Sale of Mortgaged Property in Cyprus: Introduction to the Fast Track Foreclosure Process

The Immovable Property (Transfer and Mortgage) Law 9/1965 (hereinafter the “Law 9/1965”), was recently amended, introducing a fast track foreclosure process. The introduction of the new section to the Law 9/1965 provides a step by step process for the private sale of a mortgaged property whilst restricting the mortgagor’s capabilities to stop the proceedings of the sale.

Prior to the amendments, there were only two available options for the sale of a mortgaged property: through the department of lands and surveys or through a forced sale (after a judgment had been issued). The new section, i.e. Part VIA of the Law 9/1965, has offered mortgagees a new way of foreclosure: through private sale. The concept behind these new provisions is to offer to mortgagees / bank institutions, a faster way of foreclosure, whilst mortgagors retain the right to file an appeal against the foreclosure proceedings provided that one of the specific grounds of article 44Γ (3) is applicable.

It should be mentioned that despite the efforts of legislators to introduce a fast track foreclosure, Part VIA in its initial form, was effectively a failure.  Mortgagors could file an appeal against the announced foreclosure based on the ground that an action against the mortgaged debt was pending before the court. In essence, this ground of appeal had allowed manipulation of the Law 9/1965 due to mortgagors’ strategy to file claims against the mortgaged debt in order to delay the sale of the mortgaged property or even to suspend the foreclosure proceedings, a strategy which had opened the floodgates to claims in the already burdened legal system and also, once again, led to significant delays in the process of sale.

The latest amendment of the Law 9/1965, has eliminated the aforementioned manipulation of the Law 9/1965 by replacing the “pending action” ground with the “issuance of an interim order” ground. In essence, mortgagors who have legitimate reasons against the mortgaged debt can still challenge the foreclosure proceedings through an application based on the strict provisions of article 32 of the Courts of Justice Law 14/1960.

Today, the Law 9/1965 as amended constitutes the ultimate weapon for mortgage creditors, especially banks, to obtain repayment of borrowed money or to mitigate their losses through the invocation of the provisions of Part VIA of the Law 9/1965. Simple, but strict requirements must be met (especially when mortgagees are banks, due to the additional requirements that apply), the majority of which have to do with the context and the service of the various written notices that must be sent, i.e. notice of type «Ι», «Θ», «ΙΑ» and «ΙΒ». The time periods that must elapse between notices is of the essence as well. Consequently, if a bank fulfils all necessary requirements it is extremely difficult for a mortgagor to successfully challenge the fast track foreclosure proceedings, save where an interim order prohibiting the sale of a mortgaged property has been issued, although it still remains unclear whether such interim order must be issued prior to the filing of an appeal or not.

It is clarified that, in practice, when mortgagors file an appeal against the foreclosure proceedings, they may occasionally put forward other additional legal grounds such as alleged nonconformity with the Constitution, abuse of process etc.

However, based on our experience in handling multiple cases concerning appeals and interim orders that have been brought before the courts against foreclosure proceedings through private sale, the courts are reluctant to issue a judgment in favour of a mortgagor. Despite the above, it is of paramount importance to note that every case is unique and requires careful attention to detail at every step of the way and thus, specialist advice should be sought for every case.