For the last two months, the Parliament has approved the much-publicised law for the establishment of the Special Jurisdiction for Non-Performing Loans, known as the Foreclosure Court, where borrowers can seek refuge to protect their primary residences valued up to €350,000. However, the legislation has yet to be implemented, and it is unknown if and when this will occur.
According to information from Phileleftheros, the Supreme Court is still evaluating the legislation approved by the Parliament on December 8, 2023.
The aim of the Supreme Court is for the Special Jurisdiction to function correctly and productively, at the level of the District Courts, when it is deemed that the conditions are ripe for the legislation to come into effect.
Previously, the Court must issue procedural regulations and guidelines for the Special Jurisdiction to operate.
As reported by Phileleftheros, despite the passage of the new legal framework, citizens continue to resort to the judiciary under the previous regime, for issues related to loan repayments or challenges to loan agreements. This is something that is already regulated by the Constitution.
Lawyers speaking to Phileleftheros stated that the content ultimately approved by the law does not obligate the Supreme Court to proceed with the establishment of the Special Jurisdiction, which is optional according to the law.
However, despite the potential applicability of the contentious provision in the new law, the Court is evaluating the legislation and reserves judgment.
Under the amended Courts Law, “the Supreme Court, in cases where it deems necessary, may issue instructions so that the President of the District Court, with the approval of the Supreme Court, appoints a number of judges to adjudicate financial disputes.”
Specifically, through the Special Jurisdiction, disputes between the borrower, guarantor, and security provider, and the creditor, regarding the outstanding balance of the credit facility, which is in arrears or terminated, can be examined.
It can also address any other disputes arising from or in relation to the credit facility, related guarantees and/or securities, including over-indebtedness or abusive clauses, as well as foreclosures.
The law explicitly refers to disputes that may arise between the borrower and creditor potentially leading to court action, which may involve over-indebtedness or abusive clauses. The disputes will concern the outstanding balance of the credit facility, which is in arrears or terminated.
The disputes to be examined will include loans secured by primary residences valued up to €350,000. Additionally, according to the law, the President of the District Court has the authority, upon approval of the Supreme Court, to substitute or supplement a judge, if necessary, due to justified absence or other justified impediment.
Moreover, according to transitional provisions, cases pending before the District Court on the date of entry into force of the law, concerning financial disputes and after submission of an application to the Registrar, are transferred for continuation of judicial proceedings and issuance of a decision before judges, provided that the hearing of the case has not begun.
Otherwise, they continue and are completed by the court before which they are pending.
However, when the relevant bill was discussed in Parliament, opposition MPs argued that borrowers were being given excessive expectations and warned that there would be no difference from what is currently being implemented. MPs (e.g. Aristos Damianou and Andreas Pasiourtidis) stated at the time that the law would be without consideration and could not be implemented.
It was also argued that while citizens could resort to the judiciary to protect their primary residence from being auctioned off, they would not be able to stop the foreclosure process of the property.
These specific reservations were one of the reasons why AKEL abstained from voting on the legislation.
From the Court’s perspective, when the issue was discussed, it was stated in Parliament that whatever is requested to be regulated by the bill might already be regulated by the Constitution.
On the other hand, a competent government source told Phileleftheros that the new legislation defines the scope of the right to resort to court, adding that cases ending in judicial resolution of the dispute and concerning the sensitive perimeter of the primary residence up to €350,000 will be adjudicated as a priority (once the law is implemented), with instructions from the Supreme Court.
Based on data presented in Parliament, the Special Foreclosure Court could temporarily protect the primary residences of around 20,000 borrowers.
The Ministry of Finance arrived at this number as it concerns loans that meet the criteria set by the law. Essentially, these are loans that are not being serviced and have the primary residence valued up to €350,000 as collateral.
It is reminded that during the passage of the law, despite being in the governing coalition, EDEK had voted against it, as its amendments proposed access to the Court for borrowers regardless of the value of the primary residence, as well as the inclusion of professional residences, were rejected, with the latter being considered unconstitutional by the Legal Service.
