Maria Curran: Safeguarding principal private residences
Fieldfisher solicitor Maria Curran and trainee Hugh O’Neill consider how protections for borrowers facing possession proceedings have been increased.
The Land and Conveyancing Law Reform (Amendment) Act 2019 was signed into law last month by President Michael D. Higgins and is due to commence before the start of the next Circuit Court term.
The aim of the 2019 Act, which amends the Land and Conveyancing Law Reform (Amendment) Act 2013, is to provide further protections for homeowners in mortgage arrears who are faced with possession proceedings in respect of their principal private residences.
Position until now
Under section 2 of the 2013 Act the Court has the discretion to adjourn possession proceedings of its own motion if it considers it appropriate to do so (section 2 (2)(a)). Further, under section 2 (2)(b), the Court has the power to adjourn the proceedings for a period of two months to enable a borrower to consult with a personal insolvency practitioner (PIP), and where appropriate to instruct a PIP to make a proposal for a personal insolvency arrangement (PIA) under the Personal Insolvency Acts 2012-2015. The Court in considering an application under section 2(2) (b) of the 2013 Act shall have regard to the following:
- Whether the borrower has made any payments to the lender in respect of monies advanced on foot of or secured by the mortgage in the past 12 months and, if so, the amount of any such payments, the number and frequency of such payments, and the proportion which the amounts paid bear to the amount of any regular payments which the borrower was required to make under the terms of the mortgage;
- Whether the proceedings were adjourned on any previous occasion at the request of the borrower, and, if so, the number of any such adjournments and the period of such adjournments and the reasons for such adjournments;
- The conduct of the parties to the mortgage in any attempt to find a resolution to the issue of dealing with arrears of payments due on foot of the mortgage; and,
- Whether, having regard to the circumstances of the case, the application for an adjournment appeared to the Court to be primarily for the purpose of delaying the progress of the proceedings.
New considerations to be taken into account by the court
While the provisions of the 2013 Act are maintained, the aim of the 2019 Act is to broaden the Court’s discretion when deciding whether to make an Order for possession in respect of a borrower’s principal private residence or to adjourn the proceedings to allow a borrower more time to consult with a PIP.
Section 3 of the 2019 Act is the key section which inserts a new section 2A into the 2013 Act. Section 2A applies in the following cases:
- where the Court of its own motion has adjourned proceedings under section 2 of the 2013 Act but no PIA has been brought about, or
- where the Court refused to adjourn proceedings based on an application under section 2(2)(b), or acceded to an adjournment, and no PIA has been implemented;
- where, prior to or following the commencement of the proceedings, the borrower has engaged the services of a PIP to assist in the resolution of his or her mortgage arrears problem however no PIA has been effectuated; or
- the borrower has participated in good faith in a designated scheme.
Under the 2019 Act, the Court must take into account a range of new factors when considering whether or not to grant an Order for possession in respect of a borrower’s principal private residence and may take these factors into account when considering whether to make any other order it considers appropriate in the circumstances. The specific factors to be considered are as follows:
- Whether the making of the Order would be proportionate in all the circumstances, taking into consideration the total amount that remains to be paid to the lender on foot of the mortgage, the amount of arrears of payments due on foot of the mortgage, and the advised market value of the principal private residence on the date on which proceedings were commenced;
- The borrower’s circumstances and those of his/her dependants (if any) in respect of whom the property the subject of the proceedings is their principal private residence;
- Whether the lender has informed the borrower of the terms on which it would be prepared to settle the matter to allow the borrower and his/her dependants to remain in the property;
- The details of, and responses to, any proposals put forth by the borrower to enable him/her and any dependants to remain in the property, including any proposal for participation by the borrower in a designated scheme (such as the Mortgage to Rent scheme) or to secure alternative accommodation; and
- The conduct of the parties to the mortgage in seeking to find a resolution to the arrears.
While many of the “new” considerations introduced by the 2019 Act are ones which are already considered by many County Registrars and Judges in the Circuit Courts around the country, the 2019 Act introduces additional safeguards to a borrower’s principal private residence and places additional value on the personal circumstances of the borrower and their family as well as the conduct of both parties in attempting to come to a resolution.
It is important that any lender seeking to enforce a mortgage is mindful of the provisions of the 2019 Act when progressing possession proceedings before the Courts, particularly where the response of the lender to proposals from borrowers and the conduct of the lender in seeking a sustainable solution with the borrower will come under the spotlight.