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BY DR ALAN WARING
“Those whom the gods wish to destroy they first make mad”, an ancient Greek saying goes. Judging by the growing eccentricities in the Cyprus property market, there are quite a few parties heading for destruction. For example, some developers seem to have declared open warfare on buyers and any who try to protect themselves or defend the rights of buyers. Is threat of legal action, assault or other intimidation a good way to attract new buyers?
The Long March
Over the past 5 years, Risk Watch has commented many times on the overall scandal of Title Deeds, property fraud and official blind eyes and deaf ears. The recent Financial Mirror Editorial plus the article from George Mouskides of APPDM have highlighted yet again the uphill battle that property buyers, especially foreigners, have in Cyprus both against those developers and lawyers who decide to treat them badly and against the state infrastructure and justice administration, which thus far have failed to protect them.
The new government legislation may partly correct some aspects but it almost certainly will not fix the overall problem. For example, it will not address the developer mortgage debt bubble hanging over Cyprus, estimated to be at least 7 bln Euros. It does not address the issue of rogue lawyers or errant banks or inefficient government departments or the tardy justice system. No obvious anti-corruption/anti-rusfeti mechanisms are included. Much of the buyer protection, which the government has asserted as being exemplary in its official response to probes by the European Parliament, is therefore virtual or illusory. Fortunately, the EC is still pursuing the matter. Risk Watch understands that further questions about the Cyprus government and its handling of the property scandal are being tabled in the EP, the initial ones being:
With reference to previous Parliamentary Written Questions E-0110/09, E-6793/08 and E-6513/08.
1. Cyprus Title Deeds Legislation
With a view to the new legislation that is about to be put in place by the Cypriot government to address the problem of withheld Title Deeds, would the Commission answer the following questions:
Does the Commission agree that this new legislation will not address the main problem cited in the numerous buyer petitions or indeed the above-referenced Parliamentary Questions, since it will not help buyers whose properties are encumbered with developer mortgages?
Does the Commission agree that the sale of mortgaged property without full disclosure at point-of-sale is practised systemically by Cypriot developers and should be prevented in all EU countries, with stringent penalties for transgressions?
How can a prospective buyer find out about the possibility of existing developer mortgages on the property? Do any developer websites or brochures mention this possibility or how to carry out searches to discover the risk before purchase? Historically, buyers’ own lawyers have not alerted them to this risk in the majority of cases.
Finally, will the Commission send a fact-finding mission to Cyprus in order to investigate these problems in more detail?”
2. Cyprus Developer Mortgages
“With a view to the new legislation that is about to be put in place by the Cypriot government to address the problem of withheld Title Deeds, would the Commission answer the following questions:
How many individual properties whose sales contracts are lodged at the Land Registry in Cyprus are encumbered with developer mortgages? How many of these have been sold to Cypriots and how many to non-Cypriots?
What is the current balance of the total mortgage debt of Cypriot developers and the percentage increase, year on year, over the last three years?”
The recent Supreme Court landmark case, whereby a British couple’s Paphos lawyer was forced to pay them 120,000 Euros in compensation for negligent searches, took 11 years to conclude. It is staggering that the guilty lawyer is still practising and that mandatory duty of care rules or professional standards for lawyers’ conveyancing search duties still do not exist in Cyprus. Other cases involving developers, lawyers or both are also taking years to pursue through the court system. It is almost as if there is a conspiracy by the establishment to ensure that buyers with real and often horrendous grievances are deterred from seeking justice by grinding them down and exhausting their energy, health and finances with a deliberately long drawn out process. Undoubtedly, some plaintiffs will die before their cases are concluded. However, a growing number are determined to go all the way to the European Court if necessary, no matter how long it takes.
Some More Appalling Cases
The number of cases of alleged serious wrong-doing against property buyers in Cyprus in recent years is now legion. Many have been logged in detail by the Cyprus Property Action Group (CPAG) and Denis O’Hare, who has been the subject of a gagging order and a withdrawn libel suit by Leptos (Armonia Estates). Nigel Howarth’s website www.news.cyprus-property-buyers.com cites more. Yet another is the case of Mr & Mrs Smith reported in Cyprus Mail 9 June 2010 which has even prompted the Cyprus President’s Under-Secretary to personally intervene publicly to try to ensure they receive full and prompt justice. Will he also do the same for the hundreds of others held up by slow courts and the Attorney General’s block on criminal investigations into alleged property fraud? I have selected five cases as further illustration:
Case 1: Alleged Developer Fraud and Assault
The Conor O’Dwyer case has reached such a level of international notoriety it is difficult to see Cyprus ever living it down. Mr O’Dwyer alleges that he paid Cyp 75,000 towards a property in Frenaros from the developers Karayiannis. On raising some concerns about the contract, he alleges that the developers then sold his property again without his knowledge or permission and also failed to return his money. As the Attorney General views such issues as civil and not criminal, Mr O’Dwyer was forced to take a civil case against the developers. The developers and their lawyers contest Mr O’Dwyer’s allegations and counter-charge him with attempted extortion. While collecting video evidence of the property in question, Mr O’Dwyer alleges that senior representatives of the developer arrived and assaulted him. Initially dismissing it as a simple road traffic accident, the police were then persuaded by intervention from the British High Commission to raise assault charges against the alleged attackers. His injuries were serious enough to keep him in hospital for a week. Both the fraud and the assault cases have now been before the Cyprus courts for some years, largely owing to multiple adjournments. In the meantime, he has organised a protest campaign in the UK including a vigil outside the Cyprus High Commission, protests outside Cyprus property exhibitions and a DIY protest website.
Case 2: Alleged Lawyer Fraud, Forgery and Assault
A buyer alleges that she has been defrauded of 200,000 Euros as a result of her house having been sold twice. She had appointed a well-known Cyprus law firm. She alleges that her contract of sale was withdrawn from the Land Registry using a forged power of attorney not even in her name. She further alleges that when she complained to her Cyprus lawyer about these matters he assaulted her by spitting in her face. This lawyer continues to practise unfettered.
Case 3: Alleged Lawyer Fraud
Following the death of a Cypriot woman in Cyprus in 2007, her son who had been living with her at the time of her death and who was co-executor to her will with a Paphos lawyer was puzzled by the unresolved probate. He alleges that unbeknown to him the lawyer had submitted false affidavits to the court (and without a copy of her death certificate) that this woman had died in the UK some nine years previously and that he had been unable to locate her son! The affidavits also sought, and succeeded in, her son’s removal as an executor. Her son, armed with her actual death certificate, eventually persuaded the court to overturn this errant decision and reinstate him as sole executor. However, his subsequent attempts to persuade the Justice Minister and Ombudswoman to act on what was prima facie evidence of criminal fraud failed. The Disciplinary Board of Advocates of the Cyprus Bar Association after nine months also has yet to consider his complaint of serious professional misconduct against the lawyer, who continues to practise unfettered.
Case 4: Alleged Lawyer Negligence, Deception and Collusion
A buyer alleges that his Cyprus lawyer failed to advise him prior to contract of the presence of a Cyp 50,000 mortgage secured by the developer against the property. He also alleges that his sales contract was biased in favour of the developer and that there was probable collusion with the developer. For example, he discovered that for a time the lawyer shared the services of an office secretary with the developer, thus raising a question of partiality and conflict of interest. Further, he alleges that the lawyer blatantly lied in a letter to him that the sales contract had been lodged with the Land Registry within the requisite period of 4 weeks, whereas subsequent investigations revealed the registration was not completed until 18 months later.
Case 5: Alleged Developer Fraud and Complicity of Others
A foreign couple were persuaded by their IFA (Independent Financial Adviser) who worked for a well-known firm based in Cyprus to buy as an investment four apartments off-plan at a new development from Sun Gain Estates in the Paphos area. The buyers who were overseas relied on a well-known Cyprus lawyer appointed by the IFA. The contract was signed and the initial stage payments totalling Cyp 50,000 were made. After 18 months and no progress reports, the couple asked me to investigate. I discovered that the developers had never obtained planning permission and so the work had not started. Further, the IFA reported that as all the estate agents’ sales commissions had already been paid there was no longer enough money left to complete the job even if retrospective planning permission were granted! The lawyer of record refused to respond to a request for assistance so he was replaced by a reputable Cyprus lawyer who soon discovered that in fact the Sun Gain directors had abruptly closed their Paphos offices and fled abroad with the money.
Part 2 in the next Financial Mirror examines what is perpetuating the overall problem and considers some solutions.
Dr Alan Waring is an international risk management consultant with extensive experience in Europe, Asia and the Middle East with industrial, commercial and governmental clients. Contact [email protected] .
©2010 Alan Waring
