A recent decision by the Nicosia District Court could have major implications for thousands of property owners with outstanding mortgages. The court issued an interim injunction, halting the foreclosure of two apartments and a shop due to potentially unlawful charges added to the mortgage agreement.
This marks the first time a Cypriot court has intervened in a foreclosure based on the terms of the mortgage contract itself, rather than external factors. The case centered on additional fees imposed by the bank—including commissions and insurance premiums—which went beyond the principal loan, interest, and legally permitted costs. The plaintiffs argued that these charges were excessive and violated financial regulations, placing an unfair financial burden on borrowers.
Legal Grounds for the Ruling
Representing the mortgage holders, barristers Andreas Mathikolonis and Chryso Papachristodoulou successfully argued that the extra fees violated multiple provisions of Law 9/65, including Articles 5, 8, 21(1)(c), and 21(2). They claimed that these terms inflated the borrowers’ total debt beyond what the law allows, making it impossible for them to fully understand their financial obligations.
The court agreed, ruling that the plaintiffs had a strong case. The judge noted that the mortgage agreement contained vague and open-ended clauses that made it difficult to determine the total amount owed, including interest and associated costs. This created legal uncertainty and an unfair disadvantage for borrowers.
Broader Impact on Mortgage Holders
This decision could have widespread consequences, as many mortgage agreements contain similar clauses. If upheld in future cases, the ruling may pave the way for legal challenges against banks and credit institutions that have imposed similar charges on borrowers.
Another key factor in the court’s decision was the risk of irreparable harm to the plaintiffs. The judge emphasized that allowing the foreclosure to proceed before a final ruling would mean the property owners could lose their assets unfairly. Even if they ultimately won their case, reclaiming their properties would be difficult, if not impossible.
Potential for Banking Sector Reforms
The ruling is expected to trigger further legal scrutiny of mortgage agreements across the banking sector. It may lead to reforms aimed at ensuring greater transparency and fairness in lending practices, offering stronger protections for borrowers facing foreclosure due to disputed fees.
Source: www.news.cyprus-property-buyers.com