Hope for British buyers duped during Cypriot property purchases
Many faced huge losses after being encouraged to take out mortgages in Swiss francs.
Thousands of people were duped when they were buying properties in Cyprus in the run-up to the financial crash.
Unlucky buyers didn’t get independent legal advice, were misled by solicitors and developers and were facing demands for huge mortgage payments, threats of UK litigation and the unthinkable possibility of losing their UK home.
Due to its relative strength and low interest rate at the time, a number of investors were encouraged by Cypriot banks to take out a mortgage in Swiss francs. Unfortunately its value soared post-2008, almost doubling mortgage repayments for many buyers.
But there is now some hope of redress, with overseas legal services firm Judicare saying it can potentially void loan agreements and free UK buyers from untenable agreements. It's currently dealing with 250 British cases.
Barristers from Cyprus law firm Trianyafyllides & Christoforou, appointed by Judicare, said that in many of the cases the power of attorneys that were used to sign the loan agreements were not valid as documents weren’t signed in accordance with the law. Furthermore, paperwork was validated without a certifying officer present, making the loan agreement and any other documentation potentially void. Local lending laws weren’t met either.
“All my dreams were shattered”
Tony Vasiliou is 27 years old and lives in London. At the age of 19 Tony decided to invest his inheritance money in a lush overseas property.
He started looking at properties in Cyprus in 2008. His aunt already owned a holiday home in Cyprus so he knew the area and was keen to invest.
In January 2009 he bought a semi-detached two bedroom house with a balcony and veranda for 85,000 Cypriot pounds (CHF), the equivalent of £102,000. It took two months to complete the sale.
As the property is off-plan it was still being developed when Tony bought it. There's supposed be a swimming pool but, as you can see from the photos above, it never materialised.
Tony's cousin helped him find a lawyer to be power of attorney and she dealt with legal and financial matters through the bank. Tony was adamant about having a fixed-rate mortgage but his developer, who has dealings with Alpha Bank, encouraged him to take one out in Swiss francs because as a currency it was the most stable and had the lowest interest rate at the time.
He wasn’t told about any of the risks involved and, because he believed he was getting independent financial advice, he dived in and signed the paperwork. Tony had never actually met the power of attorney and was only introduced to the mortgage adviser once at a tavern with his cousin. I know what you're thinking: that's a little unwise.
The Londoner put down a deposit with 240,000 CHF (£145,000) outstanding that he could pay once the mortgage was drawn down. He was told that over the 30-year term, the first five years would pay off the interest and the outstanding balance would decrease over the next 25 years.
Things started going wrong after just three months. “My cousin had an altercation with the developer about an air conditioning unit that hadn’t been installed and after this fallout, the company refused to sort the issue. On all of the documents that I had signed, the property came with this equipment as standard”, said Tony.
Property values started to plummet just one year into Tony’s venture. The exchange rate between the Swiss franc and euro began to change and his monthly mortgage repayments increased from €530-570 a month to over €765 a month. He couldn’t change the mortgage from francs to euros and by that point his 'independent financial adviser' had apparently fled the country.
Tony had a bit of income coming from renting the place out to his cousin, followed by another tenant, but it wasn’t enough to cover the rising cost. To make matters worse, the latter tenant died in 2013, leaving him with no income at all.
“I really was left in a terrible financial state. I started to default and received letters from debt collection companies and Alpha Bank even called my place of work, which was rather distressing.”
He was advised at this point that his monthly repayments would rise to an even more unreasonable €892 a month. The house was worth much less than Tony anticipated and by summer 2013 the outstanding balance on the mortgage was €202,000 up from the original €145,000.
Then he came across Judicare on an online forum.
Getting out
Triantafyllides & Christoforou found that the mortgage agreement was potentially void because although Tony knew the power of attorney, he had never met her. He never received a letter saying that he could cancel the purchase of his property within 14 days of sale either.
Tony’s case is due to be heard in March 2016 but he’s just desperate to get through it: “This was meant to be an adventure and all my dreams were shattered. I just want this nightmare to be over.”
Unsurprisingly it was at this point that Alpha Bank started offering settlements and debt relief to Tony, but he was having none of it.
Interesting developments
The Cypriot Parliament is currently working through a bill that allows property owners who have paid either the full purchase price or a large percentage of it to apply for the Title Deeds.
This will protect future purchasers of property in Cyprus, giving them more rights as owner of the property. Title Deeds allow them to contact the head of the Cypriot land registry who can exempt, transfer and cancel mortgages on a case-by-case basis.
In the meantime UK debt collection companies and law firms hired by Cypriot banks are continuing to pursue UK buyers for defaulting against Swiss franc loan agreements. Many are also being offered ‘middle way’ settlements from banks in the same way that Tony was, largely to save their own finances.
But buyers wrapped up in this scandal actually may have the chance to get something back from their property nightmare by claiming back the interest they paid on their mortgage if their agreement is ruled invalid in court.
Judicare and its Cypriot barristers are holding two free seminars on 24th and 25th October for all the property buyers to discuss their experiences and understand the legal issues surrounding them. Anyone affected can get in touch with Judicare on 01438 840 258 or by emailing admin@judicaregroup.com.
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