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Expat Cyprus Swiss bank mortgagees mount court action
| Published: | 19 Aug at 6 PM |
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Thousands of expats in Cyprus who purchased residential property or second homes on the island with mortgages hedged against the Swiss franc are faced with losing everything.
Between 20,000 and 30,000 homes valued at millions of pounds are involved in the scandal, which broke when island banks demanded that the full amount due on the mortgage loans be repaid. Expat owners of the properties were encouraged at the time of purchase to hedge the risk with Swiss franc loans, but the collapse of the euro against the rising Swiss currency now means mortgage amounts owed are far higher than the properties’ values.
Cypriot banks are now demanding the full amounts be returned, and legal costs and interest penalties are piling onto the already inflated sums being claimed. As a result, affected expats with properties both in Cyprus and the UK are at risk of losing everything.
Homeowners are now counter-claiming in the Cypriot courts, with lawyers acting for a group of 200 stating that flawed advice was given by banks, local financial advisors and property developers working together. Most of the purchases were off-plan, with buyers given no explanation of the terms of the mortgages or any indication of the risks of hedging based on currency exchange rates.
Lawyer Stylianos Christoforou explains that the lack of full explanation of the risks invalidates the contracts, adding that clients’ signatures on power of attorney documents were not certified, making any action taken by locals under that power improper. The vast majority of expat mortgagees did not oversee the procedure or visit the island until they were handed the keys on completion.
A further group of expats has won the right to proceed against the banks in the UK courts, but lawyers warn that the action may result in doubling legal costs should the Cypriot banks counter-claim in the Cyprus courts. The island’s economy and its banks are now in meltdown due to exposure to failing Greek banks.
Between 20,000 and 30,000 homes valued at millions of pounds are involved in the scandal, which broke when island banks demanded that the full amount due on the mortgage loans be repaid. Expat owners of the properties were encouraged at the time of purchase to hedge the risk with Swiss franc loans, but the collapse of the euro against the rising Swiss currency now means mortgage amounts owed are far higher than the properties’ values.
Cypriot banks are now demanding the full amounts be returned, and legal costs and interest penalties are piling onto the already inflated sums being claimed. As a result, affected expats with properties both in Cyprus and the UK are at risk of losing everything.
Homeowners are now counter-claiming in the Cypriot courts, with lawyers acting for a group of 200 stating that flawed advice was given by banks, local financial advisors and property developers working together. Most of the purchases were off-plan, with buyers given no explanation of the terms of the mortgages or any indication of the risks of hedging based on currency exchange rates.
Lawyer Stylianos Christoforou explains that the lack of full explanation of the risks invalidates the contracts, adding that clients’ signatures on power of attorney documents were not certified, making any action taken by locals under that power improper. The vast majority of expat mortgagees did not oversee the procedure or visit the island until they were handed the keys on completion.
A further group of expats has won the right to proceed against the banks in the UK courts, but lawyers warn that the action may result in doubling legal costs should the Cypriot banks counter-claim in the Cyprus courts. The island’s economy and its banks are now in meltdown due to exposure to failing Greek banks.
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