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The Cypriot—and more broadly the European—economy has faced an unprecedented crisis of non‑performing loans. This systemic challenge led the legislator to enact amending Law No. 142(I)/2014, which introduced Part VIA into the Immovable Property (Transfer and Mortgage) Law of 1965 (Law 9/1965). The new framework established an out-of-court, fast‑track procedure for the sale (foreclosure) of mortgaged immovable property, replacing the lengthy judicial route that previously could take up to ten years to complete. This article reviews a decade of implementation, examining procedural preconditions, the rights of the parties, and key jurisprudential developments that have shaped its interpretation and application.
The foreclosure procedure under Part VIA is triggered when the entire mortgage debt becomes due and the mortgagor is in default for at least 120 days. From that point, a graduated sequence of notices applies:
Notice Type “Θ” (Thita/ΙΧ): This is the starting point for formal default/awareness sent by a licensed credit institution. It explicitly sets out the arrears, the right to cure by payment, and the consequences of non‑compliance—functioning as a final warning before the formal commencement of foreclosure. It is not required in certain exceptions (e.g., where a court judgment has already been issued or a sale application is pending under Part VI). Its purpose is to demonstrate that the mortgagor had a real opportunity to cure the default before the compulsory sale mechanism is activated.
Notice Type “Ι” (Yota/X): This is the first substantive procedural step of foreclosure. It is served together with a full statement of account (principal, interest, charges) and sets a minimum 45‑day period for payment (previously 30 days). Accuracy of figures and lawful service are crucial; any ambiguity or defect may later support an application to set aside the next notice. Notice “Ι” also acts as a timer: if the default is not cured within the period, a sale by auction may follow.
Notice Type “ΙΑ” (Yota-alfa/XI): This is the most important part of the process. It specifically announces that the mortgaged property will be sold by auction and must be served at least 30 days prior to the scheduled date. It states the place, time and terms of sale and activates the mortgagor’s remedies. It is the only notice that can be challenged in courts by application–appeal within the statutory time limit (see next section) and only for exhaustively listed grounds. Practically, Notice “ΙΑ” is the point at which the mortgagor must act immediately, with a complete file and a clear strategy.
Notice Type “ΙΒ” (Yota-Vita/XII): Served after “ΙΑ” as the next stage in the process. By Notice “ΙΒ”, the mortgagee calls upon the mortgagor to appoint an independent valuer within 10 days of receipt, in order to determine the market value of the mortgaged property. The mortgagee appoints their own valuer in parallel, ensuring two independent valuations. If the mortgagor fails to appoint a valuer in time, the mortgagee may proceed to appoint the necessary valuers. The importance of “ΙΒ” is that the reserve price for the first auction is set on the basis of these valuations—the Law sets the floor at 80% of market value for the first auction; the property may not be sold below that price at the first auction.
Notice Type “ΙΓ” (Yota-Gamma/XIII): If the first auction does not result in a sale, the mortgagee, under Article 44H of Law 9/1965, may continue either with a repeat auction or a private sale, serving Notice “ΙΓ” on the mortgagor and every interested person. The notice must be served at least 20 days before the new sale date and must expressly state the method of disposal. As for price: for up to 3 months after the first auction the 80% reserve still applies; after 3-months, the reserve may be reduced to 50% of market value (Article 44E(4)). After six months from the first auction, the mortgagee may either exercise the right of “self‑purchase” at market value (Article 44IA(1)) or proceed with a sale without reserve (Article 44IA(2)), without a fresh valuation.
Notice Type “ΙΔ” (Yota-Delta/XIV): This is about the completion stage after the property has been sold at auction to a buyer. It was issued under Article 44K of Law 9/1965, and it basically tells the buyer to pay the the price on time. The buyer has 60 days from the time they receive the Type “IΔ” form to pay the rest of the money into a special temporary account; otherwise, the Director of the Department of Lands and Surveys (aka Land Registrar) may refuse/annul the transfer (rejecting the transfer application). Notice “ΙΔ” ensures the purchaser fulfills the obligation to pay the full price so that the transfer is lawfully completed to the new owner.
Notice Type “ΙΕ” (Yota-Epsilon/XV): This is not part of the auction itself but part of the post‑sale transfer framework safeguarding parties’ rights. It is commonly known as a “Notice to File Objection”, sent by the Land Registrar to the mortgagor (and any other entitled person), notifying the intention to transfer the property to a specified buyer and inviting any objection within a set period. The same notice gives the mortgagor the option to request a transfer of the existing mortgage or other encumbrance to another immovable, or to produce a prohibitory (injunctive) order to prevent the transfer. Notice “ΙΕ” operates as a final safety‑valve in favour of the mortgagor, giving one last opportunity to prevent the compulsory transfer, where lawful grounds exist and the procedures are properly followed.
The mortgagor—or any interested person—may file an application–appeal to the District Court to set aside Notice “ΙΑ” within 45 days of receipt (previously 30 days), but only on exhaustively listed grounds. Specifically, the Law limits the grounds to: (a) non‑compliance with the prescribed form and content of the notice; (b) unlawful or improper service; (c) premature dispatch before expiry of the “Ι” notice payment period; (d) existence of a prohibitory order under Article 32 of the Courts of Justice Law (Law 14/1960); (e) a protective order under the Insolvency of Natural Persons legislation; & (f) participation in a state subsidy scheme such as “ESTIA”.
A key legal principle underpinning the process is the autonomy of the mortgage. As confirmed by the Supreme Court of Cyprus in Maria Mitsiyiorgi (2025) [Maria Mitsiyiorgi and Others v Gordian Holdings Ltd (Civil Appeal No 287/2015, Supreme Court of Cyprus, 12 June 2025)], a mortgage creates a primary obligation that is separate from the lender’s ability to prove that the mortgagor owes them money. In that case, the trial court threw out the money claim against a guarantor because there wasn’t enough proof of account balances. However, it still ordered the sale of the mortgaged properties. This shows that the mortgage works as a separate security, allowing the sale even if the personal claim has trouble finding evidence.
Given the tight 45‑day window and the restrictive nature of the grounds to set aside, borrowers must adopt a proactive, preventive strategy whenever foreclosure risk arises. The most effective approach is to build the legal foundations before service of Notice “ΙΑ”.
Once the borrower receives Notice “Θ” or “Ι”—or even earlier if the loan is already non‑performing—they may file a claim against the credit institution challenging the amount claimed, contractual terms, or the validity of the mortgage. Within that action, they should file an interim application for a prohibitory injunction to suspend the foreclosure until the main action is adjudicated. The existence of such an order is an independent ground to set aside Notice “ΙΑ” (ground (d) above) and provides strong protection for the borrower.
If the lender has already issued proceedings, the borrower can file a counterclaim seeking suspension of foreclosure. Like a standalone action, the counterclaim provides the legal basis for injunctive relief and strengthens the borrower’s position against imminent sale.
If the borrower has already received Notice “ΙΑ” without having implemented preventive measures, the situation becomes particularly pressing. The 45‑day period—though longer than the former 30 days—remains tight to file a new action, argue an interlocutory application, and secure a prohibitory order. In such cases, immediate filing of an application–appeal to set aside “ΙΑ” is imperative, invoking any lawful ground that can be substantiated.
Upon service of Notice “ΙΒ”, the borrower is called to appoint an independent valuer within 10 days. Failure to exercise this right has serious consequences: the lender will appoint both valuers, effectively depriving the borrower of any counter‑valuation leverage in the determination of market value. Such inaction “locks in” the sale price without a balancing valuation and drastically constrains later objections to the reserve at auction.
To effectively support any legal step —whether a claim on the merits or an application to set aside— it is essential to produce robust evidence, including:
Preparation and organisation should occur early and systematically, as the time pressure after service of Notice “ΙΑ” leaves no room for improvisation. Borrowers in distress should seek legal advice from the very first notices to shape a comprehensive asset‑protection strategy.
Proper service of notices is fundamental; improper service may result in annulment or setting aside of the relevant notices and the impending auction. Article 44IE of Law 9/1965 treats service as registered post to the last known address or the address registered with the Land Registrar. Only where this is not feasible is private service permitted.
The meaning of “service” has been litigated. Earlier first‑instance decisions conflicted on whether “delivery” meant mere posting to the postal service or actual receipt. Jurisprudence clarified that private service is secondary only, if service by registered post is not feasible. The view that the lender may freely choose either method has been rejected.
Service must also be effected on all interested parties. If the mortgagor is also the principal debtor, one notice suffices. However, failure to serve co‑owners or a principal debtor company may render the entire process stillborn, as third‑party rights are affected and the fundamental audi alteram partem principle (hear the other side) is violated.
The law provides for a tiered minimum reserve price depending on the stage of the process. The reserve price at the first auction is set at a minimum of 80% of the market value, as determined during the procedure of Article 44Δ following the “IB” notice. In a subsequent attempt to sell within the same cycle, before six months have elapsed, the reserve price may – according to Article 44E(4) – be adjusted down to 50% of the market value.
Important practical point: If the debtor failed to appoint a valuer within the 10-day deadline set out in the “IB” Notice, it becomes more difficult for them to later challenge the market value that was used.
Furthermore, according to Article 44IA(2), if six months pass without the property being sold, the lender may continue the efforts to sell, either via a new auction or through private sale, without any reserve price – that is, with no minimum threshold.
Loan agreements often contain terms that may be unfair to consumers. EU law, especially Directive 93/13/EEC and Directive 2014/17/EU on mortgage credit, protects consumers by making unfair terms null and void.
According to EU case law, an unfair term is one that the supplier imposes without genuine negotiation and that creates an unfair imbalance in the rights and duties of the parties that hurts the consumer, which is against good faith. “Significant imbalance” is assessed against what the national law would provide in the absence of the term—if the term leaves the consumer worse off than the baseline law, it is likely unfair. Good faith is breached where a supplier, acting fairly, could not reasonably expect that a consumer would have accepted the term had it been individually negotiated.
Practices that have been found potentially unlawful or unfair include:
The case of Aziz (C‑415/11) [Case C-415/11, Mohamed Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa)] is a landmark. Mr Aziz lost his home through a rapid enforcement process in Spain due to loan terms he claimed were unfair. The CJEU held that Spanish law breached Directive 93/13/EEC because it did not sufficiently protect consumers. The Court emphasised that national judges must be able ex officio to examine unfairness and to stay enforcement to ensure effective protection. This applies directly to Cypriot foreclosure law: courts must actively review contractual terms.
It is important to distinguish “unfair terms” from “indefiniteness” of terms, which may also ground challenges to the validity of a mortgage. In Maria Mitsiyiorgi (2025), guarantors said that the mortgage was invalid because the terms were too vague, especially when it came to interest, fees, taxes, and legal costs. The Supreme Court turned down the claim, saying that the mortgage deeds clearly stated the highest amount that could be secured and the interest rate that would apply (fixed or variable with a margin), which was in line with Article 21(1)(c) of Law 9/1965. That provision requires that the amount secured by the mortgage be fixed or ascertainable, together with the agreed interest and collection costs. Hence, terms ascertainable from the mortgage documents are not invalid for indefiniteness.
The Tarcău Case (C‑74/15) [Case C-74/15, Mohamed Aziz v Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa)] was decisive for the protection of natural‑person guarantors. There, Dumitru & Ileana Tarcău guaranteed the obligations of a commercial company to a bank, though they had no business link to the company. The CJEU held that Directive 93/13/EEC can apply to a mortgage guarantee contract between a natural person and a financial institution if the natural person has no professional link to the debtor company. The ruling effectively aligns guarantor protection with consumer‑borrower protection against unfair terms, closing a loophole that had left “friendly” or family guarantors exposed.
Where a term is found unfair, its nullity is retroactive—as if it never existed. In Spain’s “floor clause” cases, banks had to reimburse all amounts collected under the void term. Member States or courts may not limit the temporal effects of nullity—the consumer’s full restitution is required at least from the date of the Directive’s application.
After the sale of the mortgaged property, the mortgagee must, within 30 days, send the mortgagor and all interested parties a notice of the proposed disposal of the sale proceeds. That notice states that the proposed disposal will be deemed confirmed on the 30th day from the notice date unless a prohibitory order is issued.
In a recent matter I handled, the property at stake had a market value above €300,000 with undivided shares among multiple co‑owners. The complexity lay in the mortgagee’s attempt to dispose of the proceeds without serving the notice on all co‑owners and the debtor company. As Ι argued in Court, such omissions render the process stillborn, breaching audi alteram partem. I also identified a significant gap between market value and the proposed proceeds allocation. This dramatic undervaluation, together with breach of Article 44IA (purchase at market value after six months), raised a critical legal issue.
The priority order for distribution of sale proceeds is as follows:
1. Taxes, fees and charges necessary for the transfer;
2. Prior encumbrances;
3. The mortgage debt, plus interest;
4. Subsequent encumbrances;
5. Any balance is paid to the mortgagor.
In Alan David Goodband (2024) [Nikos Papakleovoullou as administrator of the deceased Alan David Goodband v Themis Portfolio Management Holdings Limited & others, Appeal No. 113/2023, judgment dated 8/8/2024, Paphos District Court], the Paphos District Court held that the administrator’s remuneration, under Article 42 of the Administration of Estates of Deceased Persons Law (Cap. 189), takes priority over satisfaction of other debts, including secured mortgage debts. Failure to include such expenses in the proposed disposal notice is a material error justifying its set‑aside.
From my experience, successful challenges to the disposal often rely on:
Prompt action is crucial: an application for a prohibitory order must be filed within the 30‑day period, because confirmation otherwise becomes automatic when the period lapses.
Recognising the need to protect purchasers who had paid the price but could not obtain title due to existing encumbrances, the Cypriot legislature introduced Articles 44IH–44KZ into Law 9/1965 by Law 139(I)/2015. These provisions covered cases where the sale contract had been filed with the Land Registrar by 31 December 2014.
The framework empowered the Land Registrar to transfer the property to the purchaser ex officio or upon application, staying other pending enforcement/foreclosure proceedings. Mortgagees were entitled to file an objection or a request to transfer the mortgage to other immovable property within 45 days.
In a pivotal judgment, the Court of Appeal of Cyprus in Bank of Cyprus (2024) [Bank of Cyprus Public Company Ltd v Director of the Department of Lands and Surveys Paphos and Others (Civil Appeal No 285/2018, Court of Appeal of Cyprus, 20 June 2024] held Articles 44IH–44KB of Law 9/1965 unconstitutional. Specifically:
This judgment has significant implications for the legal framework on “trapped purchasers” and the protection of secured creditors’ real rights, underlining the constitutional limits of legislative intervention.
Foreclosure of immovable property in Cyprus is a complex and evolving legal field. The process is structured in clear steps, but the correct application—especially service and respect for borrowers’ rights—is critical. The case‑law, as shown by recent Supreme Court and Court of Appeal decisions, continually shapes the framework—both by affirming fundamental principles such as the autonomy of the mortgage, and by protecting constitutional rights against statutory provisions or unfair terms.
The practical application of Part VIA reveals three critical dimensions demanding special attention. First, strict compliance with procedural preconditions, particularly proper service on all interested parties, is a conditio sine qua non for lawfulness. Second, the time dimension—from tight deadlines for remedies to the graduated reduction of the reserve—creates a dynamic environment requiring a strategic approach. Third, the penetration of EU consumer law through unfair‑terms jurisprudence has introduced new protective tools that Cypriot courts increasingly apply.
For borrowers and their lawyers, effective defence requires proactive action long before Notice “ΙΑ” is served. Experience shows that success rests on systematic documentation, timely litigation and injunctive relief, and the leveraging of procedural defects commonly encountered in practice. Meanwhile, the developing guarantor‑consumer protection case‑law and the strict interpretation of service requirements offer substantial avenues of legal protection that should not be underestimated.
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posted 3 days ago
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