Waiting for the fat lady to sing

Nigel Howarth
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10
Waiting for the fat lady to sing

Waiting for the fat lady to sing on foreclosuresTHE troika of Cyprus’ international lenders have yet to decide if recent changes to the island’s insolvency law are enough to allow an outstanding review of its aid programme to be concluded, the European Central Bank said on Monday.

Earlier this month, lawmakers in Cyprus approved legislation governing foreclosures, paving the way for the island to join the ECB’s sovereign bond-buying programme. But the ECB said no final decision had been taken as to whether the Cypriot action was enough to meet the terms of its aid-for-reform programme.

“The three institutions (International Monetary Fund, European Central Bank, European Commission) are currently in Nicosia and reviewing the detailed information on the insolvency frameworks and other laws that the Cypriot parliament passed,” said a spokesman. “A final assessment on whether recent actions suffice to close the current review has therefore not been taken yet.”

Foreclosure warning letters

Meanwhile the commercial banks and the cooperatives have started sending foreclosure warning letters to defaulting borrowers whose loans are secured by mortgaged property.

The letter calls on the debtor to notify the bank if they have problems maintaining their loan repayment and advised them of their right to restructure the debt.

The provisions of the Property Transfer and Mortgaging law require that any letter sent in connection with a default or demand for mortgage repayment must be accompanied by a notice warning customers, that unless a mutually acceptable solution to their debt restructuring is negotiated, procedures to sell the mortgaged property will be instigated.

Valuation appeal deadline extended again

Editorial
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11
Valuation appeal deadline extended again

Valuation appeal deadline extendedPROPERTY owners and buyers have until the end of the year to appeal the government’s valuation of their real estate and correct any other mistakes made in the process of fixing immovable property tax (IPT).

The extension – the previous deadline was end of April 25 – was approved in a law passed on Thursday by the House plenum.

It is the second extension given since November last year for filing objections.

Thousands of owners have complained of errors made by the land registry in valuating real estate based on the new, 2013 prices.

MP said that some 22,000 people have so far filed forms challenging the land registry’s valuation.

Owners can file an appeal by paying a fee that depends on the value of their property.

As part of Cyprus’ bailout agreement with international lenders, authorities here completed the revaluation of some half a million properties in June. It was initially planned that IPT for 2014 would be levied based on the up-to-date values, but the new rates will now apply for IPT payable in 2015.

Editor’s comments

If you wish to appeal their valuation you may phone the Land Registry help line on 77777730 and follow the instructions.

You will need to have your passport and details of the property handy. The Land Registry officer will check if there has been a mistake in the valuation while you wait.

If they say there is nothing wrong and you then decide to object to the valuation you may file your objection on the relevant form, which you or your representative must submit to the District Land Office in which the property is located with the appropriate fee based on the 2013 valuation of their property:

  • For properties valued up to €100,000, the fee is €37.50.
  • For properties valued between €100,001 and €500,000 the fee is €75.00.
  • For properties valued between €500,001 and €1 million, the fee is €150.00.
  • For properties valued in excess of €1 million, the fee is €357.00.

(Note that you will need Adobe Acrobat to read the relevant form and to display an approximate English translation of each field, float your mouse over the yellow speech bubbles.)

The latest property valuations can be found on-line by following my guide at Cyprus property valuations now online.

Cypriot banks to benefit from foreclosure law

Press Release
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Cypriot banks to benefit from foreclosure law

Cypriot banks benefit from foreclosure lawLAST SATURDAY, the Cypriot parliament narrowly passed five bills affecting personal and corporate insolvency that implement the foreclosure bill passed last October. Implementation of the foreclosure bill is credit positive for Cypriot banks because it lays the groundwork for large-scale loan restructurings and improves the banks’ recovery prospects.

The laws’ passage and implementation of the foreclosure bill also allows the European Commission, the International Monetary Fund, and the European Central Bank (ECB) (known as the Troika) to conclude their fifth review of the country’s support programme. The review had been delayed by the wait to modernise the insolvency framework and implement the foreclosure law. If positive, the review’s conclusion paves the way for the next tranche disbursement. Concluding the review will also allow the country to access the ECB’s quantitative easing plan. Under the plan, Cyprus’ government bonds will become eligible for direct purchases by the ECB, which will improve bank liquidity and support modest lending.

The bills amend the corporate bankruptcy framework by introducing creditor protection for 120 days to allow for a company reorganization. They also legislate the licensing of insolvency practitioners in Cyprus and introduce a social safety net by providing protection against foreclosure on primary residences. This will allow courts to impose loan restructurings in case the negotiations between the concerned parties fail, and allow the write-off of individuals’ unsecured debt under certain conditions.

The new foreclosure framework mainly aims to shorten the time needed to foreclose and auction real estate collateral to 18 months from more than 10 years previously. Although nearly six months have passed since the new foreclosure framework was voted into law, parliament delayed its implementation until the enactment of Saturday’s bills.

The enactment will provide incentives to individuals to seek restructuring of their loans and discourages strategic defaults. This will help banks tackle the volume of nonperforming loans (NPLs), which were 50% of gross loans as of 30 November 2014.

Melina Skouridou, Moody’s Investors Service

Leptos cuts deal with Bank of Cyprus

Stelios Orphanides
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Leptos cuts deal with Bank of Cyprus

Leptos-Estates-CyprusBANK of Cyprus (BoC) reached an agreement with Leptos Estates, one of the island’s biggest developers, to restructure a loan worth several hundred million euros, the governor of the Central Bank of Cyprus said.

“Following many months of consultations with the customer and an in-depth analysis of the group’s financial situation and prospects, Bank of Cyprus reached a restructuring agreement in principle, subject to approval by the board of directors,” governor Chrystalla Georghadji said in a letter to Green party lawmaker Giorgos Perdikis dated March 20, 2015.

“Taking into account the insufficient collateral and the absence of floating charges, under the circumstances, we deem the restructuring offer satisfactory and just,” she said. “Note that the valuation of property collateral was carried out on the basis of existing residential zones with a building coefficient of up to 60 per cent”.

In a letter to the governor dated January 16, Perdikis said the value of the company’s non-performing loan, with which Leptos financed the construction of the Neapolis project in Yeroskipou, in Paphos, is €580m.

A floating charge is a security that has an underlying asset or group of assets which is subject to change in quantity and value.

A source familiar with the situation who spoke on condition of anonymity said that the outstanding amount was now less than what is reported as the company “made some payments a year ago”. No other details were provided.

Board approval is still pending, the source said.

Construction sector collapse

Nigel Howarth
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6
Construction sector collapse

Cyprus onstruction sector collapsePRODUCTION in the Cyprus construction sector fell 18.8% in the fourth quarter of 2014 compared to Q4 2013, the biggest fall in the European Union according to a Eurostat news release published this morning.

This followed a 22.1% fall in the previous quarter.

Cyprus was followed by Slovakia, where production in the construction sector fell 6.3%, France (- 5.9%) and Italy (-5.6%).

The best performing states were Lithuania, where production rose by 13.5%, Sweden (+13.2%), Greece (+11.7%) and the Netherlands (+10.1%).

Overall in the eurozone, production in construction fell 0.7% in the fourth quarter, while in the EU it increased 0.7% compared to the fourth quarter of 2013.

Further reading

Eurostat newsrelease 70/2015 – 20 April 2015

Insolvency framework bills passed

Nigel Howarth
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12
Insolvency framework bills passed

Insolvency framework bills passedAFTER countless delays and weeks of heated debates a plenary session of parliament today finally passed the five bills comprising the insolvency framework.

Despite earlier predictions that the vote was too close to call, the 56 MPs voted 33 in favour and 23 against.

MPs also voted to extend the ban on repossessing homes whose purchasers have no Title Deeds until 10 June, provided they have paid at least 80 per cent of the sale price or have fully complied with their contractual obligations towards the seller. This will give the government sufficient time to fulfil its pledge to submit legislation to comprehensively regulate the matter of homes that have been paid for but whose purchasers are facing the prospect of repossession because of developer unpaid mortgages.

Although the passing of the insolvency framework clears the way for the troika to return to Cyprus and resume its review of island’s economic adjustment programme, the passing of the insolvency framework does not necessarily mean that the next tranche of the bailout loan will be forthcoming.

The troika will first have to assess the final text of the insolvency bills and will then prepare a report for the Eurogroup.

The delay in passing the insolvency bills resulted in the IMF withholding around €85 million of bailout monies and also disqualified Cyprus from participating in the ECB’s quantitative easing programme.

Last week the ECB warned the government that it would not accept Cypriot bonds as collateral for providing liquidity to the island’s domestic banks until the insolvency bills had been passed.

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