Cyprus property owners have discovered some of the details of how their homes will be repossessed and sold as the result of a leaked government document.
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The government has had to agree a tough process to repay a bail-out of billions of euros which includes property repossession for owners who have fallen behind with their mortgages.
Values of homes on the island have dropped dramatically in recent years due to economic woes.
Industry experts estimate prices have collapsed by around 50%, leaving many owners in negative equity.
They cannot afford to sell because the proceeds are unlikely to pay off their mortgages.
The leaked document details how repossessions may work but still has to be ratified by the government before becoming law.
How properties are valued for auction
The measures include a cut-price sell off of properties to raise cash.
The first step is the bank and property owner valuing the property – and if they disagree on a price, an independent valuer will be called in.
The starting price at auction will be 80% of the agreed value, but the price will stay secret and publicising the details will be a criminal offence.
If the property is not sold after three months, the price will be slashed to 50% of the valuation.
Should the property remain on the market, the property value is reassessed, but the cheapest sale price will never drop below 50% of the value.
The measures are to be put in place to deal with the Cyprus home loans that are in arrears, of which many have no prospect of being paid.
Banks estimate around half of all mortgages on the island are in default.
The European Union is demanding the government passes the law before any further financial aid can be considered.
Property tax
Meanwhile, in another financial blow for home owners, the Cyprus Tax Department has announced the immoveable property tax for 2014 is due to be paid by November 30, 2014.
All property owners, including those overseas, who had property worth more than 12,500 euros registered in Cyprus on January 1, 2014 must pay the tax.
The tax is calculated on a sliding scale according to the value of the property.
Owners who pay up by the end of October can claim a 15% discount – while late payers face a 10% penalty, interest on the outstanding amount plus penalty charges.
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