Categories
Debt Problems | Bankruptcy Property Law

Repossessions of Properties Halted by High Court Judgment

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.

Background

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The decision of Ms Justice Dunne that section 8 of the Land and Conveyancing Law Reform Act 2009   repealed section 62(7) of the Registration of Title Act 1964 means that lenders can no longer rely on section 62(7).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:

  1. 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.
  2. 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:

  1. 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;
  2. 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;
  3. 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;
  4. 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.

If you have a question or concern, please use the contact form below. We respond within 24 hours, guaranteed.

UPDATE 2013

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.

Categories
Property Law Property Purchases and Sales

10 Key Areas to Consider When Leasing Commercial Premises in Ireland

leasing-commercial-premises
Leasing commercial premises requires caution

Thinking about leasing a shop unit?

Coffee shop?

Office?

Other commercial premises?

If you are thinking about leasing a commercial shop unit in Ireland there are a number of key areas you need to consider before going ahead.

Set out below is a non-exhaustive list of issues that you will need to be satisfied about before investing your cash in a full repairing and insuring lease (FRI lease).

At the end of the piece I also deal with some common questions I am regularly asked by people looking to start or grow their business by taking on a commercial unit.

1) The term

How long will your lease be? Will you have statutory rights under the Landlord and Tenant (Amendment) Act, 1980? Will you have a break clause? Is Vat payable?

2) Repairs

Who is responsible for repairs? If it is a lease in excess of 5 years you as tenant will likely be responsible.
If it is a lease of less than 5 years you may only be responsible for internal repairs.

The question of whether it is a new building or an older building will also be significant and other issues to be addressed would include latent and inherent defects in the building, what is considered fair wear and tear and what risks are covered by insurance.

3) Insurance

If it is a full FRI lease then you as tenant will almost certainly have to pay the insurance premium held in your landlord’s name.
This will vary depending on whether you are the sole occupier of the building or if it is multi tenanted in which case you will be obliged to pay a proportion of the landlord’s premium.

You will therefore be concerned about the risks that the landlord is insuring against and whether the building is insured for reinstatement value or cost.

As tenant you will also want to insure against public liability, employers liability, plate glass and contents but this will depend very much on the nature of your business.

4) Alterations

You may need to make alterations when you take on the property to ensure that it is right for the purpose intended.
This will generally require the landlord’s consent which cannot be unreasonable withheld or delayed.

5) Alienation of the premises

Alienation is the legal term for your assignment of the lease to a third party; you will need the landlord’s consent to this but the landlord cannot unreasonably withhold or delay his consent.

However the question of reasonableness is one which might be disputed and the landlord may argue that his refusal is in the interests of “good estate management” and is therefore reasonable.

6) Service charges

Service charges may or may not arise in your particular circumstance. If there are service charges in respect of common areas you will need to ascertain exactly what is included and how much your service charges will be.

7) Rent reviews

How the rent will be reviewed will be of critical importance to you; generally rent reviews will take place at 5 yearly intervals and is an area that may require arbitration or some agreement as to how any disputes will be resolved.

8) Guarantee

Will you be obliged to provide a guarantee for rent, rates and other outgoings?

9) Break clause

Is there a break clause in the lease?

10) Stamp duty and VAT

You will be liable for the stamp duty on the lease but landlords also have an option to charge VAT or not. This is another area that you will want to check before investing as it can have a significant impact on your cash flow.

These are just some of the many factors you need to consider and be clear on before leasing a commercial premises.

Here are some questions that crop up repeatedly. If you have any questions simply send them in to me with the contact form below and I will answer them.

Commercial Premises F.A.Q.

‘How long should I sign a lease for?’

This very much depends on

  1. What you want and need
  2. What the landlord wants, needs, and is prepared to give you.

So, it depends on good, old-fashioned negotiation between you and the landlord, or his agent.

You need to consider your future needs and potential expansion/growth; however, you must also consider your business failing. It’s not a pleasant thought but you need to consider it. At least one break clause can give you a way out of the lease, and it could be exercised due to the growth and new needs of your business, or the failure of the business.

‘What documentation will I need?’

When you go to take a look at the premises to speak to the landlord and/or auctioneer, you don’t need any. Later on if you are going ahead, your solicitor will require some identification and anti money laundering papers, but initially when negotiating you don’t need anything.

‘What are my legal responsibilities (and the landlord’s)?’

Your main responsibilities will be to pay the rent, insurance, and any service charge. However, the location of your unit-for example in a shopping centre or multi unit development-may place some extra responsibilities on you. These will all be contained in your lease in the form of covenants and conditions; your landlord’s entitlements and obligations will also be found in the lease, and for this reason you need to negotiate a good one at the outset.

‘As the property is not finished it still needs toilets, railings walls plastered, staircases and a number of other unfinished works.  I am unsure as to what I should be asking them to finish as I don’t know what it is they will expect me to finish.’

This too is a matter for negotiation and agreement, and you want to be sure to avoid having to carry out a huge amount of renovations/refurbishments which may only benefit the landlord in the long run.

If there is work to be done, and the landlord undertakes to carry it out, get a surveyor or architect to check the work before signing a lease.

Your solicitor will also be looking for certificates of compliance with planning permission and building regulations from the landlord’s solicitor, but you need to be sure that the work is carried out to a satisfactory standard for your needs.

Categories
Property Law

Commercial Landlord And Tenant Disputes-What You Need to Know

commercial-lease-law-ireland

Landlord and tenant disputes are on the rise for obvious reasons with the downturn in the economy and landlords being faced with the choice of trying to recover outstanding rent or additionally trying to recover their premises and get the tenant out.

Generally the failure to pay rent by the tenant will be a breach of a covenant of the lease leading to a right accruing to the landlord for a straightforward breach of contract and the normal remedies available to the landlord when this occurs.

The legal proceedings that a landlord will take will depend on the amount of rent owed-if it is less than 6,348.69 euros it will be by way of Civil Summons in the District Court, if it is between that figure and less than 38,092.14 euros it will be by Civil Bill in the Circuit Court. Higher than that and you will find yourself the subject of High Court proceedings.

Recovery of Premises

Generally you will find that most commercial leases will have a covenant providing for the right to recover possession of the premises when there is a breach of a covenant of the lease.

Notice To Quit

If a lease has just expired, that is the time is up, the landlord needs to serve a Notice To Quit giving whatever period of notice is stipulated in the lease itself. After the service of the Notice To Quit the landord should mark any rent received as “mesne rates only” as not to do so could be seen as a waiving of the Notice by the landlord.

Forfeiture

Forfeiture procedure is appropriate where the landlord wants to get the tenant out before the term of the lease is up. He will want to do so if the rent is overdue and not being paid and the landlord thinks that he is better off trying to let the premises to someone else.

To do this the landlord must be sure that the lease makes provision for forfeiture in the event of rent not being paid or whatever other breach of covenant the landlord is alleging. Most leases will contain such a covenant; if yours does not it will provide for forfeiture for breach of a condition of the lease.

In order to use the forfeiture procedure the landlord must first, by law, give the tenant the opportunity to remedy whatever breach has occurred.

Firstly the landlord will need to serve a Notice of Forfeiture on the tenant which will set out the alleged breach and the time withing which it must be put right or that the landlord will re-enter the premises. This is called a Section 14 notice as the requirement arises from section 14 of the Conveyancing Act 1881.

If the remedy is not forthcoming and the breach is not sorted out then the landlord can re-enter the premises peaceably-it is important that to note that anything other than the minimum damage can lead to a criminal offence being caused by the landlord.

If resistance is offered by the tenant then it would be very difficult for a landlord to enter peaceably and should withdraw.

Ejectment Civil Bill on Title

If the landlord can not take the premises peaceably he will need to go the Court route and it is by way of Ejectment Civil Bill on Title.Be warned that this is a slow process and the Courts have traditionally given a fair degree of latitude to tenants giving them more time to put things right.

Tenant Relief

Conveyancing Act 1881, section 14(2), provides some relief for the tenant provided that the landlord has not re-entered and the tenant has put matters right by paying the rent or whatever breach is alleged.

The courts have traditionally been very fair with tenants in these matters and a tenant who has paid up, even late, will be in a strong position to get this statutory relief from the Court.

Commercial Landlord and Tenant Issues in Insolvency

Liquidation

In a liquidation situation, any rental arrears which arose prior to the liquidation will rank as unsecured claims and participate in any dividend on a pro rata basis with other unsecured creditors.

Rent arising where the liquidator occupies the premises to wind up the failed company is deemed to be an expense of the liquidation and will rank, along with the costs of the liquidation, above all creditor claims.

Receivership

Rent accrued prior to the appointment of the receiver will rank as an unsecured debt.

Rent due during the period of receivership, the receiver is obliged to pay the rent as a priority expense of the receivership.

Examinership

Theoretically, rent accrued during examinership should be paid to the landlord. However, proceedings cannot be taken against a company when it is in examinership so it would be very difficult to enforce the payment of rent.

Repudiation of leases during examinership

Section 20(1) of the Companies (Amendment) Act 1990 allows the repudiation of any contracts of a company in examinership.

This includes leases and a Court has jurisdiction to approve the repudiation of a lease of a company in examinership. This is a discretionary power which will be exercised in each case in the particular circumstances of the case.

Disclaiming a lease

Section 290 of the Companies Act 1963 allows a liquidator to apply to Court for an order for disclaimer of onerous property or contracts.

The liquidator has 12 months within which to disclaim a lease and it is a slow process. The landlord will be able to claim as an unsecured creditor for damages as a result of the disclaimer.

However, whether there is going to be a dividend available to unsecured creditors or not will depend on the circumstances of each case.

Categories
Debt Problems | Bankruptcy Property Law

Judgment Mortgages in Ireland-What You Should Know

judgment-mortgage

Judgment mortgages have become more commonplace in the last few years with considerable numbers of people finding themselves in difficult financial circumstances due to the property crash of 2008/9.

A judgment mortgage will only arise after the obtaining of a judgment against a debtor on foot of a debt.

The effect of then registering a judgment mortgage on a debtor’s property will be to give the registrar of the judgment mortgage priority over unsecured creditors of that debtor.

A judgment mortgage can be registered on either registered or unregistered property and it can be registered on the family home of a debtor, notwithstanding the fact that the spouse of the debtor may be a joint owner owe the debtor nothing and, in some circumstances, be unaware of outstanding debts..

Normally it is necessary to obtain the consent of a spouse to allow a charge to be registered on the family home but this is not the case with a judgment mortgage.

Land and Conveyancing Law Reform Act 2009

Under the Land and Conveyancing Law Reform Act 2009 a judgment can be registered as a judgment mortgage by applying to the Property Registration Authority and filling out the necessary forms and providing the necessary paperwork or proofs.

Part 11 of the Land and Conveyancing Law Reform Act 2009 deals with judgment mortgages.

Section 16 Land and Conveyancing Law Reform act, 2009 deals with registration of the judgment mortgage.

Section 17 deals with the effect of registration of a judgment mortgage:

117.— (1) Registration of a judgment mortgage under section 116 operates to charge the judgment debtor’s estate or interest in the land with the judgment debt and entitles the judgment mortgagee to apply to the court for an order under this section or section 31 .
[JMA 1850, ss. 7 and 8][JMA 1850, s. 8]
(2) On such an application the court may make—
(a) an order for the taking of an account of other incumbrances affecting the land, if any, and the making of inquiries as to the respective priorities of any such incumbrances,
(b) an order for the sale of the land, and where appropriate, the distribution of the proceeds of sale,
(c) such other order for enforcement of the judgment mortgage as the court thinks appropriate.
(3) The judgment mortgage is subject to any right or incumbrance affecting the judgment debtor’s land, whether registered or not, at the time of its registration.
(4) For the purposes of this section, a right or incumbrance does not include a claim made in an action to a judgment debtor’s estate or interest in land (including such an estate or interest which a person receives, whether in whole or in part, by an order made in the action) whether by way of claim or counterclaim in the action, unless the claim seeks an order—
(a) under the Act of 1976, the Act of 1995 or the Act of 1996, or
(b) specifically against that estate or interest in land.
(5) Section 74 applies to a voluntary conveyance of land made by the judgment debtor before the creditor registers a judgment mortgage against that land under section 116 as if the creditor were a purchaser for the purposes of section 74 .

Well Charging Order

The next step afforded to the judgment creditor is to apply to Court to get a Well Charging Order and Order for Sale. This is a request from the creditor to the court to recognise that their judgment mortgage is well charged on the property and to be granted an order for sale of the property.

However the court, as always, has a wide discretion to grant any order it sees fit and it can make a range of other orders as well including adjustment orders between joint owning owners and any other order it sees fit.

See section 31 Land and Conveyancing Law Reform Act 2009.

Order For Sale Execution

If and when the judgment creditor obtains an Order for Sale from court, be that Circuit Court or High Court, he will then have to go to and apply to have the property sold through the Examiner’s office in the High Court or the Circuit Court and the Courts will arrange the sale of the property by public auction.

Severance of a Joint Tenancy

Section 30 Land and Conveyancing Law Reform Act 2009 provides that a judgment mortgage does not sever a joint tenancy and the judgment mortgage will be extinguished upon the death of the debtor-that is, a surviving joint tenant has no liability for debts of the deceased joint tenant against whose interest in the property the judgment mortgage was registered.

However, section 31 of the Act allows the judgment mortgage holder to apply for a court order dispensing with the requirement to obtain the consent to sever the joint tenancy if consent is being unreasonably withheld.((e) an order dispensing with consent to severance of a joint tenancy as required by section 30 where such consent is being unreasonably withheld)

The MUINTIR SKIBBEREEN CREDIT UNION High Court Case

This is a vitally important case if you are concerned about this issue. Both the High Court and the Court of Appeal refused the credit union’s application for an order for sale where one of the spouses was unaware and was not a party to the loan agreement which gave rise to the judgment mortgage.

This case shows that the discretion afforded to the High Court to make an order for sale will be guarded jealously and it will be exercised having regard to the circumstances of each case.

Here is the judgment of the Court of Appeal.

Categories
Property Law Property Purchases and Sales Taxation

Stamp Duty | Stamp Duty Rates In Ireland

Stamp duty is a tax on documents and most peoples experience with stamp duty will be in relation to property purchase which gives rise to the notion that stamp duty is applied to property.

But it is actually a tax on the instrument which witnesses the property transaction and you will also see stamp duty applied to other instruments (legal documents) such as shares in companies.

The Stamp Duties Consolidation act 1999 governs this whole area and in that legislation there is a Schedule 1 which sets out the heads of charge for stamp duty which stipulates that the stamp duty on a conveyance or transfer of property will range from 0% to 9%. Each year the government in the Finance Act may change the rate of duty in various heads of charge but the duty will be calculated on an “ad valorem” (for value) rate.

Generally stamp duty will be payable if the document/instrument is executed in Ireland or if the transaction relates to property in the State. You used to have 30 days within which to stamp your document/instrument with the Revenue Commissioners; this is now 44 days and you can do the stamping online with the new online stamping service provided by the Revenue Commissioners called eStamping with the purchaser being the liable person for the duty.

However if it is a voluntary transfer, such as a gift, both parties will be jointly and severally liable.

Residential Stamp Duty Rates

The rates of duty applicable for residential property (whether new or second-hand) are as follows:
First €125,000 Nil
Next €875,000 7%
Excess over €1,000,000 9%

* Transactions, where the consideration (or the aggregate consideration) does not exceed €127,000, are exempt from stamp duty.

Stamp Duty Rates On Non Residential Property

Up to €10,000 Exempt

€10,001 to €20,000 1%

€20,001 to €30,000 2%

€30,001 to €40,000 3%

€40,001 to €70,000 4%

€70,001 to €80,000 5%

Over €80,000 6%
These rates are applicable from February, 2010.

How much stamp duty you will have to pay will depend on whether you are considered to be a first time buyer, owner occupier or investor.

First time buyers do not have to pay stamp duty on either new or second hand houses but there is a clawback of duty if the first time buyer or owner occupier lets all or part of the property other than under the Rent A Room scheme.

This rent a room relief is not available to investors.

Stamp Duty On New Homes

Investors pay full duty on new homes; first time buyers are exempt. Owner occupiers may qualify for relief from stamp duty if there is a Floor Area Compliance Certificated for the property and whether the house is completed or if it is the sale of a site and contract to build a new house.

Conveyance Combined With Building Agreement

Owner occupiers will pay duty on either 25% of the total price excluding vat or the price of the site(excluding vat), whichever is the higher.
No stamp duty is payable on contents although they are taken into consideration when apportioning the total price paid.

Stamp Duty on Leases

Stamp duty is payable on leases and is divided between any premium payable which is calculated at normal stamp duty rates and duty payable on the rent.

Residential and Non-Residential Property

The stamp duty on the premium or fine is the normal rate for residential or non residential as appropriate.
Lease for a term not exceeding 35 years or for any indefinite term-Rate: 1% of the average annual rent
Lease for a term exceeding 35 years but not exceeding 100 years-Rate: 6% of the average annual rent
Lease for a term exceeding 100 years-Rate 12% of the average annual rent

Transfers Between Spouses
Transfers between spouses are exempt from stamp duty.

Stamp Duty Reliefs

Consanguinity Relief
This relief applies to transfers between blood relations such as transfers from parent to child, grandchild, grandparent, brother, sister and some others. The relief provides for payment of 50% of the normal stamp duty that would have applied had there been no relationship.

Young Trained Farmer
There is no stamp duty on a transfer of qualifying land to young trained farmers.

Site Transfer From Parent To Child
When a parent transfers a site to a child for the purposes of building a private residence, and the value of the site is less than 500,000 euros, then there is no stamp duty.The size of the site can not be greater than 1 acre.

Farm Consolidation Relief
There is considerable relief in relation to the transfer of farms to encourage the consolidation of farms and the best place to investigate this scheme is the farm advisory body, Teagasc.

Charities And Sporting Bodies
Charities and sporting bodies both enjoy relief from paying stamp duty when acquiring property; both the charities and sporting bodies need to be approved and further enquiries should be made from the Stamp duty section of Revenue Commissioners for further information.

Gifts/Voluntary Transfers
Bear in mind that if the transfer is a voluntary transaction, that is a gift, the stamp duty will be calculated on the market value of the property at the date of transfer.

If you are thinking about buying or selling a house and want a professional, competitive, personal service, we would be delighted to hear from you.

UPDATE 2013

A much simplified stamp duty system was introduced in Ireland in 2010 with many of the exemptions and reliefs outlined above being abolished.

The stamp duty rates in Ireland are as follows:

Residential Property

Up to €1,000,000-the rate is 1%

Excess over €1,000,000-the rate is 2%

There are also reliefs in relation to transfers between spouses, civil partners, and cohabitants.

Non Residential Property

The rate was 2% until the budget announced in October, 2017 which saw an increase in stamp duty on commercial property increasing to 6%.