Cyprus lawmakers are preparing to vote on a series of foreclosure reforms designed to strengthen protections for borrowers, particularly homeowners at risk of losing their primary residence.
The proposed legislation is expected to reach the House plenary on 6 April or, 16 April at the latest, following continued scrutiny by the Parliamentary Finance Committee.
The reforms aim to address gaps in the current legal framework governing repossessions while balancing the rights of lenders and consumers amid ongoing economic pressures.
Key foreclosure proposals affecting borrowers & guarantors
Among the most significant provisions is a proposal limiting guarantors’ liability where mortgaged property is sold at auction. Under the measure, guarantors would not be responsible for amounts exceeding the original loan value once auction proceeds have been deducted.
Another proposal would require banks or vulture funds to wait for a court decision before pursuing guarantors when borrowers legally dispute the amount owed.
Additional draft laws would give borrowers greater ability to seek court suspension of foreclosure proceedings where the debt amount is contested or unfair contractual clauses are alleged.
Debt relief and interest restrictions considered
Further measures under discussion include the possible cancellation of any remaining debt where auction proceeds fail to cover the full loan balance plus interest. Lawmakers are also examining proposals to prevent lenders from charging additional interest once total debt reaches twice the original borrowing amount.
Changes to insolvency procedures and rules governing minimum sale prices for foreclosed properties are also being reviewed, including maintaining reserve prices at 50% of market value six months after an initial auction.
Government bills introduce debt restructuring options
Two government bills introduce the option for debt restructuring during the foreclosure process and propose making decisions by the Financial Ombudsman binding for disputes up to €20,000.
However, legal concerns have emerged over certain provisions, particularly regarding the suspension of enforcement procedures and the constitutional validity of binding Ombudsman rulings.
Foreclosure decision expected in April
The Finance Committee continues to refine the legislative package amid a large number of party proposals. The final outcome will shape the regulatory landscape for distressed property assets and could significantly affect borrowers, lenders and the wider Cyprus real estate market.
