Bank Waiver

[slwright]

Hi I hope you don't mind me writing to you Louise but I have received the Bank's waiver and wondered if there should be anything else I need to request from either my solicitor/developer or Bank to safeguard our rights.

The letter I received from the Bank of Cyprus is in my opinion not really a release from the mortgage at all it just says that they declare that they shall release from mortgages No. .... dated .....2007 and No...... dated 2004 which is registered in their favour provided that the amount of EUR....... (the amount we are paying) will be deposited with the developer and provided further that a separate title deed for the aforesaid apartment has been issued by the Land Registry office. It this a typical "Waiver"? I was a bit concerned about the fact that it mentioned morgages the plural as we have not taken out a mortgage and can only presume that the developer takes a mortgage on each separate apartment. The last payment is due in January 2009 on which date the full payment will have been paid. Can you explain to us about this letter from the Bank.

We would appreciate your advice on this and look forward to hearing from you.

Many thanks
Sheila

[Nigel Howarth]

Hi Sheila

It certainly isn’t a waiver – it’s a letter confirming that the bank has 2 mortgages on the property – one taken out in 2004 and the other in 2007.

What it means is that the bank has first call on the apartment. So if the developer fails to pay off the mortgage or goes bankrupt, the bank will be able to sell/auction the property to recover the debt (even though you may have paid the developer in full for the property and may have been living in it for a number of years).

If the developer pays off the mortgage, it will be possible for him to get a clearance certificate from the bank stating that the property you’re thinking of buying is not mortgaged. But whether he’s prepared to do this is another matter.

I’m very surprised that your lawyer didn’t uncover the fact that the property you’re thinking of buying is mortgaged and advise you accordingly. Are you sure you’re dealing with an independent lawyer and not one who’s in the pocket of the developer?

I expect that Louise will be along with her advice on what to do in this situation.

Regards,

[slwright]

Dear Nigel,

This is what I thought. The letter didn't seem to indicate to us that the Bank would waive any mortgage on our apartment. This is so worrying. I am really beginning to think now that my solicitor is in their pockets because when he eventually replied to me with all my questions he said that he has dealt with our developer on many occasions and this was one that could be trusted 100% and that we would get our title deeds within a 2 year period. Is it normal for individual mortgages to be taken out, in which case why does it take the developer so long to get the title deeds, why can't each apartment once paid for get a release from any developer's mortgage on that particular property they actually bought and paid for, this does not make sense at all.

Should I reply to my solicitor and ask him to make sure that once we have paid the full amount for our property that he applies to the developer for a clearance certificate from the Bank.

Another worrying factor is that the Chairman of the Bank of Cyprus was the developer. I think you'll know who I mean now.

I am really looking forward to yours and Louise's advice on the matter.

Thank you one again
Regards
Sheila

[Nigel Howarth]

Dear Sheila,

In Cyprus, property developers raise the funds to start a development by mortgaging the land on which they’re building. However, once a property is sold there’s no requirement or incentive for them to pay off the loan. Some of them do pay off their debts; while others use the money they’ve received from sales to finance their next construction project, their next business venture etc. The banks do not appear to be worried about this – after all the banks are holding the property as collateral for the loan so if anything goes wrong, the bank can sell/auction the property to recover the debt. And in a rising property market, the banks will always be able to recover their money.

You also need to be aware of the fact that some property developers carry an enormous amount of business and political clout. To give you an example - a few years ago I tried to get an independent structural survey carried out for some friends of mine who were having some problems with their property that they’d bought from ‘xyz’. The surveyor, who was a member of ETEK, said that if he wrote a bad report about ‘xyz’ he’d never work in Cyprus again. You can appreciate how this would also affect those lawyers who are dependent on property developers for their business.

If you’re buying off plan, I cannot see any way that the Title Deeds to your property will be ready in two years. Issuing Title Deeds involves a long-winded, mind-numbing process involving the developer, the planning department, the local authority and the Land Registry. Assuming there are no complications, it can take ten years - sometimes a lot longer.

I’m not saying that all property developers and lawyers are bad – far from it. There are some very good and honest property developers around as well as decent, honest lawyers. But you need to choose carefully.

To reduce any risk, it’s essential that you take independent legal advice (see the red banner at the top of the page) and get a contract drawn up that will protect your interests.

Regards,

[slwright]

Hi Nigel,

Developers do pretty much the same here but in our case they borrow the whole amount required to develop the site. When each new build is sold and the full amount of money paid over from that property then a Release of Part of the Land (DS3) from the registered charge, in favour of the Developer, is then acknowledged by the Bank that that property is no longer charged as security for payment of sums due under that charge. The new owner then applies for first registration and is given his/or title deeds, usually with a first charge to a Bank or Building Society.

When each part of the build is ongoing Planning Inspectors come to the site and sign off each section, saving time at the end of the completion of the site and then a Completion Certificae is then given. Everyone is happy The Bank have got their money, the developer has made his huge profit and the purchaser is happy usually with their new home.

We are paying in stage payments so I guess the developers in Cyprus who have this system of payment do not have huge amounts to pay the Bank back quickly. The whole system is a complete mess and I really would not like to work at the Land Registry but I can understand why there is such a backlog. If they used the above system then everybody would be happy, they get a property that they have paid for instead of a hugely expensive rental.

Anyway, I look forward to hearing from Louise about the so called "waiver" and what I should do about it in the first instance.

All the best
kind regards
Sheila