Alice O’Connor: Judgment mortgages – can you sever a joint tenancy?
Alice O’Connor, associate at William Fry, considers a recent ruling with significance for debtors who own joint properties and creditors seeking to enforce against jointly owned property.
In the recent case of ADM Mersey PLC v Bergin and Another  IEHC 3, the High Court ruled on the effect of a judgment mortgage over land in cases where the land is held as a joint tenancy and where the judgment mortgage is only in respect of one joint tenant and not both.
In this case, a father and son were registered as joint tenants of lands in Kilkenny. In 2010, ADM Mersey PLC obtained judgment against the son and his wife for approximately €600,000 and registered its judgment against the son’s interest in the lands in Kilkenny. In 2013, the father amended his will to leave his interest in the Kilkenny lands to his two grandchildren.
Following this, the father and son severed their joint tenancy so that they would now hold their interest in the Kilkenny lands as tenants in common. In this case the intention behind the conversion into a tenancy in common was to put the father’s interest in the Kilkenny lands beyond the reach of his son’s creditors. This intention was openly acknowledged by the father’s solicitor in evidence to the Court.
The father died in August 2018 and so, as per the rules governing tenancies in common, the father’s interest in the Kilkenny lands was inherited by his two grandchildren.
In seeking to enforce the judgment mortgage ADM Mersey PLC argued that it was irrelevant whatever was done with respect to the interests in the Kilkenny lands after the judgment mortgage had been registered (i.e. the conversion from a joint tenancy to a tenancy in common). They argued that given the position when the judgment mortgage was registered, the son now should own the entirety of the Kilkenny lands, and their judgment mortgage should be in respect of the son’s entire interest in the Kilkenny lands – ignoring the two grandchildren’s purported interest in the Kilkenny lands altogether.
Joint tenancy v tenancy in common?
If parties hold their interest in a property as joint tenants and one of the parties subsequently dies, the remaining parties automatically inherit the deceased’s interest in the property by survivorship.
However, if parties hold their interest in a property as tenants in common and one of the parties subsequently dies, the remaining parties will not inherit by survivorship. The deceased’s interest in the property will be left in accordance with the terms of the will (or as per the rules of intestacy if there is no will).
What happens if a judgment mortgage is registered pre-change of interest?
In his decision Mr Justice Allen stated that there was “nothing whatsoever wrong” with the father seeking to put his interest in the Kilkenny lands beyond the reach of ADM Mersey PLC. He held that the judgment mortgage only attached to the son’s interest as a tenant in common in the Kilkenny lands and did not attach to grandchildren (formerly the father’s) interest.
Allen J. made a number of points:
- the judgment mortgage registered by ADM Mersey PLC against the son did not affect the interest of the father, who was at that time a joint tenant;
- the judgment mortgage did not attach to the Kilkenny lands, but only to the son’s interest in the lands;
- the judgment mortgage did not sever the joint tenancy but neither did it affect the right of the father to sever the joint tenancy, or the right of the son to consent to such a severance or to agree to a severance;
- the 2013 deed executed by the father and son to sever the joint tenancy was effective; and
- ADM Mersey PLC’s judgment mortgage only attached to the son’s interest as a tenant in common in the Kilkenny lands and did not attach to grandchildren (formerly the father’s) interest.
This decision is of importance to not only debtors who own joint properties, but also to creditors seeking to enforce against jointly owned property.
It clarifies the law in relation to the effect of a voluntary severance of a joint tenancy following the registration of a judgment mortgage against the interest of one joint tenant only.
A joint tenancy may be severed despite the registration of a judgment mortgage against one of the joint tenants prior to such a severance. The effect of this is to allow the joint tenant, who does not have a judgment mortgage registered against his / her interests in a property, intentionally move his / her interests out of reach of the judgment mortgage creditor.