The District Court of Nicosia has delivered a groundbreaking decision that could have significant implications for thousands of mortgages. This comes after it halted a foreclosure process due to questionable additional charges included in the mortgage contract.

In a first-of-its-kind judgment, the court issued a temporary injunction to stop the foreclosure of two apartments and a retail store. This is the first instance where a Cyprus court has intervened in a foreclosure based on the mortgage’s own terms rather than outside influences.

The case hinged on the bank’s imposition of extra fees, such as commissions and insurance premiums, which were added to the mortgage separate from the principal, interest, and legally sanctioned expenses. The plaintiffs claimed these charges were not only unjustified but also breached existing financial regulations, unfairly burdening mortgage holders.

Representing the plaintiffs, lawyers Andreas Mathikolonis and Chryso Papachristodoulou argued these extra charges breached Articles 5, 8, 21(1)(c), and 21(2) of Law 9/65, asserting that the terms expanded the borrowers’ financial responsibilities beyond legal limits, complicating their ability to understand their obligations.

The court sided with the plaintiffs, determining they had shown “more than a mere probability” of success in their case. The judge noted that the mortgage agreement had provisions that left the loan amount, interest, and related costs open-ended and difficult to measure, thus introducing significant legal ambiguities.

This ruling is particularly impactful as it may affect thousands of similar mortgage contracts held by various banking entities. Many contracts feature similar or identical clauses, suggesting this decision could set a legal precedent for challenging unfair lending practices in the future.

Moreover, the court found that allowing the foreclosure to proceed would inflict irreparable damage on the property owners, stripping them of their assets while their legal dispute is unsettled. Losing their properties prior to a final resolution could leave them in an inequitable position, possibly rendering their legal win ineffectual if they are unable to reclaim their assets.

This decision is expected to spur further examination of mortgage contracts and could pave the way for widespread reforms within the banking industry, ensuring enhanced transparency and fairness for borrowers facing comparable issues.