Cypriot government extends property mis-selling deadline
The Cypriot government has extended the deadline for lodging legal claims against alleged property mis-selling in Cyprus. A number of lenders and property developers in Cyprus have been cited in legal proceedings by an array of investors from around the world with a significant number from the UK. While many potential claimants were scampering to make last-minute legal claims the deadline has been moved to the 31 December 2014 which has taken some of the pressure off those caught up in the scandal.
This is an issue which is rumoured to have affected up to 15,000 expats from the UK and a whole range of other investors from around the world. So, what has happened with the Cypriot property market and why are so many UK expat investors up in arms?
Off-plan investments between 2003 and 2009
The investments in question were acquired between 2003 and 2009 which takes in the US mortgage crisis and subsequent property market collapse. It seems that the majority of those UK investors looking for legal redress acquired “off-plan” developments which were either unfinished or in some cases had not even started. There is some confusion as to why the situation has left many British expats so financially distressed but it seems that the “nightmare storm” of adverse currency fluctuations, mortgage rate increases and a collapse of the Cypriot property market came together in disastrous fashion.
Quote from PropertyForum.com : “A large group of determined property owners intend taking ‘class action’ for mis-selling Swiss Franc mortgages.”
Reports in Cyprus suggest that the majority of those impacted were buy-to-let investors who had planned to rent their properties to holidaymakers. This is an area of the worldwide economy which also collapsed in light of the US mortgage crisis thereby adding another nail to the coffin of investors in the Cypriot property market.
Surprisingly, when you bear in mind that Cyprus is part of the European Union, many investors in question were advised to take out Swiss franc mortgages as this currency was seen to be safe with stable interest rates. However, in light of the European crisis the Swiss franc appreciated by 40% against the euro, mortgage rates moved higher leading to a negative equity trap for many investors and increased mortgage payments.
There is some concern about the way in which these mortgages were sold and whether all of the risks were made clear to investors. There are also questions being asked about the powers of attorney used by Cypriot solicitors to complete the transactions and whether they were valid. These are matters which will be debated at great length in the coming months with investors left with around £1.3 billion of outstanding debts to Cypriot banks.
One of the main legal arguments is whether the cases in question should be heard in UK courts or Cypriot courts. Many of those caught up in the situation have been advised to lodge legal claims in both UK and Cypriot courts so that they are covered whichever way the legal argument falls. When you also bear in mind that some developers stand accused of using title deeds on customer properties as collateral for their own funding requirements this is indeed a dark chapter for the Cypriot property market.
We will continue to monitor the situation and report upon future developments as and when they are confirmed.
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