Many hard pressed homeowners, fearful of losing their homes as a result of being unable to repay their mortgages, have been handed a lifeline by a High Court decision in July 2011 by Ms Justice Dunne.
Prior to the implementation of the Land and Conveyancing Law Reform Act 2009 lenders relied upon section 62(7) of the Registration of Title Act 1964 to apply to Court to seek a possession order when the borrower had defaulted on his loan.
The decision of Ms Justice Dunne that section 8 of the Land and Conveyancing Law Reform Act 2009 repealed section 62(7) of the Registration of Title Act 1964 means that lenders can no longer rely on section 62(7).
Since the Land and Conveyancing Law Reform Act 2009 came into effect on the 1st of December, 2009 the consequences of this decision and section 8 of the Land and Conveyancing Law Reform Act 2009 are as follows:
- There is no right to apply to Court for an order for possession of property where the borrower entered into the mortgage prior to 1st December, 2009 and have fallen into difficulties after this date.
- The Land and Conveyancing Law Reform Act 2009 does contain provisions (in Chapter 3) similar to section 62(7) of the Registration of Title Act 1964 but this will only be of use to lenders and banks in respect of mortgages taken out after 1st December, 2009.
The implications of this decision are far reaching as many of the mortgages which would now be in difficulty would have been taken out prior to 1st December, 2009.
The decision of Justice Dunne arose when four cases, in which orders for possession were sought, were heard together-
- GE Capital Woodchester Homeloans Limited v Michael and Sinead Grogan
- GE Capital Woodchester Homeloans Limited v Colm Mulkerrins
- Secured Property Loans Limited v Tom Clair and Mary Clair
- Start Mortgages Limited v Robert Gunn and Maura Gunn [2011 IEHC 275].
The details of each case above were slightly different but all four cases involved the mortgage being taken our prior to 1st December, 2009.
Effect of High Court decision
The net effect of the decision in these cases is:
- Where the mortgage was taken out prior to 1st Dec. 2009 and go into default after that date the bank has no legal right to seek possession;
- Where the mortgage was taken out prior to 1st December, 2009 and no letter of demand was issued prior to this date there is no right to seek possession;
- Where the mortgage was taken out prior to 1st December, 2009 and legal proceedings were initiated prior to this date the bank can seek an order for possession;
- Where the mortgage was taken out prior to 1st December 2009 and the letter of demand for payment was sent out prior to this date the bank can seek an order for possession.
For the many people who are affected by this decision they now have more time to negotiate with their lender and more time in which to sell their property.
They may also find the lender more amenable to a “deal” as the bank will face the difficulty of being unable to seek an order for possession in these cases without the necessary amending legislation.
And in the current economic climate it could be argued that it would be a brave (or foolish) politician who would champion the necessary amending legislation.
Alternative Approach by Banks
Notwithstanding the decision above there is an argument to be made that the banks will not be completely stymied by this decision but may in fact have a legal cause of action arising from a simple breach of contract (the mortgage contract). It has been held by the High Court in the past (Gale v FNBS, 1984) that a mortgage contract gives the lender a contractual licence to enter and take possession of the property.
As with all matters to do with the law consult your solicitor for his/her advices for your particular circumstances.
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Kindly note that the above post was written in 2011; the gap or “lacuna” in the law identified by Justice Dunne has now been closed by the government by way of legislation.