The Cyprus Property Scandal is Still Live......
In January 2007, in a Risk Watch article entitled ‘Who Will Clean the Augean Stable?’ I suggested that it was then already ‘far too late for the government, the developers and the rest to put a convincing PR gloss on the colossal mess they have created for Cyprus’ in relation to the scandal of withheld title deeds and property fraud.
Collectively, I referred to the perpetrators as ‘white collar gangsters’.
Very little of substance was done by the previous government to rectify the state of affairs. Indeed, ministers and their officials kept asserting that the scandal was a myth and the product of evil external forces and the international media.When such a ludicrous position became unsustainable, they admitted there was a problem with non-issuance of title deeds and resorted to a plan in 2010 to clear the backlog of 130,000 non-issued deeds.
Unfortunately, the plan had barely scratched the surface of the backlog by the end of 2012. Moreover, by then Cyprus was heading for bankruptcy and had been forced in June 2012 to apply for an EU bailout.
The Troika (EU, ECB and IMF) which evaluated Cyprus’s debt position noted, in its memorandum to the Cyprus government of the required actions, that while exposure to Greece’s debt problems had been instrumental in the crisis for Cyprus banks, many of the latter’s problems were home grown and related to over-expansion in the property sector as a consequence of the banks’ poor risk management.Further, the memorandum required the government by end of quarter 4 of 2014 to ‘eliminate the title deeds issuance backlog to less than 2,000 cases’ that remained pending for more than 1 year.
While the Land Registry offices may be able to become more efficient to achieve this issuance target, it is quite another proposition to transfer those deeds issued to developers to their rightful owners – the buyers who have already paid for the property in full. Non-discharged developer mortgages as well as the developer’s unpaid taxes are a real stumbling block to transfer that many buyers are facing.
The Inland Revenue appears to be supine in forcing developers to pay their outstanding taxes, while the banks seem terrified of getting developers to service their loan and mortgage debts.Under the eagle eye of the Troika technocrats, the banks, who for years have had a lax lending policy towards developers, will now have to take action on developer Non-Performing Loans.
If developers are unable to service their loans or discharge their debts, the prospect of developer bankruptcies followed by ‘fire sale’ disposal of repossessed properties looms much larger.
But, in this economic climate and a flat property market, will there be new buyers even for apparent bargains? And, what about all those existing buyers, mainly foreigners who have paid in full and never been a party to the developer’s mortgages but nonetheless find themselves the victims of attempted bank liquidation, as in the Liasides collapse and other cases?Effective government intervention in this matter is not only urgently needed but failure to render it would amount to complicity in what has been described as sovereign corruption. This is an early test of President Anastasiades’ commitment to clean up Cyprus. How could he achieve a rapid clean-up of the title deeds mess?
One obvious major action would be the establishment of a ‘bad bank’ specifically for developer debts, along the lines of the already successful National Asset Management Authority (NAMA) set up in Ireland in response to its EU bailout problems. This would prevent developers going bankrupt while protecting the interests of property buyers and the state’s finances.
Such a proposal was put (by CPAG) to a previous Finance Minister Mr Sarris several years ago, as well as other influential parties since then, but ignored. Will President Anastasiades and his new Finance Minister Mr Georgiades act decisively on this now to prevent the total destruction of the property sector?
http://www.news.cyprus-property-buyers. ... id=0014626?
