By borrowing in Swiss francs, many individuals in Cyprus have been exposed to a double currency exchange risk.
For the most part, none of the banks are willing to repossess properties and release their customers from these loans at the present time. This is owing to the fact that the currency loss combined with falling property prices will have caused substantial negative equity. Consequently, even if the bank or developer manages to sell the property, they will not realise sufficient funds to repay the loan. In view of this, should you default on your loan the bank will eventually terminate the loan and start court proceedings against you for the full amount owed to the bank together with interest and legal costs. Should the bank be successful and judgment is granted against you by a court in Cyprus, the judgment can be registered and enforced in the United Kingdom. Whilst it has not been the traditional policy of the Cyprus banks, there are now a number of clients who have enforcement actions against them in the United Kingdom as a consequence of a bank judgment taken in Cyprus.
There is no doubt that it is better to address the situation and try to find a solution to the problem before the bank takes the step of instituting court action.
Depending on the documentation that was signed at the relevant time and the manner of signing, it is possible that a case can be raised for mis-selling of the Swiss franc loan. All documentation signed with the bank and any power of attorney which may have been given to a lawyer to sign on your behalf, as well as which developer and project were involved, will need to be reviewed by a legal representative.
The following is a summary of the typical arguments that have been raised with the Banks on behalf of our clients.
1. Many of our clients did not see a copy of the Loan Agreement signed by their previous lawyer and were not informed of the terms of this Agreement. This is a failing on the part of the bank as well as the acting lawyers.
2. The bank owes a duty to its customers to ensure that they receive professional and appropriate advice from the bank regarding the loan currency and alternative financial products which may be more appropriate to the customer’s circumstances. As a business dealing in the sale of financial products to consumers the bank was under a clear duty of care to advise on the most appropriate form of currency and on the risks associated with a foreign currency loan. These duties have been breached in most cases.
3. At no time did the bank explain to its customers the risks of borrowing in CHF and the possible losses they might incur as a result of currency fluctuations between the Swiss franc and the Euro and Sterling. Usually no illustrations were provided as to the impact such fluctuations could have on the debt to the bank.
4. Customers were not informed that they would be expected to make a final instalment for the property, of an unspecified amount to repay the balance of the loan at the end of the term. This is blatantly misleading and in contravention of EU directives as the total cost of the finance/loan is not stated.
5. The bank has increased the margin applicable to such loans on several occasions. Whilst the bank often has discretion to vary the margin, that discretion is to be exercised ‘within the framework of the law, the regulations for monetary and credit control in force from time to time, the market conditions and the liquidity and funding costs’. As the increases have been made during a time of economic crisis and recession, the exercise of the discretion is unjustified. Furthermore, the provision in the loan agreement is arguably an unfair contract term.
6. Central Bank Guidelines in place at the relevant time regarding foreign currency loans were not adhered to.
7. The European code of conduct on mortgage loans has been completely disregarded despite its adoption by Cyprus banks
8. A strong claim under the EU directives regarding consumer protection and fairness in consumer contracts.
SETTLEMENT OR LITIGATION
There is an obligation on the bank to place our clients in the position they would have been in if the arrangements for their loan had been handled correctly and lawfully.
Some of the banks in Cyprus are willing to give serious consideration to converting their loans to Sterling or Euros at a fair and appropriate exchange rate with the currency losses to be deducted/written off and to reinstate a lower rate of interest.
In cases where the bank is not willing to settle as above, litigation on the grounds of mis-selling is an alternative.
By Louise Zambartas of L.G. Zambartas LLC International Law Firm Email: firstname.lastname@example.org
The law of inheritance in Cyprus is embodied in a system of “forced heirship”. This means that (for those to whom the rules apply and who have not made or cannot make a will in Cyprus) the law itself determines who will inherit a person’s estate when they die. The rules of forced heirship in Cyprus are fairly complex and inheritance depends upon which family members survive the deceased.
The estate will be divided into two sections:
The Disposable Section; and The Compulsory Section
The Disposable Section is that portion of the estate that can be passed by will. The exact amount of the Disposable Section will depend on who the surviving relatives are and will usually vary between a quarter and half of the entire estate.
The rules relating to the Compulsory Section, once again, depend upon who the surviving relatives are at the date of death. Special provision is made for a surviving spouse who will inherit a share, the amount of which will depend upon who the other surviving relatives are. The most common case scenario will be where the spouse and children survive the deceased, in which case the surviving spouse’s share is equal to that of each child. However, even if there are no children or descendants of children, the surviving spouse’s share will be determined according to the existence of other relatives of the deceased. The assumption made by many people that under Cyprus law the spouse will inherit all of his or her partner’s assets is therefore clearly incorrect.
To Whom Do The Cyprus Rules Apply?
The Cyprus rules apply to: The estate of a person domiciled in Cyprus; and The immovable property of those not domiciled in Cyprus.
Therefore in order to determine whether the Cyprus law will apply to an individual, he or she must firstly determine his or her country of domicile. Domicile is a tricky area of law and a person’s country of domicile is not (as many people would imagine) the same as his or her country of residence. Broadly speaking domicile will be determined by examining a person’s country of permanent residency and the place that he or she intends to spend the rest of his or her days. Therefore even though a person may live in Cyprus, any possibility of their return to the UK (indicated for example by the retention of bank accounts, pensions, property etc in the UK) may be evidence to refute establishment of Cyprus domicile.
Who Can Make A Will in Cyprus?
Special concession has been made allowing some people to make a will in Cyprus. In Cyprus a person who, or whose father, was born in the UK or in a Commonwealth country is allowed to make a will governing who will inherit the whole of his or her estate in Cyprus.
Types of Will
If a person is entitled to make a will to govern his or her assets in Cyprus then careful consideration must be given to the interrelationship between the Cyprus will and any other existing will covering assets in another country. For example, an English person may have an English will in place to deal with his or her estate in England. A corresponding Cyprus will can be drawn up to sit alongside the English will, purely to deal with the Cyprus estate. Great care must be taken to include specific wording that will ensure that the second Cyprus will does not revoke or replace the English will so that both documents work smoothly side by side.
If You Cannot Make a Will
If the Cyprus rules apply to you and you do not fall within the category of a person who, or whose father, was born in the UK or in a Commonwealth country then you can still take steps to plan for what will happen to your estate in Cyprus when you die. A will may be drawn up relating to the Disposable Section and the establishment of trusts and making of lifetime gifts can be utilised to ensure that your estate passes in the manner you wish.
The laws of inheritance in Cyprus embody a system of forced heirship and will apply to: i) the estate of a person domiciled in Cyprus; and ii) the immovable property of those not domiciled in Cyprus. The rules can be bypassed if you are a person who, or whose father, was born in the UK or in a Commonwealth country, in which case it is possible to make a will to determine who will inherit all of a person’s estate in Cyprus. It is advisable in all cases to seek guidance from an expert who can consider your individual family circumstances and advise accordingly.
If you need legal advice do not hesitate to call L.G. Zambartas LLC, Law Offices on 25373734 or email email@example.com or look at our website www.cyprusproperty-lawyer.com
The title deed problem has been highlighted recently in the press and both the Cypriot and British governments have entered the fray. After coming under increasing pressure to act, the Minister of Interior, Neoclis Sylikiotis, has stated that serious efforts have been made to bring about the reformation of the whole system regarding title deeds in Cyprus. A package of amendments has been promised which should speed up the issuing of title deeds and the goal is to issue 20,000 title deeds by the middle of 2010. If this happens, it will constitute a one fifth reduction in the number of people who are currently facing difficulties.
Should this be achieved, some people waiting for their title deeds may find a solution. Clearly many others will not. In order to know whether you are likely to get your deeds soon, it is essential that the property owner understands the reasons why he does not have his deeds. It is only by knowing the cause of the problem that we can see if a cure will be available.
It is useful to understand the process which must be followed in order for title deeds to be issued. Firstly, title deeds exist for all of the land in Cyprus as a system of registered land operates. If you buy a complete plot with its own certificate of registration (title deeds) then this will be transferred into your name and you have your title deeds, no problem. Where we have problems with title deeds is where an existing plot is to be subdivided into smaller plots. Each of those parts will eventually be issued with its own new and separate title deed. So, how does that come to pass?
Everything begins and ends with the developer. An application must be filed for the division of the plot and a permit obtained. The properties must be completed. The developer must then submit paperwork confirming completion to the local government planning department. The planning department will check that construction has been completed in accordance with the planning permit and building licence issued to the developer. Assuming all is well, a certificate of completion is filed at the Land Registry who then begin the process of issuing separate title deeds for each of the individual properties on a project. Finally, when the Land Registry’s work is complete, the developer will be notified that the separate title deeds are ready to be issued which should then be passed on to the buyers. At this point, the transfer fees should be paid by the buyer and within a few months the deeds are sent out by the Land Registry. It is only then that the buyer of the property becomes the absolute legal owner.
Hence the developer, central government departments and local government departments are all involved. This gives plenty of opportunity for something to go wrong and for delays to occur.
The most common causes of delays are as follows;
• The developer himself is not the sole owner of the land – ie. there are co-owners and other pending sub-divisions of the plot; • Developers delaying in completing the actual physical construction of projects, now having been made much worse since the start of the economic crisis; • Developers delaying in submitting their paperwork to the authorities; • Developers building properties without planning permission or a building licence being issued or building in contravention of the permits; • Developers being unable to discharge any mortgage over the entire plot of land where a project has been built; • Developers unable to pay the taxes due to the government before title deeds can be transferred; • Delays and inefficiency within the local government planning departments; • Delays and inefficiencies in central government departments ie. the Land Registry; • Finally the owners themselves may create a problem if they have made changes to their property without securing the necessary planning permit and building license.
For anybody worried about their title deeds, it is important to find out which of the above problems apply. Establishing where in the process the problem lies is something which can easily be done by a lawyer.
Provided the purchase contract was registered at the Land Registry then the buyer has the right to take court action to force the developer to transfer the separate title deed into his name. This can only be done if the Land Registry has completed its work and the title deeds are ready. If this is the situation then we know that the cause of the delay is most probably financial difficulties on the part of the developer. In the current economic climate this is likely to be a common cause of delay in obtaining title deeds. The Minister of the Interior does not appear to have specifically addressed this problem except to mention that it proposes to introduce penalty fines to developers who do not cooperate in a timely manner. It is difficult to see how this will help in the situation where the developer is not transferring the deeds owing to lack of finance!
In addition to checking on the source of the delay, there are also certain other steps which property owners should take. Firstly, the buyer should make sure that his contract has been registered at the Land Registry. If the contract has been registered, it will have a deposition number and a receipt will have been issued by the Land Registry. If you did not use a lawyer, there is a significant risk that your contract will not have been registered. As this deprives you of important rights regarding the issuance of separate title deeds, this is something which you should treat as urgent.
Secondly, all owners of properties without separate title deeds should know what the developer’s situation is concerning mortgages on the whole plot of land on which the project has been built. We are only interested in mortgages which were registered before the buyer’s contract of sale and it is important to be aware that most land will have been mortgaged by the developer. It is only by knowing the mortgage status of the land that individual owners can assess the risk they are taking when buying a property and how likely it is they will get their deeds.
To conclude, it is to be hoped that the package of proposed reforms will actually become law. If they do, assistance will be available to some of the homeowners currently waiting for their title deeds. It is certainly good to know that the problem is being addressed, rather than ignored as previously. Nevertheless, it is important for homeowners to take some responsibility upon themselves to find out what is causing the delay in their particular case and to take appropriate action for the protection of their own property.
Louise Zambartas, English Solicitor and Cyprus Lawyer Tel: 00357 25-373734, Fax: 00357 25-725502 Email: firstname.lastname@example.org, Website: http://www.cyprusproperty-lawyer.com.