Cyprus Off Plan Property Corruption Problems Continue

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A year on after the Greek banking crisis British and other foreign buyers of off plan property in Cyprus, still face issues of corruption in the banking and property sector. Now, 10 years on, the problems are increasing and still ongoing putting thousands of people in horrendous situations. The estimated number known to be affected is around 6000, but that’s growing, as awareness gains traction. If you are unaware of the problems here is a brief synopsis.

  1. Developers applied for mortgages to build property on land they did not technically own, and without building permits.
  2. New owners cannot apply for their own “permit” or property deeds until the whole development is finished.
  3. Builders often changed details on the plans as they were working, without getting the necessary permit changes, causing more delays.
  4. Many developments remain unfinished and lots of developers have gone bust.
  5. Property price indexes in Cyprus are notoriously unreliable.

Further problems are continuing to to add insult to injury for those stuck in this mess, including:

  • Little in the way of a police force to protect property assets.
  • There are still money blocks on removing cash from Cyprus banks.
  • Money that is stuck means developers can’t finish building works, even if they have permits etc.
  • Deposits for property (often tied to pension funds) are also stuck due to banks refusing to release funds.
  • Investors issued with termination notices, and writs of summons in Cypriot court, the courts ignoring the fact that the majority of investors are consumers and should therefore be taken to court in the UK.
  • Full funds have been released to the developers by the bank to spend as they please.

New Laws Passed In Cyprus

New laws have been passed in European Parliament, but of course, the system in Cyprus is so corrupt they are often not adhered to. Officially, the Limitation rules in Cyprus have undergone a significant change. The Parliament of Cyprus passed the new Limitation Law (N. 66(I)/2012). The implementation of the law was delayed(!) until 31 December 2013, however it is not anticipated that the implementation will be delayed any further.

The new Law introduces certain time-limits for the filing of civil claims and time starts to run on the day upon which the cause of action arises.

Under the Law, no civil claim may be filed after the passing of 10 years under any circumstances. In addition, the following are the limitation periods for the most widely-encountered civil claims:

1. A claim related to mortgages or pledges cannot be filed after the passing of the 12 years from the date on which the cause of action is completed.
2. The default limitation period for Tort claims is 6 years from the date on which the cause of action is completed. However, in the case of damages for negligence, nuisance, and breach of statutory duty the limitation period is 3 years. The time period is calculated from the time the cause of action is completed.
3. As the law has not yet been implemented, no time limit can expire under the above provisions before 31 December 2013. However, after that date, any claim which has not been commenced and in respect of which the limitation period has passed, will be statute barred.

Interpretation Of The Statute

As actions against the bank are likely to be based on misrepresentation or miss-selling, these are claims for negligence, and the time limit is therefore 3 years from the signing of the loan documentation. Claims against developers are often for negligent building at the time of construction, therefore this is also a claim based in negligence with a time limit of 3 years, with a time limit of 6 years in addition to a claim for breach of contract.

In accordance with the Cyprus Limitation law, the limitation periods apply not only to law suits, but also to counterclaims. The effect of this is that the bank has 12 years to proceed in respect of a mortgage/loan default, however a counterclaim to such an action will potentially be statute owing to the much shorter time period applicable.

Quote From Involved Parties:

” We have petitioned the EU parliament, and the EU Commission, the latter having issued infringement proceedings against Cyprus for failing to uphold European Directives, notably the Unfair Commercial Practices Directive and the Unfair Contract Terms Directive. However this only appears to be a slap on the wrist and although new legislation is emerging to protect new investors of Cypriot investors, nothing has yet been proposed to help current victims at risk of losing their homes in the UK.

We have cases in the ECHR because the Cyprus Consumer Protection Service (the only government appointed body in Cyprus in charge of investigating breaches of consumer protection law) who refused to investigate complaints against the bank and developer. We have no faith that anyone in Cyprus will listen or take responsibility for the corruption going on.

Lastly, there is a group of investors stuck in this mess are attempting to raise awareness again by getting a petition together and by trying to get Panorama program makers to revisit the story.

Editors Update Note From Cyprus Property Buyers Website:

Update – 13 February 2014. Receivers acting for the Alpha Bank are threatening to sell the homes of people who purchased property from defunct developer unless those people pay off the developer’s defaulted mortgages, their taxes and other creditors.

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