The Transfer and Mortgage of Immovable Property Law of 1965 (hereinafter referred to as the “Law”) has recently undergone significant amendments. The need for amendment derived from the significant levels of debt which have accumulated, where most of it is concentrated in mortgage debt related to residential real estate.
The essence of the recent amendments was to remove any unfair treatment to which mortgage debtors are subjected, since the value of the exchange was determined unilaterally by the mortgage lenders and in most cases the forced sale value of the property was calculated much lower than the appraised value thereof. To ensure a balance between the contracting parties regarding the exercise of the right to contract freely, it was necessary to take measures to prevent the exploitation of mortgage debtors and/or guarantors by mortgage lenders, such as credit institutions and credit acquisition companies which have economic power over the debtor.
The present article provides in a nutshell the key amendments of the Law.
Under the new regime, lenders are required to include substantial details in the notice in the form «Θ» (the “Notice”) provided to debtors and guarantors in relation to observed defaults, including standardized information that expressly mention the following:
(a) the account number and name of the borrower;
(b) the date on which the loan was granted;
(c) the purpose of the loan;
(d) the principal amount of the loan;
(e) the interest rate (base rate and margin);
(f) any variations in the interest rate throughout the duration of the loan;
(g) the total of instalments and payments due on the date of the Notice;
(h) the days of arrears and the amount which is due and in arrears;
(i) the monthly instalment as at the date of the Notice;
(j) the total amount of instalments paid and other payments made as against the loan as at the date of the Notice;
(k) the total of instalments and payments due on the date of the Notice;
(l) the total interest on the date of the Notice;
(m) the total of the default interest on the date of Notice;
(n) the total of any other charges at the date of the Notice;
(o) the amount due as at the date of the Notice;
(p) the monthly instalment on the date of the Form «Θ» Notice;
(q) the mortgages and the amount secured by the relevant mortgages;
(r) any other securities granted in connection with the relevant facilities and the amounts secured by such securities;
(s) where applicable, the dates on which the Notices required to be sent to borrowers under the Code of Conduct on the Handling of Borrowers in Financial Difficulties;
(t) the termination date, in case the relevant facility has been terminated;
(u) whether an arbitration award has been issued, in accordance with the provisions of the Law on Cooperative Societies; and
(v) any updated data resulting from any amendment agreements in relation to loan agreements, with explicit reference to the collaterals in force and the maturity date of the loan.
According to Article 44ΓΑ of the Law, the sending of the Notice is carried out only once by the lender. The above procedure does not apply in the case where:
(a) the lender has secured a court decision against the debtor; or
(b) an application for the sale of the mortgaged property has already been filed in accordance with the provisions of Part VI of the Law.
An additional requirement has been introduced, where the Notice is being sent to the debtor or the guarantor in relation to the amount due, such Notice is being accompanied by a declaration from a qualified auditor confirming the amount due (the “Auditor’s Declaration”).
The requirement to provide the Auditor’s Declaration also applies to all foreclosure cases fulfilling the provisions of Part VIA of the Law and in relation to which:
(a) the first auction had not taken place prior to 14 July 2023; or
(b) the first auction did take place prior to 14 July 2023 but was unsuccessful.
Any written Notice sent by the lender in the form of «Θ», «Ι» and «ΙΑ» of the Second Appendix of the Law in the cases referred above for the foreclosure of an immovable property that is defined as the “primary residence” of the debtor, shall be deemed invalid and must be resent.
For the purposes of this requirement only, primary residence of a debtor means a residence which is:
(a) being used for the residence of its owner and their family members for a period of more than 6 months per year, and
(b) the estimated value of which does not exceed €250,000.
2. The Valuation Process
The new regime introduces a valuation procedure in relation to the disposal and transfer of a mortgaged real estate which aims to reduce or pay off mortgage debt (Articles 44ΚΗ and 44ΚΘ). Under Article KH, “business premises” is defined as the property which is used for business purposes whose turnover does not exceed the €750,000. The “Prime residence” is the residence which is used for the residence of its owner and/or his family members, for a period of more than six (6) months per year, where its estimated value does not exceed €350,000.
For the purposes of valuation of a mortgaged property, two valuators are appointed, one on behalf of the lender and one on behalf of the borrower, to carry out, at the same time, independent valuations of the property for the purpose of calculating its market value. The valuation process may take the following forms:
(1) In the event that the highest estimation based is less than the lowest estimation plus 25% thereof, then the market value shall be the average of the two valuation reports and the said market value shall be the final.
(2) In the event that the highest estimation is equal to or greater than the lowest estimation plus 25%, the lender within five (5) days from the day of receipt of the valuation reports, may request from the Scientific and Technical Chamber of Cyprus the appointment of a third independent appraiser within 10 days. The third independent valuator within 30 days of their appointment, shall prepare an independent valuation of the property. The third independent valuator will deliver, at the same time, a true copy of their valuation report to the lender, the borrower and/or any other interested person.
(3) In the event of the appointment of a third independent valuator pursuant to the provisions of point (2) above, the market value of the property shall be considered to be the average of the two closest valuations. In case the three (3) estimates differ equally, the average of the three valuations will be considered as the market value.
It is clarified that the valuation process described above will not be applied in case the property was transferred to the Cyprus Asset Management Company Ltd with registration number HE 387704 or any of its subsidiaries.
The content of this article is valid as at the date of its first publication. It is intended to provide a general guide to the subject matter and does not constitute legal advice. We recommend that you seek professional advice on your specific matter before acting on any information provided. For further information or advice, please contact Stephanos Ayiomamitis, Senior Associate, at our Limassol office, Tel +357 25363685 or email stephanos.ayiomamitis@kyprianou.com
