A week ago, the finance.si news portal reported on the difficulties that could be faced by lessees of KDS (Krek Services Company). The company is a member of the Catholic Church’s system of Zvon holding companies. To cover loans for Zvon 2, the company used lease contracts with its clients as collateral, according to the website. Because KDS found itself in financial difficulties, the banks began to cash the insurance contracts. Therefore, a house whose estimated value is 90,000 euros found itself on the auction block with a 1.5-million-euro mortgage form Gorenjska Banka. Because KDS still has about 70 property lease contracts used by banks as collateral, some are asking if banks will begin to cash their outstanding debts and begin to sell seized homes. The answer is no.

We spoke to an expert on the lease market in Slovenia who wished to remain anonymous. He explained that in the KDS case, the banks launched a writ of execution on all of KDS’s property because of the company’s outstanding debts. The courts then froze KDS’s property. That’s why a 1.5-million-euro mortgage was issued for a house worth 90,000 euros – and not because of a decision by KDS to insure the property with a lease contract and a transfer of property rights to the lessees. With the writ of execution and subsequent changes in the property register, the banks ensured a defined sequence of debt repayments and a basis of further negotiations. The banks informed the property owners that they are now the creditors and explained that if the owners make their payments to then rather than to KDS, the ownership of the homes would ultimately be transferred to them as part of a so-called vacating receipt, explained our expert.

The President of KDS, Iztok Čegovnik, spoke to the daily Delo and explained that the home in question went on the auction block because the lessees failed to make payments to Gorenjska Banka, which had become the new creditor. Because of this, the bank was able to cancel the contract and had no further obligation to transfer ownership to the lessees and was therefore able to place the house on the auction block.

ZBS urges calm: no reason to panic
Because of the resulting confusion, the situation was also addressed by the Bank Association of Slovenia (ZBS), which is urging against panic. According to the association, the legislation gives the same protections to those who lease their properties as it does to those who purchase them using bank loans.

Andrej Čebokli; Translated by J. B.