In June 2005 a property development company named NCP (North Cyprus Properties Ltd) had finished building homes in Olive Grove, Esentepe, TRNC. The homes were paid for, the keys handed over and the people moved in.
On 28th August 2005 the developer borrowed £500k sterling and 1,200k lira from KOOP Central bank. The bank took the homes in Olive Grove as security for the mortgage, in full knowledge the builder no longer owned them.
The bank took copies of the purchase contracts, so they had actual notice the homes were sold.
The builder defaulted on the loan and in 2009 the bank applied for the auction of the Olive Grove homes to repay the mortgage thereby trying to make the owners, including Turkish Cypriot, Turkish, English, Irish and other families, homeless.
To loan money on a security knowing that it is not owned by the person borrowing the money is immoral and reckless. Since KOOP is under government control, it was a loan of taxpayer money and this may make it a criminal act under TRNC law.
There is a solution which would mean the bank recoups all of the money it loaned while the people keep their homes. Unfortunately the bank persists in trying to have the homes auctioned rather than explore other possibilities.
By refusing to discuss alternative solutions the bank forces the owners of Olive Grove to fight for their homes using every means possible including local and international news media.
These pictures were taken by NCP, the developer, and posted on their official web site dated August 24th 2005, before the mortgage was given. None of these is the show house. You can clearly see towels hanging to dry and people are landscaping their garden. There are plants in pots outside the homes and house names on the walls.
A copy of which the bank took when giving the mortgage, said “the vendor undertakes not to assign any pledge and/or encumbrance and/or impediment on the said property.”
The following is an invitation to the ‘completion party’ from the developer 3 months before the mortgage was granted.
From: Erdem ALP [mailto:erdem©north-cyprus-properties.com] Sent: Friday May 20,2005 9:56 AM
To: Olive Grove Purchasers
Subject: Party Invitation
Dear xxxxxx and your family,
To celebrate the completion of your properties, North Cyprus Properties is inviting you to a party to be held at the Rocks Hotel on the 4th of June 2005. This will be a jazz concert and cocktail with unlimited drinks.
We recommend that if you would like to attend please book your flights and accommodation ASAP as hotel beds are limited. We hope to see you there. Unfortunately the electricity and water board have informed us their may be a delay of 15 days in connections.
It would be very much appreciated if you can reply to this invitation with your answer as soon as you can.
Customer Care Executive
Legal 0pinion is encapsulated by Lord Browne-Wilkinson when he said on 21st October 1993 during the case “Barclays Bank Plc -v- O’Brien and Another” in the House of Lords (References:  3 WLR 786)
“The doctrine of notice lies at the heart of equity. Given that there are two innocent parties, each enjoying rights, the earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice). In particular, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it.”
The bank claims it was unaware of the sales contracts when they gave the mortgage since the sales contracts were not registered. This is untrue since we can prove the bank officials took copies of the purchase contracts. By taking copies (paying particular attention to any amounts still owed to NCP) the bank had notice and recognized the contracts were important and valid.
It was impossible for purchasers to register contracts at that time unless the deeds were ready to be transferred, which they were not. Also, as foreigners, they could not register a mortgage. So, as contractual owners they could not register their interest. In such a situation, it becomes even more important for any bank to make reasonable enquiries of existing interests before loaning taxpayer money. By relying only on registered interests, the bank was clearly reckless.
Rule 12 of the By-Law of the Cyprus Turkish Co-operative Central Bank Ltd. made under the Co-operative Societies Law says “The Board of Directors shall manage the affairs of the Bank with prudence reserve and reason. They will otherwise be responsible for any loss arising from action contrary to the Co-operative Societies Law.
To loan money to a builder knowing the security contractually belongs to another party is no t acting with prudence and reason and the individual board members can be held responsible.
In any case under standard international property law the actual occupation of the homes means that unregistered contracts are still the overriding interest as shown in Williams & Glyn’s Bank v. Boland  AC 487 when Lord Wilberforce said of a wife in the same circumstances as Olive Grove Purchasers ” … only one conclusion: the wife has an overriding interest. … She was in “actual occupation,” in the ordinary meaning of the words … Since the bank made no enquiry of the wife … before granting the mortgage, its claim as mortgagee … is defeated by the wife’s overriding interest.
The basic principles of the law of equity are so clear in this case that it seems impossible the TRNC courts could rule in the bank favour against the weight of international case law without bringing their legal system into disrepute.
In addition, TRNC banks must act in accordance with agreed international principles of banking conduct to retain banking licenses.
Olive Grove purchasers can provide the following additional evidence:
(a) A signed witness statement from employees of the developer stating they saw the bank taking copies of the contracts.
(b) The developers confirmation that the homes were finished and sold when the mortgage was given and that the bank knew they were sold.
(c) Copies of furniture receipts for delivery to Olive Grove dated before the mortgage was given.
(d) A statement from the local postman confirming he delivered mail to the properties, that he could see furniture inside the houses and that it was obvious people lived there before the mortgage was given.
(e) A signed, stamped official statement confirming people were living in the properties when the mortgage was given.
(f) Additional evidence we would rather not release at present since we have no wish to embarrass the bank unnecessarily.