Banks will not raise legal obstacles in cases where trapped property buyers, victims of insolvent property developers, have paid off their loan in good faith, effectively promising to resolve a problem which has dogged thousands of buyers and damaged Cyprus’ reputation.
The assurance was given by the president of the Association of Cyprus Banks, Christos Patsalides. He told the House Finance Committee that the banks undertook where buyers had paid off their property in good faith, not to raise legal obstacles or objections for the property to be transferred to its owners.
He said the issue was complex, noting that the situation differed from bank to bank. But he said that the country must stop creating trapped buyers and urged the government to table legislation regulating the issue.
Thousands of property buyers who had paid off their property to the developer have been unable to obtain their title deeds because the property developer has used it as collateral for loans. Efforts by the government to resolve the issue over the past few years had at times stumbled on legal objections raised by the banks.
Moreover, Patsalides agreed that in an event a guarantor dies or goes bankrupt, his ‘share’ of the obligation should not be passed on to remaining guarantors.
Committee chairman Averoff Neophytou welcomed the pledge on trapped buyers, saying that this addresses an undertaking made by Cyprus as part of its economic adjustment programme, as well as the bad reputation Cyprus had acquired since the problem also affected foreign buyers.
“We have a solution today for what was a Gordian knot for five years and I welcome the decision of the Association of Banks,” he said.
“Today is a very important day for thousands of Cypriots and hundreds if not thousands of foreign buyers because based on this undertaking, if they have acted in good faith and there was no fraud involved, they will finally be able to get their title deeds,” he said.
He added that this solution will serve as an incentive to borrowers who were not paying off loans, concerned that even if they did pay, they would not get their tittle deeds.
The undertaking is effectively a gentlemen’s agreement as it cannot be included in a law because of constitutional restrictions.