Cathaoirleach,
I am pleased to introduce the Land and Conveyancing Law Reform Bill 2013 here today and I look forward to hearing your contributions.
This is a short Bill which is designed to deal with the legal uncertainty which has arisen as a result of several High Court judgments concerning lending institutions’ remedies in cases of mortgage default.
I want to emphasise at the outset that the Bill does not grant any additional powers to financial institutions. It merely restores the position which was thought to apply when the Land and Conveyancing Law Reform Act 2009 was enacted, i.e. that the relevant provisions of the law in force prior to the commencement of that Act on 1 December 2009 would continue to apply to mortgages created prior to that date.
I am, however, availing of this opportunity to introduce two provisions which I believe will be of benefit to borrowers in mortgage distress.
Firstly, I have introduced an additional safeguard for borrowers in Section 2 of the Bill. It provides that in any future repossession proceedings in respect of a borrower’s principal private residence, the court may adjourn proceedings so that a proposal for a Personal Insolvency Arrangement (PIA) under the Personal Insolvency Act 2012 may be fully explored as an alternative to repossession.
This will mean in effect that lending institutions cannot in future proceed to the repossession stage without engaging in good faith in the alternative measures provided for in the Personal Insolvency Act 2012.
Secondly, I have introduced, in Section 3, a requirement that repossession actions in relation to a principal private residence where the mortgage was created prior to 1 December, 2009 must be commenced in the Circuit Court. This provision will lead to a reduction in costs for parties and will also mean that the matter can be dealt with at Circuit Court level thereby obviating the need to attend High Court hearings in Dublin. This puts such mortgages on the same footing as similar mortgages created after 1 December 2009; under the 2009 Act actions for repossession must be commenced in the Circuit Court.
The current uncertainty in relation to the remedies available to lending institutions in the case of mortgages created prior to 1 December 2009 originated in the 2011 case, Start Mortgages v. Gunn. In that case, the High Court found that the repeal of section 62(7) of the Registration of Title Act 1964 in the Land and Conveyancing Law Reform Act 2009 had the unintended consequence in certain cases of restricting lending institutions from exercising their repossession rights. The judgment in this case has been appealed to the Supreme Court.
And while later High Court judgments in similar cases appear to have limited the potential impact of that judgement, the resulting uncertainty is undesirable and this legislation confirms the simple point that the law in force prior to commencement of the 2009 Act on 1 December 2009 should continue to apply to mortgages created prior to that date.
Mortgages provide lending institutions with security for their loans. This is a centuries old principle and is the basis of all mortgage law.
The Land and Conveyancing Law Reform Act 2009 was the result of a joint law reform project undertaken by my Department and the Law Reform Commission. It repealed about 150 pre-1922 statutes, the earliest of which dated from the late 13th century, and replaced them with updated provisions. The statutory provisions in relation to mortgages, which had been contained for the most part in the Conveyancing Acts 1881 to 1911, were repealed and replaced by the provisions set out in Part 10 of the 2009 Act.
Chapter 3 of Part 10 of the 2009 Act contains provisions relating to the obligations, powers and rights of lenders. Section 96 of the Act confirms that these apply in the case of mortgages created after the commencement date, i.e. 1 December 2009.
As regards mortgages created prior to that date, the joint project proceeded on the basis that the law applicable on the date of their creation would continue to apply by virtue of section 27 of the Interpretation Act 2005. Section 27 provides, inter alia, that where an enactment is repealed, the repeal does not “affect any right, privilege, obligation or liability acquired, accrued or incurred under the enactment”.
However, in the Start Mortgages case, which I mentioned earlier, the High Court interpreted this provision of the Interpretation Act in a manner which restricts the application of the law in force prior to 1 December 2009 to certain cases where default had occurred prior to that date and demand for repayment had also been made before that date. As I said earlier, a Supreme Court appeal is pending in that case.
Put simply, section 1 of this Bill does nothing other than restore the position intended by the Oireachtas when enacting the 2009 Act.
I would, at this juncture, like to comment on certain ridiculous claims which I understand have been made in the media about the effect of this Bill. It has been brought to my attention that a statement was made on a well-known radio show to the effect that the passing of this Bill would result in the eviction of some 300,000 people from their homes. I am at a loss to divine where this figure of 300,000 comes from as it appears to have been plucked out of the air and has no basis in reality.
Let me make it plain, I do not believe, as has been suggested, that this Bill will ‘open the floodgates’ for repossessions. The Bill merely reinstates the legal right of lenders in pre-2009 mortgages to go to a court, as a last resort, to repossess mortgaged properties where there has been a major default by a borrower. As I have repeatedly said, it was never the intention, under the 2009 Act that this right would have been compromised by the legislation; but arising from the manner in which provisions in the Interpretation Act 2005 have been interpreted in certain court cases, this is in fact what happened. It is, therefore, necessary for the Oireachtas to take the measures provided for in Section 1 of the Bill to rectify the situation.
This Government views repossession of a family home or a principal private residence as a last resort after all other avenues to resolve the mortgage difficulties have been tried but have failed. It is clear from the Central Bank Code of Conduct on Mortgage Arrears that there are serious procedures and timelines to be worked through between lender and borrower before any question of an action for repossession arises and the Personal Insolvency legislation provides for an personal insolvency arrangement in which it should be generally possible for debtors to remain in their family homes. I should add that, even where the point of a court action for repossession of a person’s home is reached, this Bill makes very specific provision for a ‘late intervention’ safeguard for borrowers by allowing for an adjournment for the parties to investigate the alternative of a Personal Insolvency Arrangement.
As public representatives we know that people in mortgage arrears are already under tremendous stress. I think that it is unfortunate, to say the least, that scaremongering of the type we recently witnessed on the radio show referred to can be aired unchallenged. It is all too easy for people to make political or emotive capital out of the terrible circumstances in which many people with serious indebtedness problems find themselves.
The Bill also provides, in Section 2, for the adjournment of actions for repossession in cases involving a borrower’s principal private residence where the court considers that the matter could be resolved through recourse to the mechanisms set out in the Personal Insolvency Act 2012. This provision is in line with the commitment I gave in the course of discussions on the Personal Insolvency Bill last year.
One of the main priorities of this Government is to deal with the problem of unsustainable personal debt. When I took office as Minister for Justice in March 2011, it became clear that little work had been undertaken to reform or modernise the law relating to bankruptcy and insolvency despite the enormous financial difficulties being experienced by so many people.
The introduction of a modern, practical and humane insolvency and bankruptcy process, through the Personal Insolvency Act, and the establishment of the Insolvency Service of Ireland, were necessary priorities in our path to recovery and growth.
I believe that the three new insolvency arrangements, offered through the Insolvency Service, will be of substantial assistance to thousands of individuals and families. The new arrangements have the capacity to provide a path back to sustainability for those crippled by unsustainable debt. In particular, they provide fair and equitable solutions for those who have no prospect of repaying their debt.
This Government believes that it is important that all households can contribute to our economic recovery and that all those presently affected by unsustainable debt have real hope for the future. Under the new arrangements, people will be given the opportunity to start again relieved of the financial pressure of unsustainable debt.
Nobody in this House can be unaware of the issues that arise where repossession proceedings relate to family homes. It is an emotive and sensitive topic and one which I, and the Government, have given extensive consideration to in formulating this short Bill.
That is why, in the course of preparing the Bill, I sought and obtained Government approval for the inclusion of provisions which are set out in section 2 and which will allow a court to adjourn repossession proceedings in such cases in order to explore whether a Personal Insolvency Arrangement (PIA) under the Personal Insolvency Act 2012 would be a more appropriate and acceptable alternative to repossession.
Provisions of the Bill
In line with the aim of the Bill which I set out earlier, Section 1 seeks to ensure continued application of certain repealed provisions of the Conveyancing Acts 1881 to 1911 and the Registration of Title Act 1964 to mortgages created prior to 1 December 2009, the date on which the repeals took effect on commencement of the Land and Conveyancing Law Reform Act 2009. As I said earlier, the intention is to remove the uncertainty which has arisen in relation to lending institutions’ remedies in certain cases of default.
Subsection (1) provides that the section shall apply to mortgages created prior to 1 December 2009, the date on which the 2009 Act came into operation. Mortgages created after that date are subject to the 2009 Act’s provisions.
Subsection (2) provides that the statutory provisions referred to in subsection (6), which were repealed by the 2009 Act, may be invoked or exercised by a person as if those provisions had not been repealed in the 2009 Act.
While the High Court judgment in the Start Mortgages case dealt specifically with the unintended effects of the repeal of section 62(7) of the Registration of Title Act 1964, the opportunity is being taken, on the advice of the Office of the Attorney General, to make it clear that relevant mortgage-related provisions in the Conveyancing Acts 1881 to 1911 will continue to apply to pre-1 December 2009 mortgages.
Subsection (3) provides that provisions which were amended by the 2009 Act may be invoked or exercised by a person as if those provisions had not been amended in the 2009 Act. These statutory provisions shall apply to mortgages created prior to the commencement of the 2009 Act notwithstanding their amendment by the 2009 Act.
Subsection (4) is a ‘without prejudice’ provision which provides that subsections (1) to (3) do not affect the ability of any person who is in a position to rely on other rights or entitlements to exercise those rights or entitlements. In short, a lender that is already in a position to seek and obtain repossession within the limits of the Start Mortgages judgment will not be affected by the provisions contained in subsections (1) to (3).
Subsection (5) provides this section does not apply to any proceedings already before the courts. This is in compliance with the ‘separation of powers’ principle in our Constitution.
Subsection (6) is an interpretation section which contains relevant definitions.
Section 2 provides that in repossession proceedings involving a principal private residence, a court may, where it considers it appropriate or on application by a borrower, adjourn the proceedings to enable the parties to consider whether a Personal Insolvency Arrangement (PIA) under the Personal Insolvency Act 2012 would be a more appropriate alternative to repossession.
The intention behind the provision is to ensure that lending institutions do not resort to repossession proceedings without considering the PIA option under the 2012 Act.
Subsection (1) makes it clear that the provision relates only to principal private residences. These include family homes under the Family Home Protection Act 1976 and shared homes under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 applies.
Subsection (2) allows the court, either of its own motion or on the application of a person, to consider an adjournment, for a period of 2 months, to enable the parties to explore the possibility of a Personal Insolvency Arrangement as an alternative to repossession.
Subsection (3) outlines certain matters the court may take into account in its consideration of an application for adjournment. These include whether the borrower has engaged in a process relating to mortgage arrears, whether payments have been made by the borrower in the preceding 12 months, whether the matter has been adjourned previously and the conduct of the parties to the mortgage in seeking to resolve issues concerning arrears on the mortgage. Bad faith on the part of either party may be taken into account by the court. If, for example, either the lender or borrower has not engaged meaningfully in attempts to resolve the arrears, that matter can be taken into account by the court.
Subsection (4) provides that at the end of the adjournment period the court may grant a further adjournment if it considers that progress has been made in preparing a PIA.
Subsection (5) provides that the court may adjourn a case to a different venue within the relevant circuit in order to meet with the time period of 2 months provided for in subsection (2).
Subsection (6) provides that the section will apply to mortgages created both before and after the coming into operation of Part 10 of the 2009 Act (1 December, 2009).
Subsection (7) contains relevant definitions.
Section 3 provides that in the case of mortgages in respect of principal private residences which were created prior to 1 December 2009, repossession proceedings must be commenced in the Circuit Court. This means that such cases must be commenced in the Circuit Court irrespective of the date of creation of the mortgage.
However, in order to avoid legal challenges in respect of proceedings which have already been commenced, subsection (4) provides that where other such proceedings relating to the enforcement of a mortgagee’s rights have been commenced in the High Court but have not yet been determined, then notwithstanding subsection (2) proceedings for repossession of a principal private residence may be taken in that Court.
This provision will help to avoid the risk of enforcement proceedings being taken in two separate courts simultaneously which would lead to increased costs for the parties concerned.
Section 4 of the Bill is a standard provision containing the short title and a commencement provision in relation to section 2.
Cathaoirleach,
This Bill is a short but important Bill. It restates the law that has existed over the centuries which enables a lending institution to rely on its security in relation to a mortgage. Section 1 does nothing more than restore the position intended by the Oireachtas when enacting the 2009 Act. Section 2 seeks to ensure that where repossession proceedings concern a principal private residence, full account is taken of the alternative options now available under the Personal Insolvency Act 2012. In addition, section 3 provides that repossession actions in respect of principal private residences must, following the coming into force of the section, be commenced in the Circuit Court.
This Bill will restore legal certainty, promote utilisation of the options available under the personal insolvency legislation and enhance protection levels for borrowers’ homes. On this basis, I commend the Bill to the House.
ENDS