Thousands of Britons with holiday and retirement homes in Northern Cyprus could be forced to return their properties to Greek Cypriots or pay compensation after a landmark ruling from the European Court of Justice.

Linda and David Orams, from Hove in Sussex, lost a long legal battle against Meletios Apostolides, who owns the land their £160,000 holiday home stands on.

Thousands of Greek Cypriots were forced out of Northern Cyprus when Turkish troops intervened in 1974 to prevent the island from being united with mainland Greece.

The European judges have ruled that British courts must enforce the judicial decisions made in Cyprus which uphold the property rights of Greek Cypriots who were forced out of the northern half of the island.

The judgment gives a green light to demolition orders and compensation claims against some 4,000 British property owners in Northern Cyprus.

Marian Stokes, the founder of the Northern Cyprus Homebuyers’ pressure group, described the ruling as “absolutely gutting”.

She said: “It’s so sad, because people stand to lose so much money. We did not think they would rule this way. We bought our land in good faith. It was usually marketed and sold in the UK, so you presume everything is ok. The implications for land ownership and conflict claims are staggering across Europe.”

In 2005 a court on the Greek Cypriot side of the green line in Nicosia, the divided capital, ordered the Orams to tear down their holiday home and return the land to Mr Apostolides, along with damages. His family were forced out during the war 35 years ago.

Mr Apostolides went to the Court of Appeal in London in 2006 to have the Cypriot judgment recognised in Britain. British judges then turned for guidance to the European Court of Justice.

Lawyers for Mr Apostolides successfully argued that since both Britain and Cyprus are European Union member states, the ruling in Nicosia was enforceable in British courts.

“I think people who have got property in the occupied north, which didn’t belong to those who gave it to them, should seek solid legal independent advice,” said Constantis Candounas, the lawyer who represented Mr Apostolides. “It opens the way for the judgment of the Cyprus court to be enforced in the UK. It means that eventually my client will have a means to enforce the decision.”

The case now returns to the Court of Appeal and one legal source confirmed that British judges must “recognise and enforce the judgment”, adding: “How they do it is up to them, it could be by compensation”. In theory, the Orams could have their home in Britain seized.