Developer Morgages

[AREonline]

Dear Nigel

I have an apartment on a small complex in Peyia. We took delivery in 2006 and all properties were sold. I and some other owners have a mortgage through Laiki bank of which our developer originally banked when we signed our contracts.

Last year the developer ceased all obligations to maintain the complex. We therefore setup a volunteer Management Committee to run our affairs. We also appointed a British Property Management company to continue maintenance on the complex, of which are providing a great service.

We have managed to reopen discussions with our developer as we still have issues to be resolved with the Final Completion Certificate and Title Deeds.

The Committee have filed an N50 form with the Land Registry of which we have gained information of an original mortgage on the land back in 2004 with Laiki Bank. The Committee then asked the developer about existing mortgages and any guarantees held with the bank to help fund new projects that may have an impact on the development and restrict selling the apartments or gaining Title Deeds. The developer responded with reassurance that there was no mortgage or is using the development as security for other loans or projects. The developer states the only reason the land is secured is to cover the waivers and guarantees for the clients who have a loan/mortgage on their apartment.

Nigel, can you please clarify what the developer means by this as he won't give any more details?

Kind Regards
Andrew

[Nigel Howarth]

can you please clarify what the developer means by this as he won't give any more details?

This is a bit difficult to explain - basically if someone needs a mortgage on a property that has yet to be issued with Title Deeds, the registered owner (i.e. the developer) has to mortgage the property to the bank and act as the buyer's guarantor.

This enables the bank to recover the property if the purchaser fails to maintain their mortgage repayments.

When deeds are issued, these developer's mortgage(s) will be transferred and lodged against the title of the property concerned, leaving the remainder free of any mortgage.

Regards,

[Janner]

This really is the big question. The one avoided by the Cypriot officials. What about the NPL's and the title deed mess it creates. I firmly believe that Cyprus' resistance to independent auditing of its banks books (debts and money laundering) is not to do so much with the level of debt but the type of debt. It will show that there was corruption all along and this will implicate too many senior figures. Lets not forget that the conflict of interest for many is clear to see. Some bankers are also developers, lawyers, agents or are very closely related with these other roles. Therefore, the conflict of interest is huge.

To me, the issue of developer loans and in particular non-performing developer loans is the single biggest issue affecting Cyprus once they have secured their bank bailout. I presume that the MOU (signed and sealed) needed to secure the reported €10 billion loan from the TROKIA will tackle this problem. Otherwise, Cyprus will be back, cap-in-hand, asking for more.

Unless the debt is dealt with head-on it will resurface, somewhere at some point. They no longer have the money to make the debt disappear. Every cent lent by the TROIKA will be monitored. If not, then the TROKIA are negligent with public money! This would not go down well in Germany, as we have seen in the past few weeks.

[Janner]

Oh, and before anyone says, "But what about the UK......blah, blah, blah". The difference is that the UK had the money to bail itself out. Cyprus doesn't. It's as simple as that, but the significance of the difference cannot be underestimated. Cyprus really has to accept what their new lenders say or face ruin.

[AREonline]

Dear Nigel

Thank you for your reply.

One of the owners on the complex has asked the following in response to you answer;

If the developer is acting as a guarantor against a default on a mortgage, how does it affect the following?

1. What if there are owners on the apartment complex that don't have a mortgage as they purchased outright when they took delivery of their apartment?
2. What if an owner's mortgage is with another bank?
3. What happens when the Title Deeds become available and an owner does not want to take them up?

Why can't Laiki Bank release the charges on those apartments where they are not the mortgagor?

Kind Regards
Andrew

[Nigel Howarth]

Hi Andrew,

If the developer has non-performing loans, I don't think anyone will be able to answer your questions at the moment.

As for question three - this contains an oxymoron. If he is the owner, then he has the Title Deeds - if he doesn't have the Title Deeds, he isn't the owner.

Assuming that he is not the owner and the deeds become available - and he doesn't want to have the property registered in his name as its legal owner, I suggest you call on the men with white jackets and a van and get the idiot taken away.

Regards,