CYPRIOT banks will have problem with their capital if parliament votes in favour of the bill to secure title deeds to the trapped property owners.

The bill gives discretionary powers to the Director of the Land Registry, under certain conditions, to discharge and/or eliminate and/or transfer and/or cancel the mortgage and/or encumbrance and/or prohibition that encumbers the property or part thereof, with the purpose of transferring the property in the name of the purchaser, provided that the purchase price has been fully paid, or the balance is deposited in a special temporary account.

Speaking before the joint session of the House Finance and Interior Committees, the representative of the banks’ association Demetra Valianti Plati expressed reservations about the bill, noting that many trapped owners will not secure a title deed.

She said the banks cannot be responsible for the fact that when some land developers, rather than using the money to repay their loan, they used it for another purpose.

She noted that land developers should have informed banks on the sales made, stressing that the banks cannot undertake a 100% share of the law enforcement.

The representative of the banks also expressed reservations for the transfer of the mortgage of land developers to other properties or their guarantors, noting that “if they do not own property we will be left exposed” and wondered how the Land Registry will decide if the collateral is of the same value.

She stressed that it is difficult to find a property that gives the same coverage and banks will remain exposed.

A representative of the Central Bank noted that banks were asked to analyse the impacts from the implementation of the bill, stressing that the banks did not send the relevant data.

Interior Minister Socrates Hasikos said that banks are not convincing and “it is not enough to have knowledge, they should have known where the money went. They did not do that”.

He stressed that the bank ought to monitor every sale made by the land developers.

The representative of the bank, in response to Mr. Hasikos’ argument, said that the only way the bank could know about the sales was to be outside of the office of the land developers.

The Finance Ministry representative said that a new bill will be filed in October according to which sales will not be permitted if the buyer is not guaranteed.

FOLLOWING today’s meeting of the Cabinet (Council of Ministers), Interior Minister Socrates Hasikos explained some of the key points of the ‘hidden mortgages’ bill designed to enable several thousand people to get the Title Deeds to the property they purchased.

“The bill covers several thousand citizens who have paid the full purchase price for their house or apartment but who cannot get its Title Deed either because the vendor (property developer) had mortgaged the property to the bank, or because the vendor has not paid the monies due to the state such as VAT, income tax, social insurance etc.”

He noted that the bill would guarantee that purchasers affected would be able to obtain the property’s Title Deed and, having done so, they will be able to sell, transfer or mortgage the property.

Asked to clarify, Mr Hasikos made it clear that the law will cover all cases where the buyer paid the full purchase price for the property and those who have paid a sizeable proportion of the purchase price who may pay the remainder into a special account through the Land Registry when they have the money.

The main provisions of the bill

• With the proposed changes, for the purpose of issuing ownership titles to the benefit of the entrapped buyer, authority is granted to the director of the land registry department to exempt, eliminate, transfer, cancel mortgages and or other encumbrances, depending on the case and under conditions.

• Specifically, the sale price must have been paid in full by the buyer. In case of an outstanding amount, the buyer can deposit it in a special temporary account managed by the land registry director.

• The director will have the power to transfer mortgages to other property belonging to the seller. If no such property is available, the director can transfer the encumbrances on individuals who guaranteed the seller’s obligations and, at the time the agreement was signed, had acted as board members, or owned over 10 per cent of the seller’s share capital.

• The bill concerns the seller’s obligations to banks and the state.

• To benefit from these provisions a sales contract for the property or part thereof, must have been submitted to the land registry department by December 31, 2014.