Relying on a flaw in legislation to shelter defaulting homeowners is surely a falling short of governmental responsibility, writes FIONA GARTLAND
THE LAND and Conveyancing Law Reform Act 2009 came into force on December 1st, 2009. Its purpose was to streamline processes and modernise how property is bought, sold and repossessed in Ireland. Its introduction followed much consultation and a report from the Law Reform Commission, and it was widely welcomed and praised.
Despite the hard work that went into the Act and the many legal minds that appraised it as it passed through the Houses of the Oireachtas, it contained a basic flaw revealed earlier this year that has thrown lenders into disarray.
On July 25th, Ms Justice Elizabeth Dunne delivered her judgment on four cases; Start Mortgages v Gunne, Secured Property Loans v Clair, GE Capital Woodchester Homeloans Ltd v Mulkerrins,and GE capital Woodchester Homeloans Ltd v Grogan.They had challenged the repossession of registered property under Section 62 (7) of the Registration of Title Act 1964, one of the pieces of legislation repealed by the 2009 Act.
Ms Justice Dunne found an entitlement to repossess a property only accrued on the date a demand for full repayment of the debt was made. She said the 2009 Act only applied to mortgages created by deed after its commencement, on December 1st, 2009. And the Interpretation Act 2005 only saved cases where an entitlement to repossess had already accrued. So the only properties involving registered land that could be repossessed were those for which lenders had demanded full repayment before December 1st, 2009. The repeal of the old Act had created a “lacuna”.
“It is not for the court to supply that which is not contained in the 2009 Act,” Ms Justice Dunne stated. The question remains, who will supply it?
It appears there is little appetite at Government level to repair the loophole. The Department of Justice has said it is “in consultations with the Office of the Attorney General regarding the implications of the High Court judgment”, a line it has been repeating since the judgment was delivered.
It is easy to understand the reluctance. In the current climate, what government would want to be seen to aid banks in the repossession of people’s homes?
There have been suggestions that Ms Justice Dunne’s ruling might be appealed, but it is very hard to see any fault in her findings. Counsel for GE Capital, Ronan Murphy SC, had told the High Court his client would consider taking a constitutional challenge to the 2009 legislation. He said there was an argument to be made about whether the Act could be valid, given it would deprive lenders of the remedy of repossession. But so far, no date has been set for such a challenge.
Meanwhile, numbers for the chancery summonses court, where orders for possession are made every Monday, have been dropping. From a high of more than 90 cases listed for a single session before the July ruling, figures are now down to the 50s.
This has not yet translated into a drop in orders being obtained; in the last four weeks, for example, 34 applications for orders for possession were granted. But as we go into the new year, lenders will be more and more likely to feel the full effects of the legislative flaw. Unemployment has continued to rise since December 1st, 2009, and with it the number of homeowners struggling with and defaulting on their mortgages.
A recent ruling by Ms Justice Mary Laffoy, in Kavanagh and Lowe -v- Lynch and St Angela's Student Residences Limited, curtailed to some extent the Start Mortgages judgment. She ruled where a mortgage created before December 1st, 2009, specifically states the mortgagee has rights under the Conveyancing Act 1881, those rights are not affected by the repeal of that Act. However, domestic mortgages for registered properties generally rely on section 62(7) of the 1964 Act for security without express reference to it within the agreement. And over 90 per cent of land in Ireland is now registered.
Without a successful appeal of Ms Justice Dunne’s judgment, a successful constitutional challenge or repairing legislation, lenders may have to take other legal avenues such as well-charging orders and orders for sale. But these involve cumbersome, lengthy and expensive processes. One might argue there could be some small sense of justice in this, given borrowers’ taxes are being used to prop up the ailing institutions, except ultimately it is the borrower who will pay for additional legal costs incurred.
And while homeowners should be protected and helped to stay in their own homes through other government measures, relying on a flaw in the law to shelter them is surely a falling short of governmental responsibility. Coupled with that, many of the properties affected by the judgment are buy-to-lets, and lenders need recourse to repossess these in the cleanest, cheapest way possible.
It is time Minister for Justice Alan Shatter fixed the flawed legislation that is causing so much uncertainty.