The supreme court full bench on Wednesday ruled that two bills passed relating to foreclosures were constitutional while a third on bank contract clauses was not, around a year after opposition parties passed them against the government’s advice.
President Nicos Anastasiades had vetoed the bills and referred them to the supreme court to decide on their constitutionality
Two of the bills relate to foreclosures proceedings. They were passed by opposition parties in a bid, they said, to introduce additional safeguards for homeowners with mortgages they are unable to service, and to restore the negotiating balance between lenders and borrowers.
Anastasiades refused to sign off on the two items, saying they rendered foreclosures legislation ineffective, hampering banks’ ability to collect delinquent loans and thus raising the risk of downgrades for the island’s banks and the economy.
One of the bills provided for a temporary halt on the commencement and/or continuation of repossession proceedings on primary homes, where the debtor is potentially eligible for the mortgage debt-relief scheme known as ‘Estia’.
It ensured that no primary home could be repossessed from the date on which the law entered into force until October 1, 2019 – a month after the ‘Estia’ programme went live, accepting applications from debtors in distress.
The president’s veto, citing several articles of the constitution, was rejected by a majority of eight to five with the judges saying they were obliged to rule on the matter despite the law having expired.
“What article three of the law does is to suspend for a small period of time the foreclosure procedure of a property comprising a primary residence,” the majority decision said.
Nor did it deprive the lender of the right to exercise a profession or a profitable business, the court said.
The court said there was no violation of the other articles cited by the president
The second bill allowed a debtor to set aside a repossession notice by filing a complaint to the financial ombudsman. Should the latter determine that the lender breached central bank guidelines on loan restructurings, the debtor would be able to take recourse with a court, which in turn would immediately issue an injunction, stopping the repossession (of a primary home or business premises) in its tracks.
The contentious bill also featured extending to 45 days from 30 days the payment due date following a notice and the auction of a property following notice.
In its unanimous decision, the court agreed with parliament that articles two and three of the law did not violate the right to property of the lender, which was protected by article 23 of the constitution.
“In our judgement, affording the borrower the capability of repaying the due amount and submitting an appeal against the sale of their mortgaged property within 45 days instead of 30, as was previously provided, cannot be considered violation of the lender’s right to property, neither does providing the borrower the capability to submit an appeal for the aforementioned reasons, nor of course providing the borrower the capability of applying for an injunction suspending the sale of their mortgaged property.”
The court said the provisions did not set restrictions to the lenders’ professional freedom neither did the expansion of their procedural rights.
The third decision regarding contract clauses was in favour of the president with a 12-one majority.
According to the court, article three of the law violated article 26 of the constitution: “Every person has the right to enter freely into any contract subject to such conditions, limitations or restrictions as are laid down by the general principles of the law of contract.”
Three other articles of the law also “constitute unacceptable intervention in the right to enter contracts freely” and also violated the fundamental principle of the separation of powers.