The law on divestments in Cyprus changes despite reactions

The law on divestments in Cyprus changes despite reactions

The two laws were adopted by a majority vote, with the Democratic Party’s MPs voting against.

By Michalis Michael

The House of Representatives in Cyprus voted on Friday the proposals of laws submitted by parties for a temporary suspension on sales until the commencement of the applications for the “ESTIA” project, as well as after the debate on better regulation concerning divestments and on the insolvency framework is completed. For these draft laws, reactions were recorded both from bankers in Cyprus and from abroad, who believe that any change in legislation poses a risk to the Cypriot economy. It is indicative that, at the beginning of the discussion, the House Speaker Dimitris Syllouris had tabled a suggestion to postpone the vote on the proposals, but was rejected by the majority.

The Law Proposals

The first draft law was submitted to the House by Nikolaos Papadopoulos, Angelos Votsis and Marinos Moussiouttas on behalf of the Democratic Party’s parliamentary team, by Giorgos Lillikas on behalf of the Citizens’ Alliance, by Michael Giorgallas on behalf of Solidarity and by Giorgos Perdikis on behalf of the Ecologists-Citizen’s Corporation, whereas the second draft was submitted by Marinos Sizopoulos on behalf of the Social Democrats Movement. At the same time, the Democratic Party tabled an amendment to the draft law it had initially proposed, with a view to temporarily suspending the divestments. The four parties’ bill was adopted with 34 votes in favor and 16 against, in the presence of 50 MPs, whereas the Democratic Party’s amendment passed with 29 votes in favor and 21 votes against. The draft law tabled by the Movement for Social Democracy was adopted by 25 votes in favor and 17 against by the 42 MPs present.

The purpose of the first draft law is to amend the Law on the Transfer and Safeguarding of Real Estate, in order for the procedure for the sale of mortgaged property by the mortgage lender to be reviewed. According to the Explanatory Memorandum accompanying the first draft law, and also according to what was mentioned by its rapporteurs at the committee meetings, the above-mentioned law proposal aims in particular at the following:

  1. Removal of the injustice caused by certain provisions of the current legislation, which undermine the validity of a prohibition order, since, in order for an imminent auction of immovable property to stop, in addition to issuing a relevant court decree, a new procedure is necessary, meaning an application / appeal with which the existence of that prohibition order appears as a reason for its success. It also clarifies the reasons which mortgage debtors can claim to prevent imminent auctioning of their mortgages, such as disputing the amount owed, which might also be related to actions or behavior from the mortgagee’s part.
  2. The courts’ obligation to check whether the banks have taken the necessary actions issued by the relevant Central Bank of Cyprus’ directive on loan restructuring and whether the possibility of promoting the sale process is exploited and misused by the banks.
  3. Expanding the due date from thirty to forty-five days after the date of the redemption notice’s delivery.
  4. Appoint two appraisers to perform independent estimates of mortgaged property through a pre-defined list kept by the Director of the Department of Lands and Surveys, so that the objectivity of their reports is ensured, regarding the determination of the property’s market value.
  5. Obligatory update from the interested buyers’ mortgage lender on the mortgage.

6 Extending the period of time in which a reservation price of not less than eighty per cent (80%) of the market value of the mortgaged property is determined from three to six months; after six months, the reserve price is set at a rate no less of fifty per cent (50%) of the market value.

  1. Extending the period in which the notice for the sale of the mortgaged property is served and published from thirty to forty-five days before the specified auction date, in order to allow sufficient time for the mortgage borrower to secure a sale at the reserved price.

Reactions and goals

At the same time the Democratic Party’s adopted amendment states that during the period of suspension, no sale process to satisfy the mortgagee, regarding the defined credit facility, which is secured by mortgage on property constituent a main residence, the debtor of which potentially meets the criteria for inclusion in the “Estia” project, as defined in the draft approved by the Council of Ministers Decree of 26 June 2019, may commence, and any ongoing procedure such as that shall be interrupted.”.

The purpose of the second proposal law is to adopt a law to temporarily halt any procedures for opening and / or continuing estate divestment procedures, which constitute a main residence, to satisfy loan facility to the borrower who is potentially an eligible borrower to be included in the “Estia” project. According to the Explanatory Memorandum accompanying the second draft law and according to what its rapporteur stated before the Committee, the “Estia” project is expected to be implemented from 2 September 2019 with the submission of license applications from interested borrowers. The law ensures that no primary residence’s divestiture process is about to begin and / or continue starting from the time the proposed law enters into force, up until October 1, 2019, so that with this project’s launching and with the submission of applications any doubts on who will be considered an eligible applicant will be clarified.

MPs voted against the House President’s proposal to postpone the debate with 45 votes against and 2 for, from 47 members present. The Democratic Party’s President, Averof Neophytou, stated that his party is in favor of discussing the issue and is voting against, as the law proposals could cause new trouble for the economy and the financial system.

On behalf of the Progressive Party of Working People, MP Stephanos Stephanou criticized the Government for, while stating it would take measures to protect non-viable borrowers, to reward consistent borrowers and to address strategic bad payers, it did not do so. MP George Loukaidis said the Progressive Party of Working People voted in favor of law proposals to protect the borrowers. / Ibna