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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.