Following Greece’s example, where the online auction platform increased property sales by 300%, the Cypriot government introduced a similar digital platform of auctions in order to significantly reduce the bank’s non-performing exposures (NPE) and non-performing loans (NPLS).
The procedure established by the Decree for the Sale of Mortgaged Property through Electronic Auction System of 2019 in accordance with the Immovable Property Transfer and Mortgage Law, article 44G (1) (b), as amended, was launched in December 2019, after publication in the Official Gazette of the Republic of Cyprus by Regulatory Administrative Act 346/2019 on November 1st of 2019.
The procedure contributes to the simplification and acceleration of sales of mortgaged immovable property owned by borrowers in default, without the need of a prior foreclosure. Participation is open to Cypriot and/or EU citizens, companies duly registered in the Republic of Cyprus or in third countries, as well as institutions, societies, organizations,
municipalities and communities.
Following Greece’s example, where the online auction platform increased property sales by 300%, the Cypriot government introduced a similar digital platform of auctions in order to significantly reduce the bank’s non-performing exposures (NPE) and non-performing loans (NPLS).
Physical presence is not needed by neither of the parties to the sale process. The dispositions of article 44G of the Immovable Property Transfer and Mortgage Law grants to the mortgage creditor the option of the auction method for the sale of a given property. According to the Law, the auction may be conducted either through the intermediation of an accredited auctioneer, selected from the official website of the Ministry of Interior, or by means of an e-auction, by the mortgage creditor, on the official platform specifically created for this purpose.
The official administrator of the online auction platform is ACB E-AUCTIONS LTD, wholly owned subsidiary of the Association of Cyprus Banks (ACB). The ACB is the competent entity for the determination, design and announcement of the e-auction system and its’ administrator. The digital auctions are conducted by the Electronic Auction Officers (EAO), selected and listed by the ACB, according to the conditions set by the Decree. The choice of an EAO for each auction is conducted either by the Administrator or the mortgage creditor.
For the initiation of the procedure, the mortgage creditor must select an auction date and serve notice to the debtor no less than 30 days in advance. Then, a publication must take place on the official website of the Ministry of Interior, on the official website of the creditor and in two national daily newspapers. Both parties must be duly registered on the official electronic auction system, in order to be identified and displayed.
According to article 8 of the Decree, for participation in the e-auction as a bidder, physical persons and/or legal entities must be duly registered in the system.
There are two portals for registration, according to the natural or legal persons’ country of origin:
i) The “ARIADNI” Government Gateway Portal; for physical persons registered in he Civil Registry of the Republic of Cyprus and for legal entities duly registered at the Cyprus Registrar of Companies;
ii) They do not reside and/or stay in another country for one or more periods exceeding 183 days in total.
For participation in the bidding procedure, all candidate bidders must fulfill the following requirements:
i) Payment of the participation guarantee fee, which is equal to the 10% of the reserved price set for the property put on auction. The receipt must be digitally submitted to the EAO.
ii) A Power of Attorney copy, submitted 2 working days in advance to the digital auction platform, in the event that the bidder acts in terms of representation through a physical or legal person.
iii) In the event that the mortgage debtor is distinguished by a special status, in other words the property set to auction constitutes the debtors’ primary residence, all documentation demonstrating the special status must be submitted on the e-auction platform 5 working days in advance.
The Law specifies in its’ clause (8) that the following physical or legal persons are not eligible to participate as bidders in the auction:
i) Any physical person or legal entity owning more than 2% of the share capital of the mortgage creditor, or is related and/or connected to this person or to his agent, parent, spouse or any other relative until the 3rd degree;
ii) Any officer, employee or director of the mortgage creditor;
iii) Any agent, officer, director or relative until the 4th degree of the EAO;
iv) Any evaluation expert who has participated in the preparation of the valuation report of the mortgaged property, including their relatives until the 4th degree.
Once all documentation provided is inspected for compliance with the Law, the complete list of bidders is issued.
The participation guarantee corresponding to the 10 % of the reserved priced of the property must be deposited 2 working days prior to the e-auction date:
i) through wire transfer to a bank account, in the name of the Administrator;
ii) through banker’s draft issued in the name of the mortgage creditor
iii) through Credit or Debit Card.
All stages of the procedures are operated online through the e-auction platform and all submitted bids are time stamped. Every bidder is instantly informed of the highest bid, of the registration and classification of their bid, as well as the precise time of the submissions. The highest bid is always placed first. Any amendments made to the auction procedure, including suspension or cancellation, are immediately notified to all bidders participating in the digital auction.
The auction is divided in bidding phases, while the mortgage debtor distinguished by a special status may exercise their right in a timeframe of 15 minutes after the beginning of the second phase, by placing a bid not lower than the highest bid resulting from the first bidding phase.
Upon conclusion of the procedure, all candidate bidders are informed of the results by the digital auction system, while the mortgage creditor receives an email notification. Then, the Electronic Auction Officer prepares a duly signed electronic auction report which is served to the mortgage creditor the following day of the auction.
The present article is for informational purposes only and does not, under any circumstances, constitute legal advice. For further information or a private consultation, please contact Arsen Theofanidis LLC and one of our legal advisors shall be happy to assist you.
By N. Kalifatidou
Advocate – Legal Consultant
Arsen Theofanidis LLC