The recent legal cases involving Dublin solicitors Michael Lynn and Thomas Byrne have prompted the State's banks to examine the use of solicitors' undertakings in property transactions.
The closure of a residential property deal traditionally involved three parties - solicitors representing the vendor, the purchaser and the lender - sitting around a table and passing around the property's title deeds until they were all satisfied with the documents. They would complete the transaction and the lender's security would be registered as a charge against the property.
This has, in recent years, been regarded as a cumbersome process, particularly during the boom in residential property lending over the last decade, so it was replaced with the solicitors' undertaking, a mechanism that fast-tracked the whole process, but which relied heavily on trusting solicitors.
In some circumstances, banks will advance money to borrowers without the security of obtaining title deeds. It has emerged in the case of Michael Lynn, who practised as Capel Law in Dublin 7, that some banks did not have their mortgages registered against his properties. This enabled him to take out multiple mortgages on the same properties, without the banks knowing, leaving several owed a sum that is now higher than the value of the property on which they each had provided the loans.
Five banks will today apply to the High Court to have mortgages taken out by Mr Lynn registered against his properties. Counsel for one bank told the court on Monday that it wanted to move urgently to register six mortgages against his properties as there would be an issue about the priority they would have on his list of liabilities, given that other financial institutions were in a similar position.
Many of the country's leading banks are reviewing their loan portfolios and lending practices to see if they are exposed on other borrowings.
