Many property owners with Swiss Franc mortgages are now paying more than they expected. What can you do? Holiday homeowner, Rowena, shares her advice.
It’s like a confession that you don’t want to share with your friends or family, but here goes…
“My name’s Rowena and I have a Swiss Franc mortgage.”
Yes, I was one of those people who, back in 2007 in the property boom years, bought our beautiful home in Cyprus by borrowing in the Swiss Franc currency. Years later, with the Swiss Franc thriving and the Sterling still struggling, our mortgage payments are almost double the amount of what we had been advised we would need to pay.
Perhaps we were naive when we were led to believe borrowing in Swiss Francs would be a good decision. It clearly wasn’t. Hindsight is a wonderful thing but it’s no good to us now. Myself and many other buyers of Cypriot properties are paying much more than what we expected and many buyers are now seeking the help of solicitors and lawyers to see if they have a case against the bank for the mis-selling of their loan.
Some people have been negotiating directly with the bank, whilst others have been getting legal advice. I have been following reports with interest, uncertain on the best course of action to take. There are a few rumours circulating, as well as some informative articles on websites such as Cyprus Property News. I decided to contact Louise Zambartas, of L.G. Zambartas LLC , to try and clarify some of the things that I’ve heard.
Do I have a case for mis-selling of our Swiss Franc loan?
It is likely that the bank has a case to answer for mis-selling of your Swiss Franc loan. In recognition of their customers’ rights to bring such claims to be determined by the court, some of the banks in Cyprus are willing to renegotiate Swiss Franc loans.
Of course, every case depends on its own merits and an analysis of the documentation signed at the relevant time is essential to assess the strength of the mis-selling case.
Will the bank write off part of my loan or reduce my payments?
The answer to this question depends on which bank is involved and some of the banks are willing to negotiate, whilst others are not. Those banks that are willing to negotiate will discount the loans, however the discount is granted on terms, which will protect the bank in the event of a future default on the repayments.
The restructuring can include an extension of the loan term depending on the age of the borrower and a reduced interest rate with a fixed margin. These factors can make a significant difference to the monthly repayments as well as the total cost of the loan in the future.
The restructuring also results in repayments of capital and interest, meaning the loan will be repaid at the end of the loan term. This is usually not the case with a standard 15-year foreign currency loan from a Cyprus bank. These loans frequently require a ‘bullet’ payment of an unspecified amount to be made at the end of the 15-year term. As many customers will be on a retirement income at the end of the term, this bullet payment will be extremely difficult to make.
It is also our experience that many customers were not aware that the loan would not be repaid at the end of the term. An easy way to check whether this is the case or not, is to add up the total amount of the repayments and compare this with the initial amount borrowed. If the capital borrowed will not have been repaid, it is clear that a very substantial bullet payment will be required at the end of the loan term.
Is there a deadline?
The limitation rules in Cyprus have undergone a significant change, with the passing by the Parliament of Cyprus of the new Limitation Law (N. 66(I)/2012). The implementation of the law has been delayed until 31 December 2013, however it is not anticipated that the implementation will be delayed any further.
The new law introduces certain time limits for the filing of civil claims and time starts to run on the day upon which the cause of action arises.
The following are the limitation periods for the relevant civil claims:
- A claim related to mortgages or pledges cannot be filed after the passing of the 12 years from the date on which the cause of action is completed.
- The default limitation period for Tort claims is six years from the date on which the cause of action is completed. However, in the case of damages for negligence, nuisance, and breach of statutory duty the limitation period is three years. The time period is calculated from the time the cause of action is completed.
- As the law has not yet been implemented, no time limit can expire under the above provisions before 31 December 2013. However, after that date, any claim which has not been commenced and in respect of which the limitation period has passed, will be statute barred.
It is worth specifically mentioning how these time limits apply if you have a property in Cyprus and a loan with a Cyprus bank.
As actions against the bank are likely to be based on misrepresentation/mis-selling, these are claims for negligence and the time limit is therefore three years from the signing of the loan documentation. Claims against developers are often for negligent building at the time of construction therefore this is also a claim based in negligence with a time limit of three years, with a time limit of six years in addition to a claim for breach of contract.
In accordance with the Cyprus Limitation Law, the limitation periods apply not only to lawsuits but also to counterclaims. The effect of this is that the bank has 12 years to proceed in respect of a mortgage/loan default, however a counterclaim to such an action will potentially be statute barred owing to the much shorter time period applicable.
Remember everyone is different and the decision you take on how to proceed is ultimately yours. Do your research carefully and make sure, if you do seek legal advice, to use a reputable lawyer.
The content of this blog is intended only to provide a summary of matters of interest. It is not intended to be legal advice.