In a landmark session marked by intense political debate, the Plenary Session of the House of Representatives has approved a comprehensive suite of 12 new legal measures designed to shield homeowners and small businesses from the risk of foreclosure. The legislative package, consisting of two government bills and 10 member proposed laws, fundamentally reshapes the power balance between financial institutions and debtors.
The reforms focus on increasing the authority of the Financial Commissioner, ensuring legal recourse for those facing unfair terms, and providing a safety net for loan guarantors.
Strengthening the Financial Commissioner
A central pillar of the reform is the upgrade of the Unified Body for the Extrajudicial Resolution of Financial Disputes.
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Binding Decisions: For the first time, the Financial Commissioner’s rulings on consumer complaints are now legally binding for disputes up to €20,000.
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Debt Restructuring: The Commissioner is now empowered to confirm debt amounts and facilitate restructuring plans for eligible debtors.
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Earlier Intervention: Borrowers can now seek help from the Commissioner immediately upon receiving a Form I notice, rather than waiting for the final Form IA foreclosure letter.
Access to Justice and Special Courts
The Parliament also moved to ensure that borrowers can have their day in court before losing their property.
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Special Judges: The Supreme Court is now authorized to designate specific judges to handle financial disputes, with a mandate to hear foreclosure cases within 12 months.
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Grounds for Suspension: Borrowers gained the explicit right to appeal to a court to suspend a foreclosure if they can prove the existence of unfair contract terms or if the debt amount is in dispute.
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Extended Deadlines: The window for a debtor to register a legal case after receiving a notice has been extended from 45 to 75 days.
New Protections for Guarantors
In a unanimous vote, lawmakers moved to limit the exposure of those who co-sign loans for others.
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Capped Liability: If a mortgaged property is sold or recovered by a bank, the guarantor’s liability is now capped and cannot exceed the value of the original loan.
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Exhaustive Measures: Lenders are now legally obligated to exhaust all efforts against the primary debtor and their collateral before they can take any enforcement measures against a guarantor.
Debt Cancellation and Interest Limits
Several Green Light proposals were passed to prevent borrowers from falling into a cycle of infinite debt.
| New Measure | Impact on Borrowers |
| Debt Write-off | If an auction doesn’t cover the full loan, the remaining balance is now written off. |
| Interest Cap | Banks are prohibited from charging more interest once the total debt reaches twice the original loan amount. |
| Collateral Limits | Banks cannot demand additional collateral if the existing mortgage already over-covers the loan. |
| Price Floor | After six months of failed auctions, the reserve price cannot drop below 50% of the property’s market value. |
Protections for the Vulnerable
The Parliament also approved a temporary stay on foreclosures for primary residences valued at up to €350,000. This measure specifically targets the protection of small family homes and vulnerable households during the current period of economic volatility.
While several other proposals including wider exemptions for commercial premises and agricultural land, were rejected or withdrawn, the final 21 piece legislative effort represents the most significant shift in Cyprus’ foreclosure framework since 2014.
Source: Stockwatch.com.cy