Cyprus has until early January to reply to a memo from the EU following a petition by the Cyprus Property Action Group and 41 MEPs calling for confirmation that withholding Title Deeds breaches EU fair practice laws.

CYPRUS is in trouble with the EU commission again, but this time it’s not the environment or financial mismanagement; it is property.

The government is facing some tough questions from EU Commission Vice President Viviane Reding about the measures they took – or should have taken – to ensure property sales did not fall under the unfair commercial practice directive (UCPD).

Reding’s letter to the government follows a June petition by the Cyprus Property Action Group (CPAG) and 41 MEPs, calling for confirmation of whether withholding title deeds is a violation of the EU’s fair practice laws.

Responding to CPAG’s petition last week, Reding said: “…an administrative letter has been sent to the Cypriot authorities enquiring on the one hand, as to the actions carried out at national level to address the reported practices and… On the other hand, about the measures taken to ensure that consumers are adequately informed about the Cypriot law transposing Directive 2005/29/EC on Unfair Commercial Practices (the ‘UCPD’).”

EU has given the Cyprus government until early January to reply to the memo. “Should the information communicated be unsatisfactory, the European Commission is prepared to take further action as appropriate,” Reding said.

It is not clear what that further action will be, but according to CPAG leader Denis O’Hare, it could include sanctions and funding cuts, as happened in Bulgaria after it failed to tackle its own corruption issues.

O’Hare believes the government has not only failed to implement the directive, but that he also has evidence the government sought to suppress knowledge of it to consumers. This claim is also being investigated by the EU.

Reding’s letter could have arrived in the nick of time, as it coincided with one bank’s attempt to auction land (and houses built on it) it had mortgaged to a bankrupt developer, leaving the land’s residents facing repossession.

Until now, the government has always claimed that such buyers were protected once they have lodged their sales contract at the Land Registry.

Reding’s initial review of CPAG’s petition should be encouraging for the estimated 50,000 expats with outstanding title deeds in Cyprus:

“The lack of pre-contractual information to property buyers about the existence of developers’ mortgages on the Cypriot properties offered for sale, which is the crucial fact having led to the subsequent lack of delivery of the title deeds, would seem prima facie to amount to a misleading omission in the sense of Article 7 of the UCPD,” he said.

Early next year Reding will issue a report into the UCPD’s implementation in member states, listing the most unfair practices encounters, including in the property sector. Once published it is probable that draft legal changes will be developed by the Commission and these will be voted on by the EU Parliament.

“At this stage we are fairly confident that the practice of withholding title deeds could be outlawed, something which could have a massive impact on the property industry in Cyprus – and most people would say about time too,” O’Hare said.