For the first time in Cypriot jurisprudence, the Nicosia District Court has suspended the sale of mortgaged properties after finding breaches of the law in the terms of mortgage agreements.
Local property experts noted that this decision could affect other borrowers, as many mortgage contracts on the island contain similar controversial clauses.
The case was brought by the owners of two flats and a shop, who said that their mortgage agreements had been drawn up illegally. It turned out that the bank had included additional commissions, insurance premiums and payments not required by law in the terms and conditions, rendering the mortgages legally invalid.
The plaintiffs' lawyers, Andreas Matikolonis and Chrysos Papachristodoulou, referred to Law 9/65, which regulates credit obligations, and pointed to the violation of Articles 5, 8 and 21. They argued that the contested terms and conditions did not clearly define the amount of the debt, interest and additional costs, which put their clients at a disadvantage.
After careful consideration of the cases, the Court agreed with the arguments put forward and recognised that the borrowers' chances of winning further proceedings were very good.
Key arguments in favour of the borrowers included:
- Vague wording in the contracts that made the final amount of debt and payments uncertain.
- Additional payments not directly related to the mortgage, which increased the debt burden.
- The risk of losing the home if the bank had obtained the right to sell the property before the end of the proceedings.
As a result, the court froze the foreclosure process, setting an important precedent for other mortgage borrowers facing similar problems. Experts believe that this decision could open the door to renegotiating the terms of many mortgage contracts. Borrowers who find themselves in a difficult situation due to unfavourable bank conditions can now refer to these cases in their lawsuits.
It should be noted that the problem of mortgaged properties in Cyprus is still topical and this ruling may have serious implications for financial institutions and the property market as a whole. Banks may now have to review their lending policies in order to avoid new lawsuits and judicial stays of foreclosures.
As a reminder, a mortgaged property is any property where the owner has defaulted on a mortgage.
There have been many cases in the Cyprus property market, especially in the late 2000s, where someone took out a mortgage with a bank and then was unable to repay it. Such properties are usually repossessed and sold at auction. Many people mistakenly believe that mortgaged properties are sold like goods in a shop, but only at a discount. This is not the case.
It is not uncommon for the final value of the property at auction to be unreasonably high. In order to get the best deal, you should buy the property before it is transferred to the bank's balance, as this will add an extra financial burden to the cost. In other words, it is better to negotiate with the original owner and buy the object you are interested in with a good discount and financial obligations.