summary above. But now that Cyprus has exited the bailout, I suspect that their influence may have diminished.
The Legal Services department is considering an appeal to the Supreme Court; it has until the 4th July to do this – and the government is looking to amend the existing law.
I understand that there are a further 15 – 20 objections filed at court.
Our Sons bought their house (without any Mortgage) in 2005 and three quarters of the house was completed by 2007. At which time the developer went bust. Another Contractor was called in to finish the property at considerable additional expense and again without a Loan, the purchase Contract stated there was a Mortgage on the land and the Contract was recorded at the Land Registry.
Given the latest development is it conceivable the Bank who have Title to the land could take the house from our Sons.
Ed: your sons will need to get a Title Search from the Land Registry. If, as you say, there was no mortgage when they bought in 2005 – any mortgages lodged after that date will not affect them.
@scruffy, agree 100%
Just f.y.i Paphos/Larnaka land reg have told me they are still processing applications too.
On the question of deeds already issued Larnaka was categorical is saying they will not be taken away from deed holder,
and that any claims made by the banks would be at govt. (which I guess means taxpayers indirectly) and Paphos couldn’t say for sure.
Ed: It’s business as usual in the Limassol Land Registry.
@Sky – When my developer went bust in 2010 the liquidator held a meeting with the purchasers. He informed us that his biggest debtor was B.O.C and that he had not paid a single penny from the day he borrowed their money. That day was in 2004. They gave me my loan in 2007 to buy one of that developer’s properties and never gave a hint as to the danger I was in.
In any other country that would be FRAUD.
@sky, “The responsibility of the bank could be invocated only if the buyer takes out the loan at the same bank which mortgaged the property being sold”
More than 100% certain that the above was happening in many cases, and for the banks to claim they did not know that the developer was doing this to his buyers be they cash buyers or buyers who took out loans at same bank is pretty impossible, 100,000’s of thousands appearing in a the developers account at the same bank that did the lending should not have gone unnoticed (have this from a banking official I know) it is the duty of the bank to verify where the proceeds came from.
State is also to blame for the total lack of checks and procedures in place….but it suited them too.
Just curious to see how it pans out regarding the cases processed so far and resulted in deeds. If the bank did not put up a fight & object is it a sign they knew they were in the wrong? remains to be seen. Not getting any clear answers from anyone thus far.
How can the bank be held responsible?
The banks are not responsible for checking if a land is mortgaged…(is there any law mentioning that they should??)
They’ve just got a client asking for a loan and a seller selling his property. So they are acting in good faith.
It’s the responsibility of the client to go to the land registry and ask if the property is mortgaged.
The responsibility of the bank could be invocated only if the buyer takes out the loan at the same bank which mortgaged the property being sold.
Tell me if I’m wrong.
Now, if the developer bankrupts and can’t pay the bank, or you, back, well….too bad…but you’ve just got robbed. It’s exactly like a homeless with no assets selling you a car he doesn’t own…the original owner will ask for it, rightly so. And how are you get your money back…now? well, you won’t.
The only compensation you can get is to send the homeless to jail. So I hope that the crooked developers (and lawyers if they are involved in the scam) will go to jail.
I’m not lecturing, I’m not a banker, just trying to understand how things can (or will) be logically and lawfully sorted out.
Ed: Firstly buyers engage the services of lawyers to represent their interests throughout the purchasing process. Most of these ‘lawyers’ either couldn’t be bothered to check at the Land Registry or were in cahoots with the developers.
And it wasn’t until the law changed in 2010 that buyers could actually check at the Land Registry themselves, but even then they needed that approval of the developer/vendor. (see New title search procedures in Cyprus. How many of them knew this was possible? And the law changed far too late as the property market had crashed by then.
The only banks willing to loan money to purchasers were the developers’ banks and they must have known (a) Developers were not repaying their loans and (b) there could be serious consequences for the purchaser. I know for a fact that in some cases the loans were sanctioned at the same branch that had sanctioned the developer’s mortgage.
Furthermore the land was effectively mortgaged twice – once to the developer and a second time to the buyer. What the banks should have done is channelled enough of the money paid by the buyers to repay the developer’s debt on that particular property – or issued the buyers with a waiver.
The banks may not have a legal responsibility, but they damn sure had a moral one.
Unconstitutional or not, the Limassol land registry is business as usual, personal visit on an unrelated matter today and I had this confirmed……800 cases pending on a bookcase behind me I was told, “land registry staff are not about to just stop going”
Madness!!
The banks are saying that the law has now violated their constitutional rights. What of the rights of the purchasers who used their life savings to get their home duped by developers, banks and the wonderful Government.
What happened to the constitutional rights of people who lost all their money in order for Cyprus to bail it out at others expense.
Has anyone been jailed yet???
I wish this country named Cyprus sings to the bottom of the ocean as the world will be a better place without it.
Will each and every developer with a NPL be made bankrupt before the banks seek to repossess the homes of innocent buyers. The developers who took these mortgages and their guarantors should be the ones to experience losses.
As pointed out by Pippa, Article 23 of the Constitution protects the right to freely possess and enjoy property in Cyprus. Surely this applies to the hapless buyers rather than the deceitful banks.
Ed: A number of developers with NPLs have agreed debt-to-asset swaps with their creditor banks – and you may have read elsewhere of swathes of Title Deeds becoming available for transfer. Some of these deeds I’ve seen were issued in 2014 but could not be transferred at that time due to the developer’s debt.
I suspect that the objections the banks have filed relate to developers who are bankrupt or who have yet to agree debt-to-assert swaps or are being intransigent.
I am in touch with a couple whose deeds are in the hands of a receiver (who is working on behalf of the Alpha Bank) will have their defence heard in court on 4th July. I will update everyone on the outcome once I hear.
No laughing matter but one land reg dept I spoke to that deals with the applications says they are proceeding as usual unless told otherwise…..and have no idea how current deed holders are affected…
So they will carry on dishing out the deed, raking in the albeit reduced transfer fees and when the proverbial hits the fan, punters will be left deedless or with a duff title deed. I can bet my bottom dollar they will be told to re-coup all they have paid left right and centre to go sue the main crook in the whole sorry affair-the developer…..don’t know whether to laugh or cry.
Ed: Those who have already received their deeds are unaffected. Note the last paragraph “These rulings are in relation to applications in which objections/appeals were filed by the bank. Therefore, it is assumed that for those entrapped purchaser’s applicants, whose applications were not appealed by the banks, this ruling doesn’t affect them at the moment.”
@ Nigel, If as you say the bank have only a claim on the land and cannot prevent a sale taking place, then surely we have little chance, if any, of any court reversing the latest district court decision. Actually, as I recall being told by our solicitor, the scenario of the solicitor paying off any outstanding debt was impossible as, according to them, the banks at that time were refusing to divulge any details re developer mortgages other than the original amount taken out. They refused to give an up to date status of the balance or indeed if it had been paid off.
When our developer went bust (2010) was the first time we were informed of his debt. Strangely, on visiting the bank to assess our liability I was informed that I would not have been given a house loan unless the bank had checked for outstanding debt on my plot. If a debt existed they would pay the debt and handover the remainder to the developer. They told me as I had a loan I had nothing to worry about.
It was some 3yrs later that the liquidator informed us that his enquiries had shown that the bank had handed the full amount to the developer and therefore we were liable. Obviously, we have nothing in writing outlining what the bank had originally claimed was their process. I think we are stuffed.
The bank’s response now is that they apologise but had done nothing illegal. Unfortunately, it seems, the courts now agree with them.
Ed: The bankers have no morals and neither have the ‘crooks’ in the legal and and real estate sectors. All they want is your money – period.
I don’t know which liquidator is dealing with you, but a friend of mine who’s developer was in receivership owing millions managed to get his deeds last year after 15 years! His receiver helped him.
What a Joke. The banks were lending these “Developers ” money left, right and centre without any checks whatsoever, and it is now the innocent people who have bought the properties who suffer.
The Banks are at Fault here.
Ed: Indeed the banks are at fault as are the ‘crooks’ charlatans masquerading as property developers, lawyers and estate agents who deliberately failed to advise purchasers that the properties they were buying were being built on mortgaged land.
So three questions:
1. If the entrapped purchasers law is found to be unconstitutional will those who have paid fees to lawyers to proceed under this law get their money back?
2. If the banks are supposed to be responsible, why did they lend twice on the same assets? Does this not make them culpable and remove their rights under Article 23?
3. If both the bank and the purchaser are covered by Article 23 of the constitution, where does this leave the lawyers who advised and helped the purchasers to proceed with their purchase?
Ed: Until such time as purchasers lose their homes there is no point in suing their lawyers as their financial loss is zero.
However if and when people lose their homes as a consequence of this ruling, purchasers will be able to sue their lawyer. Indeed there was a successful landmark ruling in the Supreme Court in 2010 where the court ordered a Paphos-based lawyer (Nicos Papakleovoulou/Papacleovoulou) to pay a British couple around €120,000 for money they’d lost due to his negligence. See Landmark ruling by the Supreme Court.
As for the legal arguments – are the banks culpable, etc. the courts will have to decide.
@Pippa – They are unfortunately taking the view that regardless of the fact you paid for the property, the land was not the developer’s to sell as most of them made no attempt to pay for it. It belonged to the bank at the time the of the sale.
In the past,the banks have even tried to say that they were unaware that the properties were being sold and if they had known, they would not have allowed the sales to go ahead.
The original scam was really a state sponsored scam and just as we thought that they had been caught out and justice would prevail, we are now the subject of a second state sponsored scam.
Don’t forget, when the bank forecloses on these properties it will not only be them that benefits. After they get their cut to repay their debt any monies left will go to outstanding Government taxes and memos that developers owed. There will be little (if any) left for any compensation.
The only tiny ray of light is that if this ends up in the ECHR, I believe European Law supersedes national laws and constitutions of member states. Given that its taken them 18mths to get to this stage God only knows when that will happen.
As pointed out by Nigel, the EU will have far less economic leverage over Cyprus, couple that with the Brexit and its clear we need a miracle to avoid being scammed again.
Ed: There is a popular misconception that mortgaged land is owned by the banks; this is incorrect. The banks have a ‘claim’ on the land in the same way that banks in the UK have a claim on a home in the UK if the homeowner has a mortgage.
Such claims take priority according to the date they were lodged. In the case of ‘trapped buyers’ the bank’s claim was lodged before the purchaser’s contract of sale and therefore takes priority.
The existence of a mortgage doesn’t prevent a sale, but in the UK and many other countries the vendor’s solicitor will repay the balance of the mortgage to the bank/building society from the money received from the purchaser and will then give the difference to the vendor.
@Nigel, thanks wasn’t aware that if the bank appeals the transfer decision by land reg that the who process stalls….
I can see both sides of the argument and the greed that a minority showed in forging ahead with purchases in the hope of making a quick buck. Clearly this does not excuse the lies and deceit freely lauded by the selling developers and the mention of rental incomes possible when they would have been in full knowledge of the fact that you just cannot rent out property as a holiday let (legally) in order to induce purchasers to see something too good to be true but not question it.
The law is the law, albeit an ass and need repealing with a protectionist law for protecting the consumer in this case passed. It will never happen as I wouldn’t mind betting that far too many lawmakers have signed as guarantors for multi million loans for their developer friends so if anything repealing any law that holds guarantors responsible for loans will come before any that protects the consumer. That may be a cynics view but one who has 68 years experience of Cyprus – I wish it were different.
Will it stop individuals leaving their brains at their departure airports – No! The lure of a suntanned smile and pipe-dream are too great sadly for mere mortals to overcome as is the notion that all states operate a legal system identical to their own. I feel for those caught up in the unholy mess and hope in moral and ethical terms it is put right but please do not rely on the EU to intervene in a sovereign states judicial procedure. Direct pressure on our parliament and MPs alone might, just might get them to listen but that’s not to say they will do anything as there is far too much at risk if they do – unfortunately.
Gonna be interesting to see how the govt deals with for example a buyer who had property transferred to them via the law (despite banks objection) and buyer has subsequently sold property etc….probably won’t be many cases like this but it is an almighty mess….thanks MP’s for passing a law that is supposedly unlawful and advising your citizens to follow it.
Ed: If a bank filed an appeal against a transfer of title at court, the transfer would not have taken place.
Am I correct in thinking that according to this ruling Article 23 (of the Constitution which protects the right to freely possess and enjoy property in Cyprus), is applicable to Banks, but not to those people that have paid in full for the said property?
Well, kept that quiet didn’t they? What a farce! “The bank’s lawyers claimed that their client (the bank) suffered unreasonably and irreversibly by these decisions. Further the bank claims that the amended law violated the bank’s constitutional rights as per article 23 and 26 of the constitution” Article 23 of the constitution protects the rights to freely possess and enjoy property in Cyprus and Article 26 provides the right for contractual freedom.
This must be the same Article 23 that would apply to the buyers who have paid in full for their property then? Who feels sorry for the bank’s who lent money haphazardly without checking the debts could be honoured? I don’t believe that they cannot turn around their losses. Other countries have done it without resorting to taking homes off people who have paid for them. The banks have more resources to hand to work at turning their debts around than some individual/s who have saved all their lives and invested in a home in Cyprus. I hope this gets thrown out by the Supreme court.
So the take away from your commentary is that Cyprus does not compile to Governance or laws that have been already passed. So assume your thoughts are Cyprus is a lawless island that only protects the chosen few.
Well, looks as if its all over now bar the shouting. Difficult to imagine a plausible appeal that would be successful against that argument. Between this judicial decision and the comments from the central bank that the country cannot have a strong economy without strong banks, it is becoming obvious that the law is going to take precedence over the morality of what has happened to the unfortunate buyers. Who will appeal? I’m betting it won’t be the LR.