Ireland’s Land and Conveyancing Law Reform (Amendment) Act 2019, based on the Keeping People in the Homes Bill, 2019 has been enacted into law. As stated in a previous article, the new legislation will require a court to consider sympathetic factors and require disclosure of what would normally be ‘without prejudice’ communications to the court when evaluating grounds for a possession orders for family homes.

Sympathy for the borrower

The new law requires judges to take into account a list of factors when considering whether to make, or refuse, an order for possession of a family home, which are more accurately described in law as principal private residences or PPRs. The factors include:

  • Whether the order is proportionate in light of, amongst other things, the debt, the arrears and the value of the property on the date on which proceedings were commenced
  • The circumstances of the mortgagor and his or her dependants
  • Whether the mortgagee has made an offer to settle the matter in a way that would enable the borrower to remain in the PPR
  • Details of any proposal made by the borrower that would either (i) enable the mortgagor and any dependents to remain in the PPR, in accordance with a scheme to be designated by the Minister or otherwise; or (ii) secure alternative accommodation
  • Details of the lender’s responses to a borrower’s proposals
  • The conduct of the parties in seeking to find a resolution to the arrears.

Furthermore, the court may also consider the following factors in assessing the merits of granting a possession order:

  • The amount of secured debt outstanding on the primary residence
  • The outstanding arrears under the mortgage loan extended for the PPR, and
  • The advised market value of the PPR at the date on which the proceedings were commenced

Exercising discretion

Earlier suggestions that the court be required to take account of: (a) the amount paid for the mortgage loan by a loan buyer by reference to the amount of the outstanding debt, and (b) the advised market value of the PPR when the loan was sold, were not ultimately included in the Bill.

While the law is very broad, the discretion only arises where a borrower has been refused an adjournment for the purposes of seeking to avail of a Personal Insolvency Arrangement (PIA). It may only be considered at the end of any adjournment for that purpose, even where a proposed PIA has been refused on appeal or where the borrower has (prior to the commencement of the proceedings) either participated in a designated scheme or engaged the services of a personal insolvency practitioner.

A commencement order is expected to be signed, with the new law commencing at least before the start of the next Circuit Court term in early October 2019.

Comment

As previously flagged, the new legislation ignores the borrower’s underlying liability which remains due and owing, notwithstanding any sympathetic decision of the court. This means that borrowers, while secure in their family homes, will be left with the burden of debt hanging over them into the future, potentially trapping them in situations that are less than ideal, depending on their circumstances. Equally, it appears that it would not be a bar to further possession proceedings.

While many of these factors may, in practice, have been considered by the court in granting long stays on possession orders in the past, the new legislation has missed an opportunity to provide any guidance as to how a judge should weigh each of the criteria’s relative importance in the overall circumstances. For example, does the conduct of the parties (and in particular, that of the lender) outweigh the proportionality of the possession order being granted?

We are of the view that it is now inevitable that there will, at least initially, be significant divergence between judges in how this new discretion is exercised. Moreover, as the Circuit Court does not normally produce written judgments, variations in determinations will likely persist until there are written judgments on appeals.

Separately, the factors to be considered by the courts and the need for valuations will make hearings longer and more expensive. This is therefore a further burden on the resources available and a continuing drag on the ability of financial institutions to resolve non-performing loan situations.

Given the possibility of being refused an order for possession, lenders may wish to consider seeking judgment for debt in parallel with orders for possession in a greater proportion of cases than at present.