Swiss Franc loans may cost more

Nigel Howarth
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13
Swiss Franc loans may cost more

Swiss Franc loans may cost moreTHOSE who purchased property in Cyprus and elsewhere with the aid of a loan denominated in Swiss Francs will be devastated to learn that the Swiss National Bank scrapped its minimum exchange rate today.

The unexpected end to the three-year-old cap saw the Swiss Franc jump to a record against the Euro and rise to its highest in more than three years against the dollar following the announcement.

The decision by the Swiss National Bank comes just one week before policymakers from the European Central Bank (ECB) meet to discuss ways of stimulating European economies. One aspect to be discussed was creating more Euros (quantitative easing), which in itself will put downward pressure on the value of the Euro against other currencies, including the Swiss Franc.

In Cyprus thousands of locals and foreigners were sold home loans denominated in Swiss Francs by the local banks and their agents during the boom years of 2007 and 2008. But between 2008 and 2011 the Swiss Franc nearly doubled in value and in September 2011 the Swiss National Bank announced that it would enforce a minimum exchange rate of CHF 1.20 to the Euro.

According to the Cyprus Central Bank, Swiss Franc loans amounted to nearly €3.2 billion in November 2014 compared to €1.6 billion in 2006. (The figures are not adjusted for exchange differences.)

Now that the bank has scrapped its minimum exchange rate, the cost of servicing loans denominated in Swiss Francs may rise again.

Cabinet gives the nod to fourth insolvency bill

Elias Hazou
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1
Cabinet gives the nod to fourth insolvency bill

Cyprus cabinet gives the nod to fourth insolvency billTHE Cabinet yesterday gave the nod to the fourth of five government bills comprising a package of bankruptcy-related legislation.

Collectively known as the insolvency framework, the bills are designed to update and amend personal and corporate bankruptcy laws to help borrowers restructure their debt. Enactment of the new legislation, designed primarily to reduce banks’ exposure to bad loans, is an obligation stemming from Cyprus’ bailout agreement with international lenders.

Three other bills have already been submitted to the House. One introduces and regulates the profession of insolvency practitioners, another deals with debt restructuring of viable businesses (examinership) and the third amends current liquidation laws.

The fourth bill approved on Wednesday concerns personal repayment schemes and debt forgiveness, and will now be forwarded to parliament. The fifth and final bill, concerning the insolvency of natural persons, has been completed but is currently being reviewed by the troika of lenders.

In order to qualify for a personal repayment scheme, an individual’s total debts (secured and unsecured) must not exceed €300,000, and the value of their primary residence must be €250,000 at the most.

Additionally, debtors must demonstrate they are unable to repay their debts due to worsening of their financial situation caused by events beyond their control, and these events must have occurred no earlier than two years before applying for the scheme. Debtors must also prove that their income has taken a hit of at least 25 per cent due to these events.

Under the same bill, a person eligible for debt forgiveness must have debts no greater than €5,000, a monthly net income of €100 or less, assets valued at €400 or less, and be a permanent resident of the Republic.

Persons are ineligible for debt forgiveness if 25 per cent or greater of their debts were accumulated in the last six months prior to the date of application.

The bill is geared at giving a second chance to people who have fallen on hard times, said deputy government spokesman Viktoras Papadopoulos.

“It will allow people facing bankruptcy due to the financial crisis to re-engage and sort out their finances in such a way as to avoid declaring bankruptcy as was the case under the previous legislation, which was black or white,” he added.

The Cabinet also approved additional legal regulations governing the work of insolvency practitioners.

The so-called insolvency framework is seen by opposition parties as a safety net for vulnerable borrowers and home owners. The parties have warned that they will suspend the enforcement of foreclosures until satisfactory bankruptcy laws are enacted.

Real estate prices expected to fall

Nigel Howarth
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5
Real estate prices expected to fall

Real estate prices expected to fallSPEAKING to inCyprusproperty.com, Real estate appraisers and consultants Pavlos Loizou and Kyriakos Talattinis offered their thoughts on the Cyprus property market during the year ahead.

Both believe that interest shown in the overseas market will be maintained due to the possibility of non-EU citizens being able to acquire permanent residency and Cypriot citizenship.

However, property prices are expected to fall by as much as 15% depending on the type of the property and its location.

Pavlos Loizou considers that the number of property transactions will remain at last year’s level or increase slightly as the Cyprus economic situation improves. Increases will mainly be due to foreign investors interested in the possibility of obtaining permanent residency and Cypriot citizenship – and locals who have been holding back on their purchase until the political and economic instability of previous years subsides.

Mr Loizou anticipates that the price of residential property and larger pieces of land will fall between 5% and 10% depending on the type of property and its location.

Kyriakos Talattinis believes that the local market will be affected by a lack of liquidity and stricter lending criteria – and that the new laws and regulations on the disposal of property will all put a further downward pressure on capital values and prices.

He expects property prices to fall between 5% and 15% over the course of the year, depending on the type and location of the property.

Although some people do have the money to buy, they are waiting in the expectation that prices will be squeezed further when the banks start selling.

Mr Talattinis believes that there will be a continuing interest from overseas buyers due to the government’s residency and citizenship incentives. He does not expect overseas demand to fall and believes that beach-front properties and others in prime locations may possibly increase in value.

Swimming pools law changes

Nigel Howarth
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2
Swimming pools law changes

THE CYPRUS Interior Ministry is proposing a new law that would classify swimming pools into five different categories. A main concern is to ensure proper regulation to prevent accidental drownings.

The law will make a distinction between public and private swimming pools, and each category will have its own criteria for construction, operation and inspection.

The classification of swimming pools, as well as terms of operation, will depend on the number of residential units corresponding to each pool. However, an operation license will be required only for public pools and for specific private pools.

Operational management for either co-owned or shared pools is based on Article 38A, Law on Immovable Property. Private pools will fall under this category as well.

Any problems with the design or building specifications will fall under competent authorities according to the Law for Streets and Buildings Regulation. In case of discrepancies that are deemed not serious, a warning will be included on the approval certificate. If there is a serious issue, the authorities will issue a certificate for unauthorized construction.

It is important to note that some issues related to health and safety will fall under the Health Ministry, while competent authorities under the Ministry of Public Works will oversee the management of electrical and mechanical issues.

The draft for the new law is currently under scrutiny by the Legal Service.

Editor’s comments

Under the provisions of present law, swimming pools that are shared by more than one family are considered as public swimming pools and must therefore comply with strict regulations including the provision of a lifeguard, separate male and female toilets, showers and footbaths.

As a consequence, those who have bought an apartment or a property in any other development with a shared swimming pool have to pay a significantly more in communal charges than those in complexes without pools. This makes buying a property in a complex with a shared swimming pool a much less attractive proposition.

This is how the Cyprus law relating to swimming pools currently stands:

Cyprus Law N.55(I)/92 paragraph 2 states that the term ‘public swimming pool’ also includes the swimming pools of buildings which are used by the owners of the units or their tenants.

Regulation Number 368/96 paragraph 47 (1) states that all the employees relating to the swimming pool have to obtain a health certificate, to be clean and to behave properly.

Regulation Number 368/96 paragraph 47(2) states that all the trained supervisors will be on duty during the operation and the use of the swimming pool. Their number is determined in accordance with the size of the swimming pool and the number of the persons usually using the swimming pool.

Regulation Number 368/96 paragraph 47 (2)(a)(i) states that for small swimming pools at least one trained supervisor is necessary to be appointed.

Regulation Number 368/96 Part VII paragraph 53 states that a license is needed for the operation of a swimming pool by applying to the relevant authority. The last decision is made by the Minister.

The swimming pool saga

In November 2005 Lakis Tofarides, the Chairman of the Land and Building Developers Association, suggested the following measures should be taken to alleviate the situation.

“The swimming pools in apartment buildings and complexes to be considered private (not public) because the residents and their guests use them. At the same time, residents, in proportion to the number of persons living on the building/complex, could be trained as lifeguards. This means that if there are large families on the building, the number of persons to be trained would be decided accordingly”.

“As far as public pools are concerned, the number of supervisory staff needed (lifeguards, etc.) should be reduced”.

In June 2007, Denis O’Hare, Linda LeBlanc and I met with the Permanent Secretary of the Interior Ministry, Dr Lazaros Savvides, and discussed the problems of the swimming pool laws with him.

In August 2008 it was reported that the Cyprus Government was looking to change the swimming pool laws. However, this was yet another vacuous announcement.

Perhaps 2015 will see an end to this ridiculous situation, but don’t hold your breath!

Banks using threats and blackmail

Angelos Anastasiou
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Banks using threats and blackmail

BANKS AND cooperative credit institutions do not follow the Central Bank of Cyprus’ (CBC) Code of Conduct in restructuring loans, and all borrowers are urged to take their case to court, the Borrowers’ Association head Costas Melas said on Friday.

He was speaking at a joint news conference, representing his association, the Consumers’ Association, the Bondholders’ Association, Quality of Life and Consumers’ Union, the Association for the Protection of Primary Residences, and the Coalition of Small Businesses and Self-employed.

The news conference, Melas said, was organised to help explain the Borrowers’ Association’s December 12 decision to urge borrowers to claim their rights in court.

Melas called on the CBC to take immediate measures for the code’s implementation, and announced the creation of a team of financial consultants that will “see borrowers at no charge, advising them of the type of restructuring they are truly entitled to, and inform them of banks’ obligations, as well as the actions required to safeguard their own rights.

“For those who wish to resort to the courts, documents and templates will be posted on every associations’ websites, which will help borrowers file their own court cases against banks and co-ops, or defend themselves in court,” Melas said.

He added that a Borrowers’ Code is being prepared, which will inform borrowers of their rights and obligations, and that open sessions will be organised in each district to inform borrowers of their rights.

As they are done today, the association’s head said, restructurings result in driving borrowers having to sign new agreements, through which banks and co-ops secure multiple benefits for themselves, like the borrower’s acknowledgment of the alleged amount due, which may include significant overcharges and requests for additional collateral.

“Banks and co-operatives treat borrowers unfairly, misleading them into signing whatever they suggest through unfounded lies, duress, threats and blackmail,” said Melas.

He warned that co-ops trick borrowers into arbitrations, which they misrepresent as loan restructurings, explaining that borrowers who accept arbitrations in fact acknowledge the alleged amount due, which typically includes overcharges.

“The arbitration decision then gets filed as a regular court decision, which entitles the bank to its immediate execution and the foreclosure of the collateral, thus depriving borrowers of their most important constitutional right – the right to a fair trial,” Melas explained.

He argued that it is unfair and illegal for banks to demand the repayment of loans granted with bank bonds – the value of which has been eliminated – as collateral, especially when their sale to private investors was deemed illegal by the CBC, the Cyprus Securities and Exchange Commission, and the House of Representatives.

“All the more so, since the elimination of the bonds’ value was owed to the banks themselves,” he added.

Monthly money transfer limit doubled

Michele Kambas
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1

Monthly money transfer limit doubledAUTHORITIES in Cyprus scrapped on Friday all restrictions on foreign bank transactions for businesses, dismantling part of a regime of capital controls imposed almost two years ago during a chaotic bailout.

The finance ministry said it had abolished a requirement for prior approval of business transactions abroad exceeding €2 million.

Cyprus imposed capital restrictions in March 2013 to prevent a capital flight during an international bailout that saw one major bank shut down and another seize clients’ deposits to help it recapitalise.

The ministry also eased capital restrictions on private citizens.

It raised the ceiling on money that individuals can send abroad to €20,000 per month from €10,000, and for foreign travellers to €10,000 per visit from €6,000.

Central bank head Chrystalla Georghadji said at the start of December she expected the controls to be abolished soon, forecasting the island’s economy would return to modest growth of 0.5 percent this year after four years of recession.

– Reuters

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