The legal framework governing property repossessions and insolvency in Cyprus has moved into a new and critical phase, as four legislative amendments introduced by MPs have been formally referred to the Supreme Court for constitutional scrutiny.
Following the resolution of five earlier presidential referrals concerning repossession laws and insolvency rules, attention now turns to a fresh set of challenges submitted by President Nikos Christodoulides. The cases will be examined by the Supreme Constitutional Court of Cyprus, with proceedings scheduled to begin this coming Wednesday.
The Republic will be represented by the Attorney General, while Parliament has appointed a private legal team to defend the legislation. At the heart of the dispute are amendments to the Transfer and Mortgage of Property Law, which the Legal Service argues contain provisions that may be clearly unconstitutional and in breach of fundamental constitutional safeguards.
Constitutional scrutiny of property repossession reforms
The four contested legislative proposals reflect a broader political effort to reshape how secured lending and repossession processes operate in Cyprus’s property market.
- A DISY, EDEK, DIPA and independent MPs bill, seeks to cap guarantor liability so that it does not exceed the original loan amount when mortgaged property is sold or repossessed via auction.
- A DIKO bill, would require lenders to exhaust all collateral and obtain a court ruling against the primary borrower before taking action against guarantors.
- An AKEL, DIKO and DIPA bill, provides for the cancellation of remaining debt after a forced sale if the proceeds do not fully cover the outstanding mortgage and interest.
- A DIPA bill, temporarily suspends repossession procedures for primary residences valued up to €350,000 until the end of the year.
Government concerns
Government sources argue that if these laws were approved, they could distort the financial system rather than improve fairness in the property market. According to officials, weakening repossession mechanisms may increase risks for lenders, encourage strategic default, and create inequality between consistent borrowers and those who delay repayments.
They also warn that such reforms could undermine debt restructuring efforts and increase moral hazard across the banking sector, potentially affecting overall financial stability.
The state, they emphasise, must balance social protection with maintaining effective enforcement tools to ensure discipline within the lending system and stability in credit markets.
Next steps for Cyprus property legislation
On the same day, the Supreme Constitutional Court will also review a separate law concerning basic payment account access for very small businesses, following an earlier presidential referral that was rejected by Parliament.
Meanwhile, four additional laws recently reviewed by Parliament are expected to be sent to the President shortly. Legal analysts suggest that three of these may ultimately be approved, while one could still be referred for judicial review.
The final decision now rests with the Presidency and the Attorney General’s guidance. If further referrals are made, Cyprus’ property and insolvency framework could once again face prolonged legal uncertainty.
