Law firms have urged Cypriot property investors to reject offers made by Cypriot banks, warning that the discounts offered on their mortgages will still leave them with “substantial negative equity.”
FTAdviser previously revealed there could be potentially be around 35,000 consumers with similar claims in Cyprus alleging they were mis-sold Swiss Franc mortgages and are now facing demand for huge mortgage payments, threats of UK litigation and the very real chance of losing their UK homes.
The large majority of the claims currently issued are against Alpha Bank.
Legal services company Judicare, which represents 250 people, and law firm Maxwell Alves, which represents 500 people, both told FTAdviser that Cypriot banks were offering investors a discount of between 25 per cent and 40 per cent on the current balance of their loan.
Neil Heaney, chief executive of Judicare, added that the proposed deal will actually depend on clients’ paperwork, including when they bought the property and what actual losses they will have incurred over that period while they were paying the loan in order to settle claims.
However, both law firms are advising their clients not to accept the banks’ offer.
Speaking to FTAdviser, George Kounis, consultant at Maxwell Alves, said: “Not all claims would fall under these offers as some people did not sign up for a loan, others did not receive their properties and others cannot afford the properties as their circumstances have changed.
“The banks have been successful in persuading hundreds of unrepresented owners to settle for a discount on their loan, but if one was to scrutinise the figures, the banks are giving back less than what they gained on the foreign currency loans, the interest rate margin hikes and the penal interest.
“This still leaves them with a substantial negative equity and pitiful rental incomes. Furthermore, where there are issues with the development these still need to be addressed. I believe banks are making these offers in an attempt to weaken our claim.
“If there are 500 people making a claim and that costs a total of £1m, it is split between the clients but if the number of clients halve their cost will double. Once you start eroding the number of people the bill goes up.”
Both law firms said that Alpha Bank is one bank who has made these discount offers.
Judicare says it is set to go to trial between October and December in Cyprus as it is not arguing with the banks about the jurisdiction. However, Maxwell Alves believes the issue of jurisdiction is central to the case and this is still being fought over.
Neil Heaney, chief executive of Judicare, said: “We have been through the preliminary stages and are now in our final stages of discussions and we are now waiting for issuance of trial dates for our first 40 to 50 clients who have been with us for the last 2.5 to three years.
“These are test cases as all these are similar - if a certain amount against the bank then their position would change. Our argument is that the loans are not valid.
“A number of banks are implicated but Alpha Bank has by far the most claims - we have 200 claims against it and at the moment we have 250 claims in total but this is growing every day.”
Where buyers are unable to keep up repayments, Mr Heaney said the Cypriot court is issuing writs to some UK consumers and that this should not be ignored, as there is an agreement in place between Cyprus and England that allows Cypriot courts to issue decisions.
He said: “The banks have stepped up the writs against UK buyers who are not paying back the loans. The banks are acting aggressively against those not paying back the loans.
“The loan agreements were done in Cyprus, the loans are in Cyprus so for non-payments of the loans, the banks just need permission to serve writs in England.”
Once a writ is received, investors will have a certain number of days to acknowledge the writ and if they do not, the bank will be in a better position to get a judgement to take a charge on people’s UK homes.
Mr Heaney said: “Many, many of these have been issued. There’s a lot going on now seeking people’s homes, that judgement is recognisable in England and they will get enforcement procedures to seize British assets.
“The banks need liquidity and if they do nothing, it could be seen as a sign of weakness. The banks have their position, and we have our position that the loans are not valid. Judgements from the Cyprus courts are now being enforced here in the UK.
“Under such applications to enforce the Judgements here in the UK, interim charging orders have been applied for and obtained by solicitors acting for the bank(s) and will be registered over those UK purchasers’ UK homes.”
Alpha Bank declined to comment.
