More recently I have received numerous emails from people who have received letters at their UK homes from developers and banks in Cyprus who granted them mortgages to purchase property on the Island.
These letters warn that legal action will be taken against them in the UK courts if they fail to maintain their mortgage repayments. Some people who have received these warning letters were totally unaware that they even had a mortgage; all are very concerned of the threat of losing their homes!
It appears that lawyers (allegedly) acting on their behalf arranged mortgages after buyers had signed Power of Attorney documents that gave their lawyer very wide ranging powers to do just about anything on their behalf (including taking out mortgages they did not want, ask for, or need).
If you have received one of these letters, take heart. The laws in Cyprus are very specific on the certification of Power of Attorney documents:
Firstly, Power of Attorney documents must be signed in the presence of a Certifying Officer.
Secondly, if the person signing the document is not known to the Certifying Officer then either:
- That person must show the Officer their ID card or passport as proof of their identity and the Officer will then compare their photograph and signature or
- Their identity must be confirmed by two people who are known to the Officer personally and who will then sign the document as witnesses.
Thirdly, any shortfall in the observance of the law by the Certifying Officer may result in the Power of Attorney and any transactions done with its use, such as signing Contracts of Sale and obtaining mortgages, to be declared null and void.
(The Certifying Officer may also be held personally liable to pay damages to the person whose signature he certified without knowing him/her).
I advise those who have received letters threatening legal action by the banks in Cyprus to seek advice from their UK lawyer – and in particular their views on the outcome of a court case based on the information above.
Have the banks got wind?
It appears that the banks in Cyprus may have got wind of the situation and are aware of these invalid Power of Attorney documents and some other issues.
Some of them are sending mortgage application forms to people living in the UK even though they already have a mortgage.
By completing and returning a mortgage application form you would compromise any argument you may have that your Power of Attorney document is invalid.
The Cyprus banks are also sending out letters to those with mortgages asking them to sign statements confirming that they were advised of the dangers regarding exchange rate fluctuations and possible increases in other currencies interest rates.
What is clear is that by signing any such statements and returning them to the bank you would probably prejudice your case.
Furthermore, if you were advised to buy in Cyprus and to take a mortgage by a UK-based registered financial advisor who ‘witnessed’ your signature on a Power of Attorney document it obviously be considered as being an illegal document which would nullify any transactions done with its use.
You may wish to check with the Financial Services Authority (FSA) to see if your UK-based advisor is registered with them. If he or she is registered you may complain to the FSA and make a claim against your advisor on the basis that if you had been advised of the full facts about your potential purchase, you would not have gone ahead and bought. This would be especially so in the case where you later discovered that the developer had mortgaged the site on which he was building.
Should your advisor be unable to meet such a claim the Financial Services Compensation Scheme (FSCS) may very well be able to assist.