Thousands of expats and second homers who bought property in Cyprus with a Swiss Franc mortgage are facing a crackdown by banks demanding their money back.
Many are mounting legal challenges to argue they did not know about the mortgages or the risks involved.
Those with homes in Britain are facing court action and risk losing their properties on the Mediterranean island and in the UK if they lose.
Lawyers estimate between 20,000 and 30,000 Cyprus properties are involved in the Swiss Franc mortgage scandal. The value of properties involved runs into millions of pounds.
Expats take on the banks
The owners of the Cyprus properties hedged their mortgage risk with Swiss Franc loans – but in the years since they took out their borrowing, the euro has collapsed thrusting the Cypriot economy into meltdown while the Swiss Franc has grown in strength.
That means the mortgages owed by many are considerably larger than the value of their homes – and their debt is growing with interest penalties and legal costs.
Banks are demanding their money back and homeowners are counter-claiming.
Now, 200 expats and second home owners are mounting a legal challenge against the banks in the Cyprus courts. The cases are listed for October.
Lawyers claim Cypriot and Greek banks did not explain the terms of the mortgage deals or how the Swiss Franc hedging worked – nor the risks could this engender if the value of the franc rose against the euro as it has done.
Flawed advice claim
Some expats won the right to hear the case in London, but lawyers fear if they pursue the action in the UK, they may face a double set of legal costs if the banks start a counter action in Cyprus.
“Local financial advisers and property agents in Britain worked with the developers to make a ‘one stop shop’ for clients to invest in Cyprus properties,” said lawyer Stylianos Christoforou. “In most cases, the clients never visited Cyprus and only saw the property they were buying on paper as an off-plan development until building finished and they were handed the keys.
“The case is not that there was misselling, but the property transfers and mortgages were not properly explained or managed, so the contracts are void. “
Christoforou explained that clients did not have anyone certify their signatures when they passed power of attorney, which means that any action taken by someone under that power was improper.