On the 1st of November 2019 it was published in the Official Gazette of the Republic (Regulatory Administrative Act 346/2019) and came into force the Decree for the Sale of Mortgaged Property through an Electronic Auction System of 2019 by the Minister of Finance (herein "the Decree").

The Decree was issued by the Minister of Finance by virtue of the powers conferred to him in accordance with article 44G(1)(b) of the Immovable Property (Transfer and Mortgage) Law (as amended) (herein "The Law").

Α. Sale of mortgaged property by auction

The article 44G of the Law gives the right to a mortgage creditor (for example, a Bank) to choose the method by which the auction of the mortgaged property shall be conducted, provided that the mortgage creditor has complied with the conditions, procedures and notices pursuant to the provisions of the articles 44A- 44E of the Law. The above article provides that an auction can be conducted in the following two ways:

With the traditional (physical) way which is conducted with the intervention of an auctioneer selected by the mortgage creditor through a list of accredited auctioneers that is maintained in the official website of the Ministry of Interior or,

Electronically, by the mortgage creditor, through electronic auction systems and through a website under the provisions of the Decree.

Β. Administrator of the Electronic Auction System

The person responsible for the design, determination and the announcement of the electronic auction system and of the administrator of the electronic system, was decided to be the Association of Cyprus Banks ("ACB"). The electronic auction system which was launched on Monday, 18th of November 2019 can be found at the website, https://www.eauction-cy.com/. The electronic system will be administered by the limited liability company by shares ACB E-AUCTIONS LTD (herein "the Administrator"), which is a wholly owned subsidiary of ACB.

C. Electronic Auction Officers

The process of managing and conducting electronic auctions is undertaken by the Electronic Auction Officers (EAO) who can be found in a list prepared by ACB and who are individuals that fulfil the qualifications/criteria determined by the Decree. The EAO can either be chosen by the mortgage creditor or appointed by the Administrator.

D. Availability of Electronic Auctions

The date of an electronic auction will take place is determined by the mortgage creditor who informs the EAO. The electronic auctions take place only on working days (Monday to Friday) from 10:00 am until 12:00 midnight (excluding certain holidays).

E. Service of notice for the intended sale

The mortgage creditor is obliged to serve a notice of an electronic auction, to the mortgage debtor at least 30 days prior to the scheduled auction date and shall publish such notice on the official website of the Ministry of Interior , on the official website of the mortgage creditor and in two (2) daily Cyprus newspapers with national circulation within the same timeframe of thirty (30) days prior to the scheduled auction. For the participation of both, the mortgage creditor and the mortgage debtor, in the electronic auctions, it is required to be identified and registered through the electronic auction system following the detailed guidance displayed in the website.

F. Identification and registration of users to the Electronic Auction System

A natural person or legal entity can participate in an electronic auction provided that such person has been registered in the electronic system as candidate bidder. In order for such registration to be possible, such person must be successfully identified, in accordance with the provisions of article 8 of the Decree, through:

a) The Government Gateway Portal ("ARIADNI") only natural persons registered in the Civil Registry and legal entities registered in accordance with the Companies Law Cap.113), or

b) The relevant EAO (in case of natural and legal persons of another member state of the European Union or third country, organisations, institutions, Societies, municipals and communities).

G. Terms, Conditions and Procedure for Participating in an Electronic Auction

Bidding is only allowed to candidate bidders who fulfil the following conditions:

They have paid the participation guarantee fee, which amounts to the 10% of the reserved price of the property and a copy of the receipt of such payment has been submitted electronically to the EAO.

A copy of a power of attorney (in case the bidder acts as a representative of a third party) must be submitted to the electronic auction system at least two (2) working days before the scheduled electronic auction day (until 3:00 pm, of the submission date, the latest)

In case of a mortgage debtor with preferred status (meaning a debtor whose the mortgaged property which is for sale constitutes a primary residence), must submit to the electronic auction system all necessary documents evidencing the status of the mortgage debtor with preferred status at least five (5) working days before the scheduled electronic auction date (until 3:00pm of the submission date)

Until 5pm of the day before the electronic auction day, the EAO, after checking the submitted documents and confirming their compliance with the relevant conditions, submits to the electronic auction system the list of the candidate bidders approved by the EAO.

The following persons are deprived of their right to bid:

A person who holds more than two percent (2%) of the share capital of the mortgage creditor, or is connected with this person or to his agent, spouse parent, or to any relative up to a third degree, or

Any officer, director, employee of the mortgage creditor, or

Any officer, director, agent or relative up to the fourth degree of the EAO, or

The valuation experts who have prepared the valuation report of the mortgaged property as well as their relatives up to the fourth degree.

H. Participation Guarantee

The amount that is required to be paid as a participation guarantee for the electronic auctions amounts to 10% of the reserved price of the mortgaged property and it is clearly indicated in the post concerning the auction. . The amount of the participation guarantee may be decreased to 5% of the reserved price of the mortgaged property, in cases where the mortgage creditor is of the opinion that the guarantee amount is very high and that this may possibly discourage possible bidders from participating in the electronic auction.

The participation guarantee must be paid the latest by 3:00 pm, two (2) working days before the scheduled electronic auction date, in one of the following ways:

By wire transfer to the special bank account held in the name of the Administrator;

By banker's draft in the name of the mortgage creditor;

By means of freezing of Credit or Debit Card.

Upon the successful completion of the electronic auction, the Administrator withholds the bidder's participation guarantee (highest bidder) and returns to the rest of the bidders their participation guarantees.

I. Bid Submission

Electronic auction is an open bidding type in the course of which successive bids are placed. The candidate bidders participating can place a bid higher than the then maximum bid till the end of the bidding time with a minimum additional bid of one (1) euro. All bids made through the electronic auction system are time stamped.

The bidding begins with the reserved price and with the submission of the offer, while at the same time the candidate bidders are informed directly through the electronic auction system for the amount of their offer, the exact time of its submission, the registration of their offer and of the then maximum submitted bid as well as to the order of their classification. The person who placed the highest bid, is placed first, as the highest bidder. All the candidate bidders that participate in the electronic auction, are informed immediately in case of suspension or cancellation of the auction.

By the lapse of the first bidding phase, the second bidding phase starts, where a mortgage debtor with preferred status has the right to exercise his preferred right, within fifteen (15) minutes, by placing his bid, which it cannot be lower from the bid of the first phase's highest bidder, to the electronic auction system.

Upon completion of the bidding process and the exercise of the preferred status of the mortgage debtor, where applicable, the candidate bidders participated in the electronic auction will be informed about the auction results through the electronic auction system and the mortgage creditor will be informed through an email notification.

The Electronic Auction Officer shall then draw the electronic auction report which shall provide to the mortgage creditor duly signed on the first day following the auction.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.