UK investors who bought properties in Cyprus between 2003 and 2008 with a Swiss Franc mortgage from the likes of Alpha Bank have found themselves owing a lot more than anticipated.
Their monthly payments have sky rocketed and many can no longer afford to meet the repayments but are stuck with the prospect of losing their UK home to pay for their dream holiday villa, which has now turned into a nightmare.
Judicare is one of only a few law companies operating on behalf of clients where there is suspected malpractice by estate agents, financial advisers, solicitors and banks; and specifically where it is believed they were mis-sold Swiss Franc mortgages, have been ‘misled’ by their solicitors and are now facing demands for huge mortgage payments and threats of UK litigation.
Neil Heaney, CEO of Judicare, representing 200 buyers, reckons there may be 20,000 to 30,000 British people who have bought properties with a mortgage in Swiss Francs. Some will have a case against the banks, others will not.
Heaney explained: “People bought properties off plan through a one stop shop of estate agent, IFA, property developer and bank. The initial monthly payments averaged £300 and would rise to £500 to £600 when the property had been built. But borrowers soon began to see their monthly payments leap to £1,200 or more. This was because their mortgage was in Swiss Francs and the exchange rate fluctuated.”
In many cases the banks said the Swiss Franc mortgage was the only option for buyers to secure their property. But the complexity of foreign currency mortgages was not explained and borrowers were tied into the deal with no way out and no remortgage options.
Legal cases
Judicare is following two strategies to help people in this predicament. Firstly, irregularities in the legal process and secondly, mis-selling of the Swiss Franc mortgage.
Heaney said: “There is no case against the developers as the houses were completed and delivered to the buyers. If the properties were not built or completed it is because the developer went bankrupt.
“But there were irregularities in the legal process to allow for legal challenge against banks, certifying officers and the lawyers.”
Stylianos Christoforou from TCA law firm as Counsel for Judicare in Cyprus, explained: “It is the job of the certifying officer to certify the signature of the buyer on the loan agreement. But what was happening was that the loan agreement was sent to the buyer in the UK to be signed, so it was not witnessed by the certifying officer in Cyprus; but nevertheless they would certify the signature. This makes the loan agreement void.”
“There is also the issue of the Swiss Franc. As part of the European Directive, the bank had a duty to warn the client about the fluctuations of currency.
“There were other issues as well, such as no credit checks being made by the bank on the clients, and not offering them a 15-day cooling off period.”
Trials in Cyprus
The first cases of British borrowers taking the banks and lawyers to court are due to come to trial in Cyprus in October. The trials are likely to last around four months and the judges decision will take another three to four months so it won’t be until at least May 2014 that the first outcomes will be known.
Which ever way the first case goes, it is highly likely that the loser will take the case to the Court of Appeal. So this nightmare for UK investors in Cypress who took out a mortgage in Swiss Francs will no doubt drag on for some time to come.
Banks bring legal action to the UK
Some of the Cypriot banks have now started to take legal action against UK borrowers who have stopped paying their mortgage but most people are ignoring it. Judicare is warning that borrowers must face up to the situation or they could end up losing their UK home as well as their property in Cyprus.
Christoforou explained: “If buyers are taken to court in Cyprus for not paying their mortgage and they do not defend the case, the Cypriot banks can register with UK courts to enforce against the borrower’s UK assets.”
The message for anyone in this situation is not to ignore it as it will not go away. Heaney’s advice is that people should seek legal assistance: “They may have a case, they may not, but even if they don’t, it may be possible to restructure the loan to make it easier for them to repay. But each case must be fought on its own merit.”
Christoforou reckons around 90 per cent of these Swiss Franc loans to UK investors were arranged through Alpha Bank and 90 per cent affect those who bought property in and around the Phaphos area of Cyprus.
Ex-footballer turns to property investment and legal action
Neil Heaney, CEO of Judicare, is a former professional football player who played for Arsenal, Manchester City and Southampton as well as England Under 21s. At the end of his football career he turned to property investment.
When an investment in an off-plan property in Spain ran into difficulties he employed Judicare, based in Spain, to represent a group of investors, himself included. The success of this action led him to be approached for advice for help in Spain and across other countries.
Heaney said: “Through my network of friends, family and former playing colleagues who knew of my involvement in the legal case in Spain, I began to receive approaches to offer advice and to assist others with similar problems in Spain.
“Before long I was being asked to help with issues in other countries such as Dubai, Cyprus and Portugal. The sheer scale of the problems that investors were encountering with purchases overseas started to become apparent.”
As a result he partnered Jose Dorta – the chairman of the Judicare Group – to establish the UK based Judicare office offering specialist advice and recovery action for investors with overseas property disputes all around the world.
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