New laws being introduced in Cyprus as part of its bailout deal with the ‘troika’ of powerful creditors could offer a lifeline to many of the thousands of British investors struggling with mortgages that have spiralled in value, ahead of a delayed court battle.
The changes will set guidelines for Cypriot banks’ treatment of their mortgage debtors in the country, introducing a mediation process that will strip banks of their power to simply foreclose where the owner still wishes to retain the property.
Laws were supposed to be passed last week, but it is understood that the final vote for the insolvency framework agreed with the IMF, European Union and European Central Bank, which includes five bills, will be heard in the Cypriot parliament on 17 April.
As a condition of the bailout, a system has to be in place to tackle bad debtors. The troika have specifically stated they are not seeking mass foreclosures.
However, while the new rules will help those seeking a solution to mitigate costs and retain their property they are unlikely to help those buyers who want to be rid of their investment, or who are alleging mis-selling and pursuing legal action.
FTAdviser has been tracking the plight of thousands of UK buyers of property in Cyprus, amid separate legal claims in both the UK courts and in Cyprus over mortgages which were issued in Swiss francs and which in some cases trebled in value due to currency fluctuations.
George Kounis, consultant at Maxwell Alves Solicitors, one of the law firms acting for around a thousand investors in a High Court claim, previously said British purchasers of properties in Cyprus have €1.6bn of loans outstanding.
He said balances have grown because Swiss franc loans appreciated in value against the euro while property values fell steeply.
Stylianos Christoforou, Cypriot barrister at Judicare, which is acting for 200 investors in Cyprus, said UK consumers were told they had to take out Swiss Franc mortgages and monthly installments trebled from around £400 per month to £1,000-£1,200 per month.
The large majority of the claims currently issued are against Alpha Bank. The law firms have alleged as many as 35,000 customers could be affected.
Alpha Bank has refused to respond to requests for comment.
In February FTAdviser reported the first court cases were scheduled for late March, but they have been delayed again and are now set to take place within the next six weeks.
As it currently stands, where buyers are unable to keep up repayments, the Cypriot court is issuing writs to some UK consumers at the behest of the lenders.
Neil Heaney, chief executive of Judicare, said under the current regime, banks are allowed to foreclose property which is 80-100 per cent owned by an expat or a national if the property developer is facing financial difficulties.
“This is one vulnerable group that need to be protected.
“[The new rules are] good news for those who wish to keep their property but face genuine hardship or difficulty and are looking for a workable agreement on their mortgage.
“It is not for those who believe they were mis-sold a mortgage or for those wishing, through taking up their rights before the Cyprus Courts, to be rid of their properties.”
Christos Triantafyllides, lead counsel for Judicare in Cyprus, and a member of the legal committee in Cyprus that has prepared the new laws, added that the new laws could also prompt a change in approach on the part of banks against some borrowers.
“The new legislation will however, and regrettably, signify the beginning of an ever more aggressive attitude on behalf of the banks against those who have borrowed from them, but are not consistent with the payment terms agreed.”
donia.o’loughlin@ft.com
