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Proposed clarification to mortgagees’ rights welcomed

AUTHOR(S): Tony O’Grady, Julie Murphy-O’Connor, Niamh Counihan
PRACTICE AREA GROUP: Corporate Restructuring and Insolvency
DATE: 04.04.2013

Overview

On 28 March 2013, the Irish Government published the Land and Conveyancing Law Reform Bill 2013 (the “Bill”), which, if passed, provides that particular statutory provisions granting certain powers, rights and remedies to mortgagees (such as the right to summary possession, overreach, appoint a receiver or sell as mortgagee in possession) continue to apply to mortgages created prior to the commencement of the Land and Conveyancing Law Reform Act 2009 (the “2009 Act”), notwithstanding the repeal and amendment of those statutory provisions by the 2009 Act on 1 December 2009 (1).

Background

The Bill has been drafted to address the unintended consequences of the 2009 Act and the uncertainty in the law relating to the exercise by lending institutions of their right to summary possession. This uncertainty arose as a result of the decision in Start Mortgages Limited & Ors v Gunn and Ors (2) (the “Start Mortgages Case”).

In the Start Mortgages Case, Ms Justice Dunne held that the repeal of section 62(7) of the Registration of Title Act 1964 (the “1964 Act”) with effect from 1 December 2009 by the 2009 Act precluded chargeholders from seeking to recover possession of registered property in a summary (short / simplified) manner, unless the principal monies secured by the charge were due prior to that date (which under the mortgages in question required a valid demand for payment prior to that date).  This was on the basis that, unless the secured monies had become due by 1 December 2009, the mortgagee’s right to obtain possession by summary proceedings had not been ‘acquired’ or ‘accrued’ by the date of the repeal. Therefore it was not saved by section 27(1)(c) of the Interpretation Act 2005, which protects rights that are ‘acquired’ and ‘accrued’ prior to the repeal of the legislation on which they are founded.

As a result of the Start Mortgages Case, mortgagees by deeds entered into under the Conveyancing Acts 1881 to 1911 (the “1881 Act”), were concerned as to whether they could continue to rely on the powers and rights conferred on a mortgagee by the 1881 Act (including the power of sale, the power to appoint a receiver or the right to “overreach” subsequent encumbrances on title) and certain sections of the 1964 Act (including the right to seek summary possession) despite their repeal.

While subsequent decisions of the High Court, such as Kavanagh and Ors v Lynch and Ors (3)), EBS Limited v Gillespie (4)) and McEnery v Sheahan (5) tempered the potential wider implications of the Start Mortgages Case, summary possession of registered land remains problematic.  In the absence of the decision in the Start Mortgages Case being overruled by the Supreme Court (6) or the enactment of legislation to address the position, it is not possible, on the basis of the decision in the Start Mortgages Case, for a mortgagee to seek summary possession unless the secured monies had become due prior to 1 December 2009. 

The Bill

The Bill, if passed into law, provides that certain statutory provisions of the 1881 Act and the 1964 Act will continue to apply to mortgages which pre-date 1 December 2009, notwithstanding the repeal and amendment of those statutory provisions by the 2009 Act.  Accordingly, a mortgagee’s right to summary possession, overreach, appoint a receiver or sell as mortgagee in possession, will continue to apply to mortgages created prior to 1 December 2009.   It is not however proposed that the Bill will apply to any proceedings initiated prior to its coming into operation. 

The Bill also proposes the adjournment of possession actions in certain cases relating to the principal private residence (“PPR”) of the borrower where it is considered by the court that the matter could be resolved by recourse to the recently enacted Personal Insolvency Act 2012 (the “2012 Act”). The Bill provides that the court, where it considers it appropriate or on application by the borrower, in proceedings for possession of a PPR, may in certain circumstances adjourn the proceedings to enable the parties to consider whether a personal insolvency arrangement under the 2012 Act would be a more appropriate course of action than possession. 

The Bill is a long anticipated and welcome development which, if passed into law, will address the difficulties experienced by mortgagees in seeking summary possession of registered land in the wake of the Start Mortgages Case. 

The Bill and the explanatory memorandum to the Bill are now available for viewing.

End Notes

1. Section 8(3) of the 2009 Act repealed all of the provisions of the Conveyancing Acts 1881 to 1911 and certain of the provisions of the Registration of Title Act 1964 which applied to mortgages

2. [2011] 2 IEHC 275

3. [2011] IEHC 348

4. [2012] IEHC 243

5. [2012] IEHC 331

6. An appeal is pending against the decision of the High Court 

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