Foreclosure in Greece

What is foreclosure in Greece and how does it work?

Foreclosure is a legal process by which a lender or creditor attempts to recover the balance of a loan by forcing the sale of the borrower’s property, usually after the borrower defaults on loan payments. It is commonly applied to mortgage loans, but other secured debts can also lead to foreclosure.

Foreclosure in Greece typically applies when a borrower fails to meet the terms of their loan, specifically failing to make the required mortgage payments. The lender, which is often a bank, can begin the foreclosure process after a certain number of missed payments (usually more than three months of default).

The foreclosure process in Greece involves several legal steps.

Before initiating foreclosure, the bank sends a formal notice of default to the borrower, informing them of the default and the outstanding debt. This is usually referred to as a “demand for payment” (εξώδικη καταγγελία).

The borrower is usually given a grace period to pay the arrears. This period can last from 30 to 60 days, depending on the bank’s policy and the terms of the mortgage contract. During this time, the borrower can negotiate with the lender to restructure the loan or come to another settlement agreement.

If the borrower fails to make payments or negotiate a settlement, the lender may initiate legal proceedings and file a lawsuit to repossess the property. The legal system in Greece becomes involved at this point, as the lender must obtain a court order authorizing the foreclosure and sale of the property.

Once the court approves the foreclosure, the property is usually sold at auction.

The foreclosed property is listed and sold at auction, starting at 2/3 of the property’s market value as determined by an independent appraiser. If no buyer is found at this initial price, subsequent auctions may lower the starting bid to attract buyers.

Since 2017, most foreclosures in Greece have been conducted through electronic auctions (Ηλεκτρονικοί Πλειστηριασμοί) instead of physical auctions, which has streamlined the process and reduced the potential for protests or obstruction.

The foreclosure process can take anywhere from several months to over a year. The exact timeline depends on several factors, including how long the borrower has been in default before the lender initiates foreclosure proceedings, delays due to attempts to restructure the loan or negotiations between the borrower and lender, the legal steps involved, and the speed of the auction process, especially if there are difficulties in selling the property.

When the foreclosure process is completed, the borrower loses ownership of the property and his or her credit rating is severely affected, limiting his or her ability to obtain future credit.

If the property is sold for less than the outstanding loan amount, the lender may pursue the borrower for the remaining balance (known as a “deficiency judgment”). The borrower may also be responsible for certain legal fees and court costs associated with the foreclosure.

When do you get foreclosed in Greece?

Foreclosure in Greece can occur when borrowers are unable to meet their mortgage obligations, leading lenders to seize and sell properties to recover unpaid debts. Several factors can contribute to this financial distress, ranging from personal economic hardship to broader market conditions.

Some of the main reasons that commonly lead to foreclosure in Greece are:

• Mortgage loan default: The most common reason for foreclosure is the borrower’s failure to make timely mortgage payments. This usually happens after three or more consecutive missed payments. If the borrower cannot catch up, the lender initiates foreclosure to recover the loan balance.
• Economic hardship: Many borrowers in Greece face foreclosure due to economic difficulties such as job loss, pay cuts, or business closures. The financial crisis in Greece has caused widespread unemployment and wage cuts, leading to an inability to meet loan obligations.
• High household debt: Greece has one of the highest levels of household debt in Europe. When individuals take out multiple loans (e.g., mortgages, personal loans, or credit card debt), it can lead to financial strain, making it harder to keep up with mortgage payments.
• Interest rate increases: Many mortgages in Greece have adjustable interest rates. When interest rates rise, monthly mortgage payments increase, sometimes making them unaffordable for the borrower. This situation often results in default and foreclosure.
• Unsuccessful loan restructuring: Some borrowers try to renegotiate or restructure their loans to lower their monthly payments. If these negotiations fail or the borrower is unable to meet the new terms, foreclosure may result as the lender attempts to recover the debt.
• Health issues: Serious health problems, disabilities, or long-term illnesses can cause significant financial strain. Borrowers facing unexpected medical expenses or an inability to work may default on their mortgage due to these financial burdens.
• Divorce or family separation: Divorce or family separation can lead to financial instability. If one partner is unable to keep up with mortgage payments alone, foreclosure may follow. Property division disputes can also complicate the situation.
• Property devaluation: In some cases, the value of the property falls below the loan amount (negative equity). Borrowers in this situation may be reluctant to continue paying on a property that is worth less than the mortgage, leading to strategic default and foreclosure.
• Failure to pay property taxes: In Greece, property taxes (ENFIA) are mandatory. If a borrower fails to pay their property taxes, this can also lead to legal action and foreclosure as unpaid taxes accumulate and lead to financial pressure.
• Business failure: Borrowers who took out loans to invest in businesses may face foreclosure if their business fails, reducing their ability to make mortgage payments. This is especially true for small business owners or the self-employed.
• Expiration of legal protections: Greece had several laws that provided temporary protection for primary residences, particularly for vulnerable groups. However, as these protections expire or become more limited, many borrowers who relied on these laws are at risk of foreclosure.

What Happens to Foreclosed Properties: Real Estate Auctions

Once the foreclosure process is initiated, the lender seeks a court order to repossess the property. The court must approve the foreclosure, which allows the lender to take control of the property.

Once repossessed, the property is sold through an electronic auction (Ηλεκτρονικοί Πλειστηριασμοί). This system has been in place since 2017, and is intended to make the process more efficient and transparent. Auctions are open to the public and anyone can bid for the property.

The property is sold to the highest bidder at auction, and the funds from the sale are used to pay off the outstanding mortgage and any other related debts, such as legal fees and auction costs.

If the sale price exceeds the amount owed, the remaining funds are returned to the original property owner. However, if the sale price is less than the amount owed (common in cases where property values have declined), the borrower may still be liable for the remaining balance.

After the auction, ownership of the property is transferred to the successful bidder. The borrower (former owner) must vacate the property after the sale. If they refuse to leave, the new owner can take legal action to evict them.

Consequences of Property Foreclosure in Greece

If your property is repossessed in Greece, the consequences can be significant and affect both your financial situation and your personal life.

The most immediate consequence of foreclosure is the loss of ownership of the property. The property will be auctioned off and the owner will no longer have any legal rights to it. This can also result in displacement if it’s your primary residence, meaning you’ll have to find alternative housing.

If the property is sold for less than the amount of your outstanding mortgage debt, you may still owe the lender the difference, and the lender may continue to pursue you for the unpaid balance, adding to your financial burden. In addition, you may be responsible for any legal fees, auction costs, or other expenses associated with the foreclosure process.

A foreclosure will have a severe impact on your credit score in Greece, which can make it difficult for you to obtain future loans, mortgages, or even credit cards. The foreclosure mark can stay on your credit report for several years, limiting your financial options. It can also affect your ability to rent property, as some landlords check credit histories before offering leases.

In addition to the financial impact, the foreclosure process can also be emotionally challenging, especially if it involves losing your primary residence. The stress of financial hardship, the loss of your home, and the uncertainty of your future living situation can take a toll on your mental health and well-being.

How we can help you if you are facing foreclosure

If you are facing foreclosure in Greece, our law firm can provide invaluable assistance in a number of ways. An expert lawyer for Greek real estate law, debt negotiation, and foreclosure regulations will help you navigate the legal complexities, explore potential alternatives, and protect your rights.

Let us help you::

• Understand your rights under Greek law, including any protections that may apply to your situation. We can assess whether your property qualifies for primary residence protection or if you fall under any vulnerable group protections that may delay or prevent foreclosure.
• Review loan and mortgage agreements to identify any legal defects, unfair terms, or inconsistencies. If the bank or lender made mistakes in the loan process, you may have grounds to contest the foreclosure.
• Negotiate with lenders, acting as an intermediary between you and the lender. We can negotiate for loan restructuring, reduced monthly payments, or an extension of the payment period to help you reach an agreement that could avoid foreclosure.
• Delay the foreclosure process by filing motions or using legal procedures that give you more time to reorganize your finances, sell the property, or negotiate with the lender. We can also seek court intervention if the lender is proceeding too quickly with the foreclosure or violating legal procedures, potentially stopping the auction or repossession.
• Assist in selling your house in Greece before it is repossessed, if foreclosure is inevitable and you prefer to avoid the negative consequences. Our firm can guide you through a short sale process, where the property is sold for less than the outstanding debt, but with the lender’s approval, potentially reducing your financial liability.
• Protect you from harassment or aggressive actions by your lender or debt collectors, an attorney can intervene on your behalf. We can ensure that the lender follows proper legal procedures and that your rights are not violated during the foreclosure process.
• Represent you in court, make sure your side is heard, and present any defenses or claims that may stop or delay the foreclosure. Our expertise in litigation and real estate law will give you the best chance for a favorable outcome.

While our primary role is legal, we will always be at your side, providing a sense of control and support during what is often a very stressful and emotional process. Knowing that a professional is handling your case will alleviate some of the burden and anxiety.