President Nikos Christodoulides has signed three of five returned foreclosure and insolvency laws into force, while referring the remaining two to the Supreme Court — bringing the total number of legal referrals on the issue to six.
The government communicated its final position through the publication of the three signed laws in the Official Gazette.
The laws were among 12 passed by parliament on April 6. Of those, only half will now take effect; the fate of the rest depends on Supreme Court rulings on their constitutionality.
What’s now in force
The three laws give borrowers additional tools to protect their primary residence.
Under the first — a Courts Law proposed by DIKO — borrowers can apply to a District Court within 45 days of receiving a foreclosure notice to have it set aside.
District Court judges will have jurisdiction to hear disputes between borrowers and creditors over outstanding balances on terminated credit facilities, as well as related disputes involving guarantees, collateral, overcharging, abusive clauses, and foreclosures. Courts must complete hearings on the merits within 12 months of filing.
Where a foreclosure notice was issued before the law came into force, the 45-day window runs from the date the law takes effect.
The second law — a Credit Agreements Law proposed by ELAM — prohibits creditors from demanding additional collateral from borrowers when the mortgage on the property securing the home loan, combined with the borrower’s creditworthiness, already covers the loan amount.
The third, an amendment to the Personal Insolvency Law proposed by ELAM, raises the protected value of a primary residence to €400,000 and removes distortions that created artificial barriers for insolvent individuals who would otherwise qualify under the insolvency framework.
What’s been referred to the Supreme Court
The two laws now before the Supreme Court were both referred after parliament rejected the government’s earlier attempts to return them.
The first, proposed by AKEL and the Ecologists, would have given debtors access to the courts to challenge abusive clauses and the level of their debt. The government referred it on the grounds that it would threaten financial stability and have serious consequences for public finances.
The second, proposed by AKEL, DIKO, and DEPA, amends the Interest Rate Liberalisation Law to bar banks from charging additional interest once the total amount owed — including interest — reaches twice the original debt.
The government’s primary objection is a retroactivity provision, which it argues violates the right to freely contract by retroactively affecting rights already acquired. The Finance Ministry had previously agreed to the proposal on condition it applied only to new loans.
The new framework
Of the 12 laws parliament passed on April 6, six are now in force — two originating from government bills and four from parliamentary proposals.
Under the new foreclosure framework, properties at auction cannot be sold below 50% of their market value. Borrowers have the right to apply to set aside a foreclosure notice for up to 12 months.
Banks and credit acquisition companies cannot demand additional collateral when the mortgaged property already covers the loan. The Financial Commissioner’s decisions on complaints against financial institutions will be binding up to €20,000, though institutions retain the right to appeal to the courts.
The insolvency framework is also strengthened, with the debt verification mechanism provided by the Financial Commissioner improved to support debt restructuring.