Strengthening Borrower Protection and Introducing New Requirements for the Sale of Mortgaged Property

During April and May 2026, the Republic of Cyprus introduced important legislative amendments aimed at regulating the relationship between borrowers, credit institutions and purchasers of credit facilities. The new provisions affect residential mortgage lending, the requirement for additional guarantees, and the procedures governing the enforcement and sale of mortgaged property.

The amendments were introduced through the Consumer Credit Agreements Relating to Residential Immovable Property (Amendment) (No. 2) Law 117(I) of 2026, published on 12 May 2026, and the Transfer and Mortgage of Immovable Property (Amendment) Law 76(I) of 2026, published on 21 April 2026.

Prohibition on Requiring Additional Guarantees Where Mortgage Security Is Sufficient

One of the most significant changes is the introduction of a new Article 18A to the legislation governing consumer credit agreements relating to residential immovable property.

Under the new provision, where the mortgage over the property securing a housing loan, together with the borrower’s creditworthiness and ability to repay the loan, adequately covers the amount of the loan, licensed credit institutions, credit purchasers and purchasers of credit facilities are prohibited from requiring additional collateral or personal guarantees from the borrower.

In practical terms, where the existing mortgage security and the borrower’s financial position already provide sufficient protection for the lender, the lender may not require additional forms of security, such as the provision of another property as collateral, additional guarantors, or personal guarantees from third parties.

For example, if a borrower has obtained a housing loan of €200,000 secured by a property with a market value of €350,000 and the borrower has sufficient income to meet the repayment obligations, the lender cannot require additional guarantees merely to increase the level of security for the loan.

This amendment introduces the principle of proportionality in loan security requirements, ensuring that borrowers are not required to provide excessive guarantees where the existing mortgage and their financial capacity already adequately secure the credit obligation.

The provision is particularly relevant in the context of the Cypriot financial market, where, following the transfer of significant loan portfolios to credit servicing companies and investment funds, borrowers have in some cases faced requests for additional guarantees despite the existence of adequate mortgage security.

Introduction of a Minimum Price Requirement for the Sale of Mortgaged Property

A further important amendment concerns the procedure for the sale of mortgaged property under the Transfer and Mortgage of Immovable Property Law.

The amendment to Article 44ΙΑ modifies the procedure applicable where a first auction has been unsuccessful and the mortgage lender continues efforts to sell the property.

Previously, the mortgage lender could continue the sale process without a reserved minimum price, creating the possibility that property could be sold at a value significantly below its market price.

Following the amendment, any continued sale process must include a reserved minimum price which cannot be lower than fifty per cent (50%) of the market value of the mortgaged property.

For example, where the market value of a mortgaged property is assessed at €300,000, the minimum reserved selling price under this procedure cannot be lower than €150,000.

The purpose of this amendment is to prevent the disposal of properties at disproportionately low prices, preserve the value of mortgaged assets, and create a fairer balance between the creditor’s right to recover outstanding debts and the borrower’s right to protection of their property interests.

Extension of the Time Period for Responding to Foreclosure Notices

Additional amendments have been introduced to Article 44Γ of the Transfer and Mortgage of Immovable Property Law, which regulates the notification procedure prior to the intended sale of mortgaged property.

The period available to affected persons to take appropriate action following receipt of the relevant notification has been extended from twenty-one (21) days to thirty (30) days from the date of receipt of the notice.

Furthermore, the official notification forms known as Type I and Type IA have been replaced and updated in order to comply with the revised legislative requirements.

The extension of the response period provides borrowers with additional time to assess their position, obtain legal advice, communicate with the creditor, negotiate possible solutions, or consider available restructuring options before further enforcement steps are taken.

Practical Implications for Borrowers

The new legislative framework strengthens the legal position of borrowers in several important areas.

Firstly, borrowers receive enhanced protection against requests for excessive or unjustified additional guarantees where the existing mortgage security and their creditworthiness already adequately cover the loan obligation.

Secondly, the introduction of a minimum reserved selling price provides additional protection against the sale of mortgaged property at significantly reduced values during certain stages of the enforcement process.

Thirdly, borrowers are granted additional time to respond to notices relating to the possible sale of their mortgaged property, allowing them to seek professional advice and evaluate available legal and financial options.

Important Clarification

Although these amendments strengthen borrower protection, they do not eliminate the borrower’s obligation to repay housing loans and do not prevent creditors from taking enforcement action where the borrower fails to comply with the terms of the loan agreement.

Foreclosure and debt recovery procedures may continue to apply in accordance with the applicable legislation where borrowers fail to meet their repayment obligations or do not cooperate with available loan restructuring procedures.

The purpose of the amendments is not to remove the rights of creditors, but rather to establish a more balanced legal framework that allows creditors to recover outstanding debts while ensuring that borrowers are protected from disproportionate requirements and unfair procedures.

Borrowers who receive notices from credit institutions, credit servicers or purchasers of credit portfolios are advised to seek timely legal advice and carefully evaluate the options available for protecting their rights and interests.