Four foreclosure bills unconstitutional

Editorial
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12
Four foreclosure bills unconstitutional
Four foreclosure bills unconstitutional
The Cyprus Supreme Court

CYPRUS can now receive delayed rescue funds from international lenders after the Supreme Court on Friday ruled that additions to new legislation on foreclosures were unconstitutional.

The Supreme Court ruled that the four additional bills were unconstitutional and violated the principle of separation of powers.

Attorney General Costas Clerides said the path was now clear for the government as there were no more legal obstacles to implement the law as it was initially proposed.

Nicosia did not receive its next tranche of €436 million in bailout cash after EU finance ministers last month said the foreclosure bill was not the one envisaged by the adjustment programme.

International lenders said they would wait for the court decision before deciding on their next review of the programme.

Since the 10 billion euro bailout was agreed in March 2013, Cyprus has been praised by the troika of lenders — the European Commission, European Central Bank and International Monetary Fund — for its diligent completion of loan requirements.

The government said lenders are unhappy with additions MPs attached to the legislation to dilute its effect on low-income groups and prevent mass repossessions.

President Nicos Anastasiades sent two of the bills back to parliament and four others to the Supreme Court to rule if they are constitutional.

The new law ensures that foreclosures cannot be indefinitely delayed, reducing the process from years to months, establishing procedures for valuing properties and auctioning them.

Four foreclosure bills unconstitutional

IPT payment deadline extended

Editorial
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9

THE HOUSE plenum last night unanimously passed a law extending the deadline for payment of immovable property tax (IPT) by a month, as well as extending by one month the 15 per cent discount.

The legislative proposal, tabled by EDEK MP Nicos Nicolaides, provides that the latest payment date for IPT will be December 31, instead of the end of November as had been announced. Homeowners will receive a 15 per cent discount if they settle their account by November 30, instead of the end of October.

A 10 per cent penalty plus interest and other administrative fees will be charged if IPT is paid after December 31.

During debate at the House, ruling DISY said it was in favour of this particular extension, provided however that this practice does not become the norm.

Many homeowners were finding it difficult to make IPT payments which time-wise coincide with the payment of municipal tax.

DISY’s Prodromos Prodromou said the government would try to introduce changes so that the two payments do not coincide.

As part of a bailout by international lenders, the government was supposed to have updated real estate values by mid-2014, but in July, the parliament decided that this year’s IPT rates would be based on 1980s values, like last year, while the new system is expected to be implemented in 2015.

Aristo trial postponed

Editorial
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9
Theodoros Aristodimou trial postponed
Photo credit: ? ????????????

THE START of the trial into a suspicious land zoning case in Paphos, involving prominent developer Theodoros Aristodemou, was on Thursday postponed for November 14 to give defendants time to study the evidence before responding to the charges.

Aristodemou – founder of Aristo Developers – his wife Roulla, company designer Christos Solomonides, and former Paphos municipality engineer Savvakis Savva were arrested in September in connection with forgery and fraud in the demarcation of 177 plots of land in the area of Skali.

Defence lawyers requested a continuance because, as they said, they have not yet received all the evidence.

Prosecutors did not object to the request.

Judge Dora Socratous rescheduled the hearing for November 14 at 9am.

The defendants are free on bail, set at €100,000. They will have to report to police once a week.

The four are suspected of falsifying the development plans that showed reduced green areas and a road network in order to allow Aristo a larger area for development.

The excess development area meant a gain of some 2,700 square metres and hundreds of thousands in profit for Aristo.

The alleged crimes are believed to have been committed between February 3, 2010, and December 28, 2011.

Cyprus mortgage scam

Nigel Howarth
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14
Cyprus mortgage scam
Cyprus mortgage scam
Jonathan Arnott MEP

ONCE again a question has been raised in the European Parliament relating to the many property issues in Cyprus. This one concerns what its author, Jonathan Arnott MEP, refers to as the ‘Cyprus mortgage scam’.

Question for written answer P-007065-14
to the Commission
Rule 130
Jonathan Arnott (EFDD)

Subject: Cyprus mortgage scam

Could the Commission please provide information on what action it intends to take, or has already taken, in relation to Cypriot banks selling mortgages dishonestly(1)?

(1) See ‘UK homeowners hope EC laws will help in case against Alpha Bank’, Cyprus Mail, 21.7.2013.

Answer given by Mr Katainen on behalf of the Commission

The pending national court procedures will show whether the Cypriot banks have infringed potential duties to inform about certain risks of a loan contract, in particular with regard to loans in a foreign currency.

The Commission is aware that real estate purchasers in Cyprus, for various reasons, did not always receive the property title immediately after payment of the purchase price. Since 2011 such purchase agreements can be registered with the Cypriot Land Registry in order to increase legal certainty for the purchaser.

In order to work towards a sustainable solution, the Cypriot authorities committed, as part of the economic adjustment programme, to establish a task force that will develop recommendations in order to address this issue.

IPT payment extension anticipated

Editorial
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10
IPT payment extension anticipated

A PROPOSAL to extend the deadline for payment of immovable property tax (IPT) by a month, as well as an extension by one month of the 15 per cent discount has been welcomed by the political parties, head of the House Finance Committee Nicolas Papadopoulos said on Monday.

According to EDEK MP’s Nicos Nicolaides’ proposal, the latest payment date for IPT will be December 31, instead of the end of November as had been announced. Homeowners will receive 15 per cent discount if they settle their account by November 30, instead of the end of October.

A 10 per cent penalty plus interest and other administrative fees will be charged if IPT is paid after December 31.

As part of the bailout, the government was supposed to have updated real estate values by mid-2014, but in July, the parliament decided that this year’s IPT rates would be based on 1980s values, like last year, while the new system is expected to be implemented in 2015.

IPT payment extension anticipated

Editor’s comments

The revised Memorandum of Understanding (MoU) issued in September 2014 calls on the Cyprus Government to:

“implement the recurrent immovable property tax for the tax year 2015 based on a General Valuation (GV) for all immovable properties, determined on the basis of tangible building- and plot related characteristics. The design of the immovable property tax should ensure a broad tax base and IPT proceeds not lower than in 2013.

“A draft of the proposed tax rates and thresholds will be submitted for timely consultation with programme partners by Q4-2014. Following consultation with programme partners, the final design of the immovable property tax will be adopted by the House of Representatives by Q1-2015.”

There is some speculation as to whether the Government will be able to achieve this goal in light of the many thousands of objections it has received to the 2013 property valuations.

Standard & Poor’s raises Cyprus credit rating

Nigel Howarth
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3
Standard & Poor’s raises Cyprus credit rating

Standard & Poor's raises Cyprus credit ratingSTANDARD & Poor’s Ratings Services has raised its long-term foreign and local currency sovereign credit ratings on the Republic of Cyprus to ‘B+’ from ‘B’. At the same time, it affirmed the short-term foreign and local currency ratings at ‘B’. The outlook is stable.

In yesterday’s press release, Standard & Poor’s said that:

“The upgrade reflects our view that Cyprus’ economic and budgetary performance has been more positive than we expected over the past six months. The government’s commitment to significant fiscal, financial sector, and structural reforms, along with assistance from its European partners in improving its debt profile, has supported this improved performance. We also view Cyprus’ economic performance as stemming from its relatively flexible labor and product markets, its resilient services sector, and its relatively low tax burden, all of which pre-date the economic crisis. Cyprus’ economic performance has been accompanied by a smaller drop in consumption than we anticipated, which we believe is partly linked to a general loss of confidence in Cyprus’ banks.”

Referring to the Cyprus economic adjustment program, S&P noted that:

“Cyprus has, in our view, complied with its economic adjustment program, which is financed by the ESM and IMF. We believe that the program should remain on track even if there are disbursement delays by its official lenders.”

However, it went on to warn that:

“The forecast for domestic demand remains uncertain and presents a risk to public finances. Rapid private-sector deleveraging is underway, with credit growth in households and corporates contracting by over 9% in 2013 and an average of over 8% so far in 2014. High levels of strategic defaults by households on mortgage obligations, however, indicate that 2014’s stronger-than-expected consumption levels may only be temporary.

“In addition, the asset quality of Cyprus’ banks continues to decline despite banking sector restructuring. Nonperforming loans (NPLs) were at an estimated 53% in August 2014, the highest in the EU, compared with 46% at the end of 2013. High levels of NPLs also reflect the government’s decision not to create a “bad bank” (which would likely involve government backing).”

Commenting on its outlook, S&P said that:

“The outlook on the long-term rating is stable, balancing our view of Cyprus’ progress in economic and budgetary adjustments against outstanding challenges in the financial sector, in particular the deterioration in banks’ asset quality and removal of cross-border capital controls.

“We could raise the ratings if the financial sector stabilizes, notably if asset quality improves and economic reforms continue such that growth prospects significantly improve; if budget deficits over 2015-2017 decline more than we currently forecast; or if all capital controls are eliminated.

“We could lower the ratings if financial sector stability comes under renewed significant pressure, for example if the deterioration in banks’ asset quality remains unaddressed, if the government seems unable to fulfil ESM/IMF program conditions, or if budgetary performance worsens materially from our current expectations.”

Further reading

Cyprus Long-Term Ratings Raised To ‘B+’ On Strong Budgetary Performance; Outlook Stable (subscription)

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