developer's mortgage

[Jo B]

Hi, I'm new to all this so forgive my ignorance re some of the finer points of Cyprus home-buying...
We purchased off plan in a small development, the builder is now having "financial difficulties" & is trying to broker a deal with the owners where he gets paid a sum for transfering the Title to the buyers' names in addition to the buyers paying off his mortgage, which seems to have been taken out after contracts were signed. The situation is a lot more complicated- but my question at the moment is; if we wait for the developer to go belly-up -which looks exceedingly likely-will the Title be transferred to the bank, who have the charge on the land? In which case will we be able to negotiate a deal with the bank (to have the mortgage paid off) & save ourselves the developers "fee" for transfer?
Any advice appreciated!

Jo

[Nigel Howarth]

Hi Jo and welcome to the Cyprus property forum.

I'm sorry to hear of your situation, the current financial situation is giving many people a lot of headaches.

If your contact was deposited at the Land Registry BEFORE your developer mortgaged the land, then your claim to ownership will take precedence over the banks claim on the land. However, that mortgage will not go away - so when you come to sell your home, the bank will want the debt to be cleared - you could end up paying some of the proceeds from the sale to the bank. Although this may sound OK, the bank will continue adding interest to the unpaid amount which could grow considerably over time.

Also, you cannot just go to the bank and pay off the developer's mortgage because your developer will have to agree to you doing so.

If your contract was deposited at the Land Registry AFTER your developer mortgaged the land, then the banks mortgage claim will take precedence over yours. If the developer went belly-up, then you will be at risk of losing your home as the bank may dispose of it to recover the debt. But the bank may take a different approach and chase the mortgage guarantors to recover the debt (i.e. the person or people who guaranteed the mortgage on behalf of the developer).

I would be very wary of paying any "fee" to the developer as there is no guarantee that he will use it to pay off the mortgage. If you are going to have to pay anyone, it should be the bank.

What I suggest you do is take independent legal advice on how best to proceed. One of the things your lawyer will need to look into is the amount of mortgage outstanding - and then all of you on the development can see what it's going to cost you.

I know of situations where a developer has gone bust, but some of the people on the development refused to pay to get the road and other work completed. Needless to say this sort of thing doesn't help neighbourliness - and I hope it doesn't happen in your situation.

As I suggested above, you need to take independent legal advice. Louise Zambartas runs the legal section here - it would be worthwhile talking with her to see how best to move forward.

Regards,