Expat homeowners in Cyprus saw MPs vote for a ban on repossessing their properties won by the narrowest of margins in Parliament.
The new law stops banks repossessing homes from owners without title deeds because developers had already raised loans against the properties.
In many cases, owners had paid off their mortgages and then found banks still moved for repossession because a loan they did not know about was secured against the home by the developer.
The legislation had already gone before Parliament, but was rejected by President Nicos Anastasiades because of inconsistencies in the wording and extra protections offered to landowners and developers which the bill was designed to remove.
Finally, the bill went back to Parliament with amendments and was passed by a 27 to 26 majority.
New law shields homeowners
A government spokesman explained that under Cypriot law, developers could include land and buildings belonging to others as balance sheet assets against loans from banks.
”This has affected tens of thousands of homeowners, especially expats as developers mortgaged their homes and retained the deeds, leaving them open to a claim from a bank if the developer failed to pay the loan,” said the spokesman.
The new law protects homes from repossession if a developer has failed to repay any loans secured against them, providing the occupier has either paid at least 80% of the sale price or met any financial obligations put in place on purchase.
The measure lasts until July 10, 2015 – but the government hopes to have a permanent solution in place before that date.
Credit problems triggered by developers and home owners each having mortgages against the same properties are one of the issues that the Cyprus government must sort out as part of the European Union bail out.
Bailout on track
The government promised to have reports and draft legislation ready for the Troika bail out team by June 2014, buy have stilled failed to unravel the issue.
The International Monetary Fund stalled on transferring 86 million euros to the government until the law passed. Cyprus was also excluded from the European Central Bank’s quantitative easing program until
The measures to stall repossessions are part of that process.
Putting repossessions on the backburner also stalls legal action from Cypriot banks to seize assets in Britain from mortgage defaulters on the island – providing the writs issued in the UK meet the criteria of the new law.