Good News In the Pipeline for Banks

April 4, 2013

4th April 2013 Good News In the Pipeline for Banks. The Land and Conveyancing Law Reform Bill, 2013 may be seen as good and bad news for banks but it is a welcome legislative intervention to an unsatisfactory legal limbo created by the Start Mortgages judgment[1]. While subsequent judgments in Kavanagh v Lynch[2]and Gillespie[3]clarified to some extent a bank’s statutory rights to possession of charged property, they did not fully address the loophole which prevented banks from issuing proceedings for possession in certain circumstances. The main purpose of the Bill is to address the consequences of the Start Mortgages judgment. A further and unexpected provision in the Bill appears to introduce safeguards for homeowners.

Purpose of the 2013 Bill

1. The Bill closes the legal loophole created by the interpretation of the Land and Conveyancing Law Reform Act, 2009 in the Start Mortgages judgment. It had been held that as Section 62(7) of the Registration of Title Act, 1964 was repealed by the 2009 Act this had the practical effect of negating a charge holder’s statutory rights to possession where a mortgage was created before 1 December 2009 and the chargeholder’s statutory rights accrued after 1 December 2009.

A charge holder’s statutory rights to possession are reinstated by the Bill which provides for the continued application of certain repealed provisions, most notably Section 62(7). However, Section 1(5) of the Bill provides that it will not have retrospective effect and therefore proceedings issued prior to the enactment of the Bill will not benefit. This will require charge holders to discontinue possession proceedings in being and reissue them following enactment of the Bill.

2. The Bill also appears to provide safeguards for home owners where possession proceedings have issued[4]. This section applies to all mortgages created before or after 1 December 2009. The Bill appears to provide for two month adjournments for the asking, to enable home owners to consider a Personal Insolvency Arrangement under the new Personal Insolvency Act, 2012. However, the Bill does set out a number of specific factors the Court should consider such as the number of prior adjournments, whether repayments have been made in the previous 12 months and the conduct of the parties generally.

This provision does not apply to investment/buy to let properties. This is in line with the Trokia led and Government backed policy of permitting banks to work down their loan books by removing these toxic loans from their books.

Concluding comments

The unexpected feature of the Bill is that it appears to encourage Courts to grant adjournments in proceedings for possession of family homes. This should not cause too much concern as frequent adjournments were already a common feature of this type of litigation, and so it is unlikely to materially increase delays. Instead it should be seen as a positive, albeit long awaited development for banks. After nearly two years of uncertainty and unnecessary costs for banks and borrowers alike, it restores a bank’s right to possession of the charged property of a defaulting borrower. The 2013 Bill has yet to be formally debated in the Dáil and it remains to be seen whether amendments are made prior to enactment.

Mark Woodcock and Rachel O’ Connnor.

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[1]Start Mortgages v Gunn and Another 2011 IEHC 275

[2]Tom Kavanagh and Fergus Lowe v Jeremiah Lynch and St Angela’s Student Residences Limited –  delivered on 31 August 2011

[3]2012 IEHC 243 [4]S.2 of the Bill

The information provided in this document does not constitute legal advice nor should it be relied on as such. The information is provided as a guideline only and should be supplemented by formal legal advice.

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