Cyprus Holiday Home owners-affected by financial fiasco?

March 28, 2013

Cyprus has never been in the press so much. This time not due to property-related news, but to do with how the Cypriot authorities are treating people’s money and savings held in Cypriot Banks, including Bank of Cyprus and Laiki Bank (unfortunately seemingly pronounced “lucky”, not sure many would agree with that though).

In the pasCyprus Beach-Pissourit there has been concern over property-related matters and Title Deeds have featured heavily, as thousands of foreign national buyers have had to wait to get their “Title” dully registered.

Generally speaking Government services in Cyprus are slow and paperwork can take a while, in the cogs of bureaucracy. During that time the Title Deeds have not been registered, the buyer can be vulnerable, dependent on how they have gone about registering their “Title” to the property. In the past some buyers acquiring new property have had to wait 12-24 months, or more, to get the Title Deeds issued in their name.

Cyprus Holiday Home owners or buyers of Cyprus property

Cyprus Holiday Home owners or buyers should be ok if:

  • a legal advisor conducted a full search at the Land Registry Office to make sure the Title was originally clean and that no prior mortgages existed on the property or land
  • the relevant building licences have been in order and issued correctly
  • the purchase agreement was properly lodged at the Land Registry office immediately the sales contract was signed, to meet the obligation of “Specific Performance“, which is meant to help the change in Title to be registered more quickly.

Given the subdued property-buying climate in recent years in Cyprus, I wouldn’t have thought there are that many buyers in the pipeline, who can now have much influence over the property purchase process, although many may still be waiting for Title Deeds.

According to statistics from the Department of Lands and Surveys, 2011 saw the lowest volume of home sales to overseas buyers for a decade and at their lowest level since the property market started to take off in 2001. 2011 saw the number of contracts deposited at 1,652 for the year, compared with 2,030 for 2010. At the height of the boom in 2007, 11,281 properties were sold to overseas buyers. The figures for 2012 are also down 11% on 2011.

It should be noted that some Banks have developer mortgages on their books, over which they have first charge. This may have been a mortgage secured against the land, on which the new building took place, to raise the money in the first place for the development. Unless the correct legal advice had been sought, some buyers may have been unaware of this. If this is the situation, the buyer will find it difficult getting the Title Deeds and therefore may not technically be the owner of the property, even though they might have their own mortgage on the property.

Up until now we have not seen much about the use of European Enforcement Orders (EEOs) originating from Cyprus. There have been one or two high profile Spanish property cases where these have been used by banks, to try to recover debt in the UK, from owners of a Home in Spain, who might have struggled with mortgage re-payments, or abandoned their Spanish property.

But given the circumstances in Cyprus, I would not be surprised if we hear about EEOs linked with Cyprus property over the coming years.

Cypriot banks may well try to use this cross-border, European, legal mechanism to recover loans, or parts of loans, if the property in Cyprus, they hold as security, is significantly devalued and unable to service the debt, or falls short of the mortgage value if it is sold. Given the banks are about to undergo huge changes in how they balance their books, then looking at the assets they hold will be high up on the shopping list of “To Dos”

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