British Property Owners bring claims against Cypriot banks
22 June 2014
Property values in the Greek Republic of Cyprus continue to drift downwards. There have been many bargain hunters looking to purchase distressed assets during the first few months of 2014. While the property markets in both the UK and USA reached the bottom in 2012 and started to revive, this has not been true of Southern Spain and Southern Cyprus.
Coupled to this uncertainty as to the timing of purchases, there remains the intractable problems of securing a Title Deed in the Greek Republic of Cyprus. There is a long delay between the final payment for a property, at which time possession is granted, and the issue of a title deed. There are a number of things that need to be done before a title deed will be issued, primarily the payment of taxes by both the purchaser and the vendor. Many vendors are extremely reluctant to settle tax obligations.
During June 2014, several hundred property claims brought by British victims against Cyprus banks, developers and lawyers have begun to be settled before the matter went to the High Court in London.
The cases against Alpha Bank Cyprus and more than 20 Cypriot property developers, agents and lawyers were due to be heard in June in the High Court to see whether the English Courts have jurisdiction to determine such claims. Binding heads of agreement for the settlement have been reached.
The British victims have been represented by several UK law firms. Cases have been pooled together, so the litigation would have been categorised as a class action. One UK law firm is representing around 100 UK victims of mortgage and property mis-selling in Cyprus.
This may significantly alter the landscape for all victims. We have been battling hard to ensure justice for victims of unconscionable conduct by Cypriot banks, developers, their sales agents and lawyers,” McNair, a UK lawyer, said.
McNair, whose firm has been able to engage various Cypriot banks in settlement negotiations, also said that it is essential to issue proceedings in England promptly to protect victims from being sued first in Cyprus by the banks.
“Act fast to instruct specialist solicitors familiar with both the English and Cypriot legal systems, who have experience of formulating the correct claims and of dealing with these defendants and who will be taken seriously by them,” McNair said.
This is an interesting state of affairs, due to the fact that both the UK and the Greek Republic of Cyprus are members of the EU. As part of the vision for closer union between EU states, there exists a facility whereby legal judgements, handed down in an EU states, can be enforced in other EU jurisdictions. This means that the UK victims of Cyprus property irregularities can sue the Cypriot institutions in London and then the UK lawyers would seek to enforce the judgement against the assets of the Cypriot institutions in the Greek Republic of Cyprus.
This facility first came to public prominence during the Orams case, when a Greek Republic of Cyprus court ruled against Linda and David Orams and then threatened to seize their assets in the UK if they ignored the judgement. This was the more remarkable as the dispute was focussed on a property in the Turkish Republic of Northern Cyprus, which is outside the jurisdiction of the EU.
Mr McNair also raised awareness to the fact that non-performing loans are currently being targeted by banks and that repossession judgments obtained in Cyprus can be enforced on UK assets.
Over recent years almost 15,000 UK residents have purchased Cypriot properties off-plan. Large loans have been eagerly provided by Cypriot banks, frequently in Swiss Francs for their low and supposedly stable interest rates, against overvalued properties, often never adequately built out.
Mr McNair stated “Commonplace features of such cases are a failure to advise on the risks of foreign currency mortgages, serious misrepresentations as to the property itself and dubious powers of attorney held by Cypriot lawyers, as are unhealthily close relationships between the banks, developers and selling agents.”
UK nationals' loans in Cypriot banks are estimated at almost €2 billion, of which two-thirds are non-performing.
One clear lesson of this ongoing saga is that it is unwise to borrow large sums from EU banks in order to purchase a holiday home in the sun. Despite the fact that these loans are proactively marketed by Estate Agents, who will often complete the paperwork on a purchaser's behalf, overseas debtors are especially vulnerable. The loan books of Republic of Cyprus banks are overloaded with what are euphemistically described as non performing loans. Most of these loans are to Cypriot property developers and builders. As these organisations have close affiliations to the banks, a bank is unlikely to foreclose on these loans. Therefore, the overseas assets of a British or German property buyer present attractive targets for Cypriot banks.
22 June 2014