Cyprus Introduces A New Judicial Framework For Credit Facility Disputes And Mortgaged Primary Residences

Cyprus Introduces a New Judicial Framework for Credit Facility Disputes and Mortgaged Primary Residences

The Courts of Justice (Amending) Law 116(I) of 2026, published on 12 May 2026, introduces important amendments to section 22C of the Courts of Justice Law. The changes concern disputes arising from, or connected with, credit facilities secured by a primary residence and are expected to have practical implications for borrowers, guarantors, security providers, creditors and entities involved in the acquisition or management of credit facilities.

The amendments pursue two principal objectives. First, they clarify the jurisdiction of the District Courts in disputes relating to terminated credit facilities. Secondly, they establish a more specific procedural framework for challenging measures taken in connection with the sale of a mortgaged residence under Part VIA of the Transfer and Mortgage of Immovable Property Law.

Expanded judicial scrutiny in credit facility disputes

Following the amendment, the District Court is expressly empowered to hear disputes between borrowers, guarantors, security providers and creditors concerning the debit balance of a terminated credit facility.

Importantly, the Court’s jurisdiction is not limited to determining the outstanding amount claimed under the facility. The amended provision extends to disputes arising from, or relating to, the terminated credit facility itself, together with any guarantees and/or security granted in connection with it.

The provision expressly includes disputes concerning overcharges and/or unfair contractual terms. This confirms that proceedings under section 22C may extend beyond a conventional debt recovery analysis and allow the Court to examine broader aspects of the contractual relationship between the parties.

Credit facilities secured by a primary residence

A central feature of the amendment is that its application is limited to credit facilities secured by a primary residence.

For the purposes of section 22C, a primary residence is defined as a residence used for the accommodation of its owner and/or members of the owner’s family for more than six months per year, provided that its estimated value does not exceed €350,000. The valuation must be carried out by a valuer who is a member of the Cyprus Scientific and Technical Chamber.

The statutory definition of family members includes the spouse, minor or dependent descendants, dependent ascendants, civil partners and children arising from a civil partnership.

These criteria are likely to assume particular importance in practice, as access to the protections available under section 22C will depend, among other factors, on whether the relevant property falls within the statutory definition.

Challenging a Form “IA” notice

The amendment grants the Court jurisdiction to examine an appeal filed by the mortgagor and/or any interested party against a Form “IA” notice issued in relation to the intended sale of a mortgaged residence.

The appeal must be filed within 45 days of receipt of the Form “IA” notice. Parties seeking to challenge a notice should therefore assess their position promptly to avoid losing the statutory right of recourse.

The amendment also introduces a transitional provision. Where a Form “IA” notice had already been served before the Courts of Justice (Amending) Law 116(I) of 2026 came into force, the forty-five-day period runs from the commencement date of the amending legislation.

Subject to satisfaction of the statutory conditions, this provision may create an opportunity for affected mortgagors and interested parties to pursue relief in relation to existing notices.

Requirement for timely determination of proceedings

The amendment also introduces an indicative procedural timetable for the completion of relevant proceedings.

Cases falling within amended section 22C should be heard and judgment on the merits should be delivered within 12 months from referral of the case to the adjudicating Judge, unless the Court orders otherwise.

The period includes any determination relating to an appeal and/or an application to set aside a Form “IA” notice.

The introduction of this timeframe indicates a legislative intention to accelerate proceedings affecting enforcement processes and primary residences, while preserving judicial discretion where circumstances justify departure from the target timetable.

Possibility of a new Form “IA” notice

The amended framework also regulates the position following the setting aside of a Form “IA” notice. A new Form “IA” notice for the intended sale of a mortgaged residence may be served on the mortgagor and all interested parties following expiry of the period prescribed by law and/or after final judgment has been issued in the relevant proceedings.

Where no final judgment has yet been delivered and a new Form “IA” notice is issued, the mortgagor may be entitled to file a further appeal seeking to set aside the new notice. That right is not automatic. The mortgagor must demonstrate special reasons, as the Court considers appropriate.

This provision may become particularly relevant where enforcement steps continue while related disputes remain pending before the Court.

Bad faith as a limiting factor

The amended section 22C also introduces an express limitation to the available protections.Where the mortgagor has acted in bad faith at any material time, the protections relating to the setting aside of a Form “IA” notice may not apply. This limitation extends not only to the original notice but also to any subsequent notices issued under Part VIA of the Transfer and Mortgage of Immovable Property Law.

The provision is likely to give the Court broad discretion when assessing conduct and indicates that the statutory protections are not intended to shield abusive or obstructive behaviour.

Conclusion

The Courts of Justice (Amending) Law 116(I) of 2026 introduces a more developed procedural framework for disputes connected with credit facilities secured by a primary residence. By expressly recognising disputes concerning overcharges and unfair contractual terms, regulating challenges to Form “IA” notices and introducing an expected timeframe for determination of proceedings, the amendments reinforce the procedural role of the District Courts in this area.

At the same time, the framework preserves protections for creditors by permitting new notices in defined circumstances and limiting relief where the mortgagor has acted in bad faith. Borrowers, creditors, servicers, assignees and other affected parties should assess the implications of the amendments at an early stage, particularly where a Form “IA” notice has been issued, enforcement action is ongoing, or disputes relating to a terminated credit facility remain unresolved.

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.