Trapped Buyers Latest
A recent decision by the appeals court may adversely affect thousands of 鈥榯rapped buyers鈥� who, despite having paid in full for their home or apartment, have not obtained a title deed due to outstanding financial obligations of property developers.
Issued on June 20, the court ruling concerns a case involving Bank of Cyprus as the plaintiff versus the land registry and a property developer. The latter had sold an apartment to a buyer, but the immovable property (land and building) on which the apartment was located was encumbered with a mortgage. Despite this, and based on a 2015 law aimed at helping trapped property buyers, the director of the Paphos land registry had green-lit the transfer of the title deed to the buyer.
The mortgage on the immovable property was held by Bank of Cyprus, which proceeded to challenge the land registry鈥檚 decision. The bank filed a case with the district court but lost. Subsequently it took recourse with the appeals court, which in June reversed the district court鈥檚 ruling and found in the bank鈥檚 favour.
The appeals court found that certain clauses of the 2015 law (but not the entire law) were unconstitutional, as they violate the right to property as well as the right to freely enter into a contract.
It thus determined that the land registry鈥檚 prior decision to set aside the mortgage was unlawful, and that the bank still has a claim on the property that must be settled before title is transferred to the buyer.
It鈥檚 understood that because the court decision does not void the 2015 law per se, practically it does not impact cases where title deeds have already been transferred to previously trapped buyers. However, it would affect pending cases before district courts, estimated in the several thousands.
In a bid to sort out the trapped property buyers mess, back in 2015 parliament had passed a law granting the land registry the authority to exempt, eliminate, transfer and cancel mortgages and or other encumbrances, depending on the case and under certain conditions.
The law sought to resolve the problems created by the failure to issue title deeds to people who had paid for their property, either because the property was mortgaged by the developer, or the state could not go ahead with the transfer because of outstanding taxes.
Since developers鈥� land and buildings were counted as assets that need to be offset against their debt to banks, this gave lenders a claim on people鈥檚 properties that had been mortgaged by developers.
But the case adjudged by the appeals court now could throw a spanner in the works.
In this particular case, the buyer of the apartment had filed a bill of sale to the Paphos land registry, seeking to obtain a title deed. But the land and building containing the apartment were mortgaged.
As explained to the Cyprus Mail by Maria Karayiannidou, an attorney for the law firm representing Bank of Cyprus, the district court had earlier deemed that the bank failed to transfer the mortgage to another property of the same developer. Having failed to do so, the court reasoned, the bank could not argue that it had suffered financial loss in its arrangement with the developer, and as such it could not challenge the buyer鈥檚 filing of an application for a title deed.
But the appeals court subsequently sided with the bank. Crucially, it deemed that whereas a lender has the option to transfer a mortgage to another property of the borrower, it is not obligated to do so.
In this case, the bank argued that the borrower鈥檚 (the developer鈥檚) other properties also had a mortgage on them. It calculated that transferring the mortgage to the other properties would not be in its best financial interests. Because a lender is not obligated to transfer a mortgage anyway, the bank argued, it could not be blamed.
The question now is how this latest court judgment affects thousands of other similar cases involving trapped buyers. Presumably the contested clauses of the 2015 law would need to be amended again.
But parliament is currently in recess and will not resume business until September.
Source
What happens to trapped buyers who applied successfully for their Title Deeds?
Will they be required to return them to the vendor?
What will happen to those who have bought property from those who received their Title Deeds under the provisions of the Trapped Buyers law?
It鈥檚 a complete and utter mess!
Best guidance to those considering buying a property in Cyprus
Only buy property that has a clean Title Deed. I.e. a property that is not burdened by any debts or other encumbrances and does not suffer from any planning infringements.
Do not buy off-plan.
Always use an independent lawyer when buying a property. I.e. a lawyer who has no connection whatsoever with the person selling the property or anyone else involved in the sale such as the estate agent.
(For British buyers, The UK Foreign Commonwealth and Development Office provides a list of English-speaking lawyers to help British nationals find the legal support they need. You can find the list at Find a lawyer in Cyprus.)
The Appeal Court judgment may be found at Civil Appeal No.: 285/2018
Thanks to Cyprus Property News
What I don't understand is how can it be legal to borrow against the land when it has already been sold. Is that not fraud, a fraud that the bank appears to be part off.
We have a friend who bought an apartment off-plan in 2008. The developer finished the apartments but failed to complete the roads,聽 lighting and install adequate drainage and waste removal. They then went bust, she has tried to get her title deeds but so far she has failed to do so.聽 Apparently the outstanding work needs to be done before the deeds can bee issued.
This must be a case where the European courts should get involved.
@MacGeorge8035
Quite a few have been caught by that and one complex developer failed to complete pool, fire doors and the specified sewage system... That complex is now in negotiations with a holding company to resolve the outstanding matters...sadly owners left holding the baby and their share of costs over and above the purchase price ...
Even municipalities have to take their share of blame and responsibility as they signed off the property as complete so it could be sold ..lawyers implicated estate agents even banks etc ...but they won't and dont imo
Update 19 July.
According to the Interior Minister, Title Deeds that have already been issued to buyers cannot be taken back. The Minister is already on the case and is expecting to put a revised law for consideration before parliament in Sept.
So far the trapped buyers law is suspended.
What a mess!
Thanks to Cyprus Property News
The majority of this mortgage debt is owed to those that bought up greek bank debts who loaned to cyprus banks ( IMF and EU Bailout Fund)
The debt has not gone away and as part of EU reforms tied to the EU bailouts banks and public sector jobs were targeted to reduce cyprus government expenditure and regulate the聽 cyprus financial sector to comply with EU standards.
Hellenic bank have recently been taken over and their share of the pryamid of mortgage debt has been taken on by the new owners Eurobank (Greek)
Aplha Bank (Greek)聽 聽hundreds of clients of the Alpha Bank in Cyprus will have received from their Bank a Registered letter informing them that they (the Bank) have now transferred their Loan/ credit facility to a third party. The third party who have now acquired the credit facilities is a Company registered in Cyprus called SKY CAC Ltd who will now 鈥渢ake over鈥� the management of the Loans with a view to recovering 鈥� where appropriate 鈥� the amounts from borrowers. In particular, those Borrowers who are in default of their housing
The recent ruling by a Cypriot court declaring the Trapped Buyers Law unconstitutional underlines a significant tension between national constitutional law and the overarching principles of EU law. This decision has brought to the forefront the critical issue of regulatory inadequacy, where the legal framework in Cyprus failed to protect home buyers from exploitative practices by developers and banks. Specifically, the lack of sufficient regulation allowed developers to remortgage land on which homes were being built, jeopardising the buyers' investments and security.
The supremacy of EU law over national laws is a foundational principle within the European Union, ensuring uniformity and coherence in legal standards across member states. This principle mandates that when national laws conflict with EU directives and regulations, EU law prevails. This is particularly relevant in cases like the Trapped Buyers Law, which aligns with EU directives on consumer protection and fair practices in property transactions. The EU's intervention underscores the importance of safeguarding consumer rights and enforcing regulations that prevent malpractice by developers and banks.
The ruling by the Cypriot court, while adhering to the national constitution, may face challenges under EU law due to its potential conflict with EU consumer protection standards. The European Court of Justice (ECJ) may be called upon to adjudicate such conflicts, ensuring that the rights of home buyers are upheld and that member states comply with EU regulations. This situation highlights the ongoing need for robust and transparent regulatory frameworks that protect consumers and maintain the integrity of the property market.
The involvement of the EU in this matter serves as a reminder of the critical role it plays in advocating for consumer rights and enforcing regulations that promote fair practices. It also underscores the necessity for member states to align their national laws with EU directives to ensure comprehensive protection for all consumers across the Union.
Thousands of property owners in Cyprus do not have titles
It has been reported that thousands of flat and house owners in Cyprus are unable to obtain title deeds for their properties.
This information was provided on Wednesday, 17 July, by Elikkos Elia, Permanent Secretary at the Ministry of the Interior.
Mr Elia stated that the Land Department currently has a backlog of more than 9,000 applications, of which only 2,331 fulfil the necessary criteria for issuing titles. He also highlighted that since 2015, the department has received 21,495 applications from trapped property buyers in Cyprus. Of these, in 11,158 cases it has been able to transfer title deeds.
Mr Elia stated that the primary reason for the Land Department's refusal to issue title deeds is the developers' indebtedness to local banks from which they have borrowed. He also noted that some projects were executed without adhering to the requisite procedures.
"We are faced with the fact that many property developers have failed to honour their obligations. Banks have provided money, but the developers have been unable to fulfil their financial obligations. Often people purchase objects at the design stage, without knowing whether the property construction permit has been obtained and whether the object will eventually be built as planned," said Elia.
It should be noted that the Cyprus government adopted the Law on Deceived Buyers in 2015 in response to the activities of fraudulent property developers.
The programme's primary objective is to assist individuals who, for various reasons, have been unable to obtain title to their properties. Since its inception, the government has encountered thousands of such cases.
In accordance with the established regulations, individuals who have been the victims of fraud are required to submit their applications to the Department of Land Cadastral Registration. The department is then obliged to conduct an investigation and issue title deeds, provided that the property in question corresponds to the specifications outlined in the building plans.
There are three categories of property owners who find themselves without a title:
Those who have fulfilled all their obligations but have been unable to obtain a deed due to the developer's outstanding debts.
Those who were unable to obtain a title due to making illegal alterations to their property.
Those who did not receive a title because the developer was building in an irregular manner.
Those in the first category are entitled to a free title. Those in the second category must pay compensation, the amount of which depends on the type of violation. Those in the third category can get the title for free, and in this case the Ministry of Internal Affairs demands compensation from the offending developer
Source
How many of these property developers, bank officials and lawyers who committed this fraud are in gaol.
@Toon Sorry,聽 I was being sarcastic!!!
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