The Council of Ministers approved a bill regarding foreclosures and sales of mortgaged properties on which the owners have defaulted.
The Ministries of Finance and Interior prepared the draft legislation amending the present laws pertaining to the transfers and property mortgages.
The new law will allow mortgaged property to be sold by mortgage lenders, without the involvement of a government service.
The main provisions of the proposed law are the following:
(a) The process of selling a mortgaged property may begin following non-payment of instalments beyond 90 days (under the current legislation, this period is 30 days).
(b) After the expiry of the 90-day period, the mortgage lender may send notice to the debtor, seeking repayment of the outstanding debt within 30 days from the date of notice. Otherwise the lender may exercise his right to sell the mortgaged property.
(c) If the property owner fails to comply, the mortgage lender may serve a second notice informing the owner that the mortgaged property will be sold at auction (indicating date, place and time). The notice will be served no less than 30 days before the date of auction of the mortgaged property.
The owner may, within 30 days of receipt of the notice, file an application to the Court to set aside the notice of the intended sale for the following reasons:
the notice does not fulfil the requirements regarding form and content, the notice has not been duly served, the notice is dispatched before the deadline for making the payment to the mortgage lender, action is pending before the Court on the notice referred to in point (b) above.
(d) The lender will serve notice to the debtor instructing him to nominate a licensed valuer within 10 days for the purpose of determining the market value of the mortgaged property. The lender will appoint a second appraiser.
(e) The two valuers, simultaneously and independently and without disclosing their evaluation, must submit their estimates to the property owner and the mortgage lender within 30 days of their appointment.
(f) If the difference between two estimates of the market value of the property does not exceed 25%, then the market value is deemed to be the average of the two estimates.
(g) In case the difference between the two estimates is equal to or greater than 25%, the lender is required within 5 days from the date of delivery of the evaluation reports, to ask the Scientific and Technical Chamber of Cyprus to appoint an independent third valuer within 30 days to prepare a third independent evaluation of the property and deliver a copy of the evaluation report to the lender and the owner.
(h) The market value of the mortgaged property will be deemed the average of the two closest evaluations.
(i) The initial sale carried out by the mortgage lender will only by auction and a reserve price will be set, corresponding to 80% of the market value of the property. No property may be sold below the reserve price.
(j) If the auction does not result in sale of the property, the lender can proceed with further attempts to sell the property (through new auctions or other types of sale) for a period of 3 months, maintaining the reserve price of 80% of its market value.
(k) If the mortgaged property is not sold, the reserve price may be dropped to no less 50% of its market value for a period of nine months during which time efforts to sell the property will continue. Upon completion of this period, the procedure will be repeated with the reserve price continuing to be no lower than 50%.
(l) The mortgage lender has the option to buy himself the mortgage property only after completion of 12 months from the commencement of the sale procedure.
(m) The process is repeated every year, if the mortgaged property has not been sold.
It is noted that where the mortgaged property is the main residence of the debtor, the provisions of the bill will be introduced on 1 January 2015, when insolvency proceedings will be implemented. The insolvency framework will cover, under certain conditions, the protection of the main residence. It also provides a quick settlement of debts owed by individuals without income and assets.
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