What happens when you can't buy your house

Due to the current economic situation, more and more people are finding themselves unable to repay loans. George Coucounis describes what happens in Cyprus if you find yourself in this unfortunate position.

More and more people from the UK who bought property in Cyprus find themselves unable to pay either the purchase price or repay their loan instalments due to the current economic situation and falling Sterling.

The situation affects developers and banks who are worried because it adversely affects their plans, their credit - cash flow and they have no alternative but to give time to the purchasers to raise money. However, the financial position of buyers does not seem to be improving, leading many to try to sell their properties even at a lower price to save their deposit or part of it.

The time limit is tight and sooner or later developers and banks will proceed to officially demand payment, they will terminate sale contracts/loan agreements and ask delivery of the properties.

The remedy of charging interest or default interest will not be adequate since it worsens the position of the buyers and increases their liabilities up to the degree they will not receive their deposit back.

The question now is what the legal position of the buyer in default is. The buyer is considered to be in breach of the sale or loan agreement, making the vendor and the bank entitle to give notice for the payment of the money due. A buyer who fails to respond can expect to receive a notice of termination of the agreement/s and a demand for the delivery of the property, either to the vendor or to the bank.

The claim of the bank for the delivery of the property is based on the assignment of the sale contract to them. Therefore, a buyer who fails to deliver the property must be aware that he will be responsible for the loss of the use of the property equal to its rental value, additionally to any other loss or damage the vendor or the bank will suffer. The vendor can normally claim the money due to him with interest, delivery of the property back to him and the withdrawal of the sale contract from the Land Registry.

The bank can normally claim the payment of the loan together with the total interest due, delivery of the property and the withdrawal of the sale contract from the Land Registry.

Some buyers will comply and others will not. The ones who co-operate may come to an agreement finding a solution to the issue without Court proceedings, but the others will face legal action. The matter will result to the sale of the property and the net proceeds will be used against the debts of the buyer. There may be adequate funds to pay off the debts and if there is a balance, the surplus will be returned to the buyer and any shortfall will remain his to pay.

It is evident from the above that a prudent buyer who is unable to pay the price to the vendor or repay his bank loan must find an amicable solution minimizing his loss. On the other hand, if that is not possible, he must co-operate by considering the procedure to intervene where possible to protect his rights. In this respect, he should seek proper advice to face the problem and find the best possible solution minimizing his loss and damage.

His dream may not come true but times are difficult everywhere.

About the author

George Coucounis

George Coucounis is an experienced lawyer practicing in Larnaca, Cyprus. Educated at University College (London) and Thessaloniki University (Greece), George is fluent in English and has been practicing law in Cyprus since 1982.

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