The Memorandum of Understanding that Cyprus concluded with its
international creditors in 2013 committed the government to
introducing a so-called "foreclosure law" - legislation
to amend the procedure for the forced sale of mortgaged property to
allow for private auctions. The initial target date was end-2013,
but the deadline was extended to require legislation to be enacted
by mid-2014 and implemented by the end of the year.
The existing system allowed recalcitrant debtors to delay the
realisation of mortgaged property for years by means of strategic
applications to the courts for orders to cancel auctions, by
objecting to the reserve price set by the Land Registry or on a
number of procedural grounds, with the result that the average time
taken to enforce a mortgage was 10 years, and a determined debtor
could extend the delay well beyond that.
In its annual report for 2013 the Association of Cyprus Banks
published details of the initial draft law on forced sales of
mortgaged land, which gave the creditors the lead role in the
realisation process and limited the involvement of the Land
Registry, the government office that has hitherto controlled the
process. Over the following three or four months there has been
much debate and discussion over the draft law, much of which has
focussed on a perceived need to introduce additional safeguards for
so-called "primary residences".
The providers of international financial support had made it clear
that they viewed enactment of the freclosure law as an essential
precondition for release of the next tranche of funds, and after
many delays the Cyprus parliament passed the law on 6 September,
together with several other measures intended to mitigate its
effects. It is widely expected that the President will accept the
foreclosure law and remit the others to the parliament for
reconsideration. If the parliament refuses to alter its stance the
President is required to promulgate them, subject to the right to
refer them to the Supreme Court to consider whether they are
compatible with the constitution.
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