Categories
Debt Problems | Bankruptcy

Unfair Terms in Consumer Mortgage Agreements-An Instructive Supreme Court Decision

The Supreme Court has handed down an instructive judgment in a case in which a County Registrar had granted a possession order against the borrowers.

The borrowers sought an extension of time from the High Court in respect of the County Registrar’s decision. The High Court refused the extension and the borrowers appealed to the Supreme Court.

The basis of the appeal

The borrowers relied on a previous decision that a County Registrar must, before granting an order to allow repossession of a property, review the mortgage agreement for unfair terms. Unfair terms are dealt with in regulations in Ireland which give effect to an EU directive, the Unfair Terms in Consumer Contracts Directive.

Brian and Christina Cannon also argued that there were indeed unfair terms in their mortgage agreement:

  1. The “transfer of rights” clause. The Supreme Court held there was no evidence that this was an unfair term and transfer of rights clauses are uncontroversial and standard
  2. The “acceleration” clause. This would be unfair if it purported to allow the lender to all in the entire loan as a consequence of one missed payment. However, this was not the case and could not happen for the lender had to abide by the Central Bank code of conduct and was obliged to serve various notices on the borrowers
  3. The “price variation” clause. There is an exemption in the Regulations which allows the lender to change interest rate without notice if there is a valid reason. In any event, the lender must adhere to the 2016 Consumer Mortgage Credit Agreements Regulations which obliges the lender to serve a notice of change of interest rate on the borrower.

The Country Registrar’s role

The County Registrar’s role was clarified in the decision and it was held that this role involved considering the terms of the mortgage to ascertain if any potential defence was open to the borrower. If it is then the case must be transferred to the Circuit Court Judge to deal with it.

Read the full decision in Pepper Finance Corp v Cannon & Anor here.

Categories
Debt Problems | Bankruptcy Property Law

The Misuse of Inhibitions and Cautions to Frustrate Lenders-High Court Cancels Inhibitions on Property

Since the property crash in 2007 some hard pressed property owners, who had judgments registered against them, have used various ploys and ruses to block and thwart the holders of judgment mortgages from selling their property against their wishes.

A recent High Court case concerned this very issue and it is worth taking a look at the decision in ACC Loan Management Limited v Fryday & others. The timeline in this case is critically important and is as follows:

ACC obtained judgment for €1,301,344.44 against William and Vanda Fryday in 2009 and registered this judgment as a judgment mortgage in 2011 on certain property folios of the Frydays. In 2012 ACC sought a court order to the effect that the judgments were “well charged” on the folios in question.

The Frydays had sworn affidavits in December 2012 and January 2014 as part of the legal proceedings and did not make any suggestion or assertion that anybody else had an interest-beneficial or legal-in the property.

Then, in April 2014 and December 2014 the mother (Lavinia) and brother (Richard) of the first defendant (William) registered with the Property Registration Authority two inhibitions on the properties in question. These inhibitions were based on the mother and brother claiming to have an interest in the property and were lodged with the consent of the registered owners (William and Vanda, a married couple) of the property.

ACC had obtained a well charging order and an order for sale of the properties and now sought to have these inhibitions cancelled. Naturally, the Frydays opposed this application. ACC argued that these inhibitions were only registered by the notice parties, Lavinia and Richard, to thwart and prevent the bank from selling the property and to frustrate the bank in enforcing the judgment it had obtained against William and Vanda Fryday.

The Court, having considered the timeline set out above, held that the inhibitions claiming an interest by the Frydays (Lavinia and Richard) were only claimed when the bank went to enforce its judgment and seek the well charging order with a view to sale. The Court ordered the cancellation of the inhibitions as it found that the sole purpose of the inhibition was to prevent the bank from enforcing its well charging order.

Conclusion

The use of lis pendens, cautions and inhibitions by property owners against whom judgment has been obtained is quite common. The problem from the lender’s perspective arises when he wishes to sell and needs to cancel or vacate these burdens on the folio. It can be costly and slow to do so but the registration of such burdens is relatively straightforward with an application to the Property Registration Authority being the route to take, pursuant to the Registration of Title Act 1964.

The chilling effect of an inhibition, caution, or lis pendens is to discourage interest in potential purchasers of the property on which the burden has been registered.

Read the full decision: ACC Loan Management Limited and William Fryday and Vanda Fryday and Lavinia Fryday and Richard Fryday It is a detailed judgment and sets out how and why the Judge arrived at the decision to exercise the Court’s discretion to cancel the inhibitions.

Categories
Business and Company Law

Commercial Leases and the COVID-19/Coronavirus-the Fallout for Small Business Owners

rent-review-commercial leases

I was contacted last week by a couple of clients whose business has gone through the floor or evaporated entirely as a consequence of COVID-19.

One of the first concerns they had was the difficulty they were inevitably going to encounter in trying to continue to pay the rent on their commercial premises. Here are some questions that spring to mind.

Must I keep paying rent?

It is almost certain that there would be no entitlement to cease paying rent. From a legal perspective the lease will contain an obligation to pay rent and you will be in breach of that covenant if you fail or refuse to do so.

If you did stop, you are leaving yourself open to the landlord taking matters further. Courses of action open to her would include commencing legal proceedings to recover the arrears and/or to forfeit the lease and recover possession of the premises. If you had paid a rent deposit this would obviously at risk and if there was a guarantee for the rent, the guarantor could expect to hear from the landlord who will try to enforce his guarantee.

Can I terminate the lease or just hand it back?

No, you could only do so with the consent of the landlord. This assumes that there is no break clause option in the lease.

Fundamentally, once you enlist you must soldier-that is to say, when you signed up to the lease you signed up to various terms and conditions and covenants and it is unlikely that the COVID-19 catastrophe will allow you to walk away from those obligations.

A force majeure event may allow this to happen, but COVID-19 is almost certainly not going to be held to be such an event.

Can I claim off my insurance policy?

You need to review the terms and cover provided by your policy. It may be possible to claim for losses arising from COVID-19 but, quite frankly, when you are scouring through an insurance policy looking for a term or condition to favour you it will probably be a futile exercise.

Can the landlord close my premises?

This is a tricky one and will depend on the premises and where it is located. If, for example, the premises were in a shopping centre and the landlord decided to close the whole centre you may be able to argue that the landlord has torn up the lease.

You would have a harder time with that argument, however, if the landlord was following directions of the government or medical advice.

Can I suspend payment of rent?

There may be provision in the lease for the suspension of rent, but this is likely to apply if the building was destroyed or damaged by lightning or some such similar catastrophe. Otherwise it is unlikely that the normal rent suspension provisions which might be found in a commercial lease would apply.

The bottom line

The terms, covenants, and conditions in your commercial lease apply from day 1 and even though COVID-19 is an appalling vista for any small business owner the law will not come to your rescue and you are stuck with the provisions of the lease. You are reliant on the generosity, decency, and common sense of your landlord.

Categories
Personal Injury Claims

Letter of claim in a personal injury action-time period shortened to 1 month

If you claim that somebody caused you an injury and you intend commencing personal injury proceedings against that person you, or your solicitor, must write a “letter before action” to that person. This obligation is set out in section 8 Civil Liability and Courts Act 2004 as follows:

8.—(1) Where a plaintiff in a personal injuries action fails, without reasonable cause, to serve a notice in writing, before the expiration of 2 months from the date of the cause of action, or as soon as practicable thereafter, on the wrongdoer or alleged wrongdoer stating the nature of the wrong alleged to have been committed by him or her, the court hearing the action may—

(a) draw such inferences from the failure as appear proper, and

(b) where the interests of justice so require—

(i) make no order as to the payment of costs to the plaintiff, or

(ii) deduct such amount from the costs that would, but for this section, be payable to the plaintiff as it considers appropriate.

(2) In this section “date of the cause of action” means—

(a) the date of accrual of the cause of action, or

(b) the date of knowledge, as respects the cause of action concerned, of the person against whom the wrong was committed or alleged to have been committed,

whichever occurs later.

You will note that the obligation was to write the letter within 2 months of the accident, or the date of knowledge of the person against whom the wrong was committed.

Changes in 2019

In January 2019, however, a new piece of legislation, Central Bank (National Claims Information Database) Act 2018, section 13 reduced this time period to one month. This section states

13. (1) In this section “Act of 2004” means the Civil Liability and Courts Act 2004 .

(2) Section 8(1) of the Act of 2004 is amended by:

(a) the substitution of “one month from the date of the cause of action,” for “2 months from the date of the cause of action, or as soon as practicable thereafter,”, and

(b) the substitution of “the court hearing the action shall” for “the court hearing the action may”.

(3) Section 14 of the Act of 2004 is amended by the insertion of the following subsection after subsection (4):

“(4A) Where there is a failure to comply with subsection (4), the court hearing the personal injuries action concerned shall—

(a) draw such inferences from the failure as appear proper, and

(b) where the interests of justice so require—

(i) make no order as to the payment of costs to the party responsible for the failure, or

(ii) deduct such amount from the costs that would, but for this subsection, be payable to the party responsible for the failure as it considers appropriate.”.

You will note from the above section that the Court “shall” draw such inferences from the failure as appear proper; the previous position was that the Court “may” draw such inferences-that is,

“draw such inferences from the failure as appear proper”.

Conclusion

The failure to send this letter before action within 1 month may lead to the plaintiff being penalised in respect of costs at the subsequent Court hearing.

Categories
Property Law Property Purchases and Sales

Commercial Property Investment-4 Vital Things to Consider

Thinking about buying a commercial investment property? There are a number of factors you will need to consider. 

Here are four important ones: 

1. The tenant

The quality of your tenant is critically important because it will determine how sound your rental income stream will be. Having a major retail brand or franchise as a tenant is a huge advantage over having a one man or woman business.

If there is difficulty in collecting the rent you can certainly go to Court and get a Court order for vacant possession and a judgment for the outstanding rent and costs. But this judgment will be of little value if you cannot enforce it and your debtor simply does not have the money to pay the judgment amount. This is a strong possibility with an inexperienced sole trader.

You will also have incurred your own legal costs and you can be sure your solicitor will want to be paid.

So, a weak tenant carries inherent and obvious risks from the outset.

2. The physical condition of the property

The physical condition of the property is worth considering carefully if you want to avoid a property which will require significant expenditure in maintenance or repair and refurbishment. The type of lease in place will determine who is responsible for repairs and maintenance to the building so this would want to be checked before investing.

3. Location

The location of your investment property is vitally important for a number of reasons. Firstly, from the perspective of selling the property on when you are ready. Secondly, if you have to evict the tenant or he does not renew the lease you will have to find another tenant and the location, if good, will make this a much easier task.

On the other hand the business that was carried on may have been one which relied to a large extent on the business and personal contacts and reputation of the tenant. It may be difficult to re-let the premises if it is in a secondary location and is only suitable for a small number of businesses.

4. The legals

You will need to ensure that all legal, planning, and regulatory matters are in order. This involves checking that good title is being offered, the planning and building regulations/building bye-laws are in order, the terms and conditions of the existing lease, and any rates or management company liabilities have been fully discharged and there will be no unpleasant surprises for a buyer of the building.

Conclusion

Buying a commercial investment property is broadly similar to buying a residential investment property. You are more likely, however, to have a sitting tenant with a commercial property and you may be buying a property that is subject to a long commercial lease-for example for 15, 20, or 35 years.