Hundreds of Scots whose dream of owning property in Cyprus has become a negative equity nightmare are being urged to protect themselves from Cypriot banks pursuing mis-sold mortgage debt.
They are among the 15,000 Britons who bought property in Cyprus between 2003 and 2009, many buying "off plan" before developments had even started.
Most were would-be buy-to-let investors who planned to offer the property to holidaymakers, while others moved to the island to work or for retirement.
Many now face the loss of their UK homes unless they resist claims from Cypriot banks which may be based on mortgage mis-selling.
City law firm Maxwell Alves, which already represents more than 1,000 English borrowers and has lodged an action in the High Court, has now advised Scottish victims to come forward, because a separate Scottish court action would need to be initiated.
But the firm has also this week launched constructive proposals which it hopes will help rejuvenate developments in Cyprus and mitigate losses on all sides.
Developers, mortgage lenders, lawyers and estate agents sold the Cypriot mortgages in Swiss Francs, citing cheaper interest rates and beneficial exchange rates against the euro.
But when Cyprus toppled into financial crisis, the value of the Swiss Franc soared 40 per cent against the euro, inflating loan repayments, while the crash in property values of up to 70 per cent in Cyprus pushed buyers into negative equity.
Homeowners say they were never warned of the currency exchange risks, which makes the mortgage contracts void.
Cypriot banks are now serving legal papers to enforce charges on the UK homes of borrowers, and making settlement offers which lawyers say should be resisted.
Angus Logan at law firm Maxwell Alves in Edinburgh said: "We have taken steps to commence litigation in England, but we have reason to believe there are quite a lot of people in Scotland affected too.
"I am fairly sure there are dozens, if not hundreds, of Scottish consumers who were seduced into buying these properties."
Mr Logan went on: "In some instances, some will have had a panic attack already because they will have received writs claiming they owe money."
While some owners may have decided to write off losses, "some are people who can't afford to write off anything", Mr Logan said. "What is urgent about it is they have only got until 31 December to file a claim, or rather to be listed as having a potential claim."
The lawyer said there was an ongoing legal debate about whether class actions in relation to mis-selling could take place in UK courts or must be heard in Cyprus, but European consumer legislation gave the option of 'home' jurisdiction.
"That would have to mean the Scottish courts," Mr Logan said.
Although one bank, Alpha, was widely reported in July as having settled with borrowers, the law firm says those cases related largely to buyers of properties which were never built or left unfinished, triggering claims against developers and the bank.
George Kounis, a London-based Cypriot property consultant at Maxwell Alves, said the firm has submitted interim settlement proposals to Alpha Bank, the Bank of Cyprus and a number of developers, based on its white paper, The Alternative Approach, which can be downloaded.
He said details of the proposals were confidential but they addressed how negative equity would be shared, how to rejuvenate "ghost town" developments, and how to ensure maintenance costs were covered in future.
Mr Kounis said: "The approach so far has been legal actions by both sides, purchasers claiming mis-selling and banks and developers claiming arrears.
"But the reality is that even if purchasers did not complain, they would have been left with a negative equity they could not possibly cover from rental income or their own resources, they would have been left with a unit in an estate that is mostly unoccupied either because the units have not been sold or they have been abandoned by their owners, and they would be left with hefty maintenance costs because most of the units in these estates are not contributing."
He added: "We need to think outside the box. So far the parties have been arguing who should suffer the losses. The responsible thing to do is to think of how best to reduce the losses by keeping existing purchasers and attracting new ones."
Mr Kounis will fly to Cyprus on Monday to begin discussions with banks and developers.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereComments are closed on this article