property already had a mortgage

[Janner]

Hello, I am hoping you can offer advice on the my situation. I purchased a new apartment from a developer in Cyprus. I was told that the lawyer was independent. The building work is still going on but the bank recently contacted me to tell me that the mortgage was in arrears. I contacted the developer who told me that it was my responsibility to pay it now (was guaranteed rental). My 'independent' lawyer told me the same thing. I then saw the article about a possible breach of legislation by not being told material facts prior to purchase. I checked with the bank to see if the developer had a mortgage on the land that my apartment sits on and they do. I contacted my lawyer and asked why they hadn't told me this important fact. They told me it was ok because a waiver would be issued by the bank on completion of the build and when the title deeds were issued. I checked again with the bank asking about the waiver but all they said was that all legal issues are the responsibility of my lawyer who is now not replying to my emails! I contacted the bank to say that I was trying to resolve the issue and could they bear with me. The bank have now contacted me threatening legal action. I feel completely let down, I fails to see why I should continue to pay a mortgage for something that could be taken away from me if the developer goes bust. Surely my lawyer had a responsibility to tell me about this 1st charge on property (developers mortgage) and surely the bank shouldn't have given me a mortgage for something that was already mortgaged. Had I known about this I would never have bought the apartment. I am now concerned that the Cypriot bank will take legal action against me in the UK and go after my assets. I have asked for all documentation from my lawyer and the bank but have nit received a reply. I feel that I have been misled and that it isn't my fault but due to ther corrupt practices and blatant flouting of the law. If anyone could offer me advice it would be much appreciated. Kind Regards, Janner

[Nigel Howarth]

Hi Janner & welcome to the forum,

I am afraid that you are one of the many thousands of people who have been mislead by the dubious practices of nefarious property developers, banks and lawyers.

Of course your lawyer should have advised you of the first charge, but I suspect that he was not as independent as he claimed - either that or he was negligent - or perhaps both.

I carried out a survey some time ago. Out of the 1,036 people who responded, 1,012 (98%) said they would NOT have bought a property had they known the land on which it was built was mortgaged. So it is easy to see why the developers, banks and lawyers do not disclose this information to their clients.

Do you know the amount of the developer's mortgage?

The reason I ask is that if a developer wants to sell property to those who need a mortgage, he will act as their guarantor. BUT the bank will not allow him to act as a guarantor unless it has a charge on the land. The system here is absolutely crazy!

But on a more positive note, if the developer were to be forced into liquidation by the bank, there is a possibility that the bank will not attempt to recover your property (providing that you maintain your mortgage repayments). The reasoning behind this is that it is unlikely that the bank will take action against you because you are one of its customers and they have no grievance against you. But I have to stress that this is theoretical as the situation hasn't arisen yet.

However, those who made a cash purchase would not be so lucky if the developer's assets were liquidated. They would be 'unsecured creditors' and one of the last in line to receive any money.

Regarding your contract of sale, the clause that talks about the bank issuing a waiver when the Title Deeds are issued is completely pointless. What it should have said is that the bank will issue a waiver when you take delivery of the property (and you should have had that waiver from the bank when you signed the contract).

As for the guaranteed rentals - was this written into your contract? Many of these promises are empty and another of the dubious practices employed to entice buyers. I'm afraid that if it was not written into your contract of sale you will find it impossible to get this 'promised' rental income from the developer.

It is possible for a bank you get a judgement against you in Cyprus and then apply to a court in England and Wales (and Scotland I believe) to have the court's decision upheld. Whether the bank would be foolish enough to do so is another matter. It would undoubtedly make headlines in the UK press and add yet another nail in the Cyprus' coffin.

What I suggest you do is speak to a solicitor in the UK and get their assessment of the situation.

You could also sue your lawyer in Cyprus for negligence. A British couple successfully sued a lawyer in Paphos for negligence and the Supreme Court awarded them €120,000 in damages - you can read the story at http://www.news.cyprus-property-buyers. ... /id=004686

One more thing, the EU are onto this scam. Recently, Daniel Hannan raised a question in the EU Paliament and we are waiting for a response from the EU Commission - see http://www.europarl.europa.eu/sides/get ... anguage=EN

Regards,

[Janner]

Thank you Nigel,

I have stopped paying my mortgage because I have been miles. I do not believe that is lawful in light of the articles on your website. I guess time will tell. If the banks, developers and lawyers are so confident that they acted lawfully then it can only end up in one place. The court room! My concern is that I am paying into something for which I carry all the risk. If the developer goes bust then the bank can just take it. I cannot take that risk and feel it would be silly to do so. Therefore, no mortgage payments for me. I assume that if the bank goes after me then they are confident in the legality of their process, so this will be a test! We cannot have one EU law for some countries but not others. I guess it comes down to interpretation of the law and we are back to the court room again. If the banks don't challenge it then surely they will lose vast domes of money? I cannot believe that this hasn't been tested in court yet. What are the banks doing about all those who have just walked away? Have they been chased? Also, you mentioned England, Wales and possiblyScotland. What about Northern Ireland? I contacted Louise Zambaratas. Is she reliable and how do you know? Also, and finally, if the banks are in the wrong will they bother chasing me? That way I lose my initial investment but get to walk away. If I go after them I might spend the same in legal costs which, even if I won, I wouldn't see as the developer would just go bust and the bank would have my property! Seems like the easiest option is to walk away if possible. Lots of questions, I appreciate that, but I look forward to your reply.

Regards

Janner

[Nigel Howarth]

Hi Janner,

Sorry for the delay - computer problems.

I don't know of anyone who has been taking to court by a Cyprus bank - but that doesn't mean it isn't going to happen. And until a 'specimen' case has been ruled upon, nothing can be ruled out.

I believe the laws in England & Wales are different from those in Scotland & Northern Ireland, which is why I made the comment.

I have either spoken with or met with a number of the lawyers on the British High Commission's list. Louise (sometimes) answers questions on this board and a couple of others and I have had several conversations with her. You don't need to worry about her honesty and integrity.

Only a court can decide if the banks are in the wrong - and until that happens, everyone is in limbo.

Regards,