Ceann Comhairle,
I move that the Bill be read a second time.
This is a very short Bill the key purpose of which is to restore our law on aspects of repossession to where it was intended to be under legislation, enacted in 2009 and sponsored by the-then Fianna Fáil Minister for Justice. The Land and Conveyancing Law Reform Act 2009, while introducing major reforms in the law, intended also to save certain provisions of old legislation in relation to repossessions under pre-2009 mortgages. But, in the case of Start Mortgages V Gunn, Judge Dunne in the High Court determined that this saver did not have the intended legal effect. As a result there is now an uncertainty in relation to the law on repossessions in relation to pre-2009 mortgages and the removal of this uncertainty is the main purpose of the short Bill before the House this evening.
For a lender to seek a court order to repossess the home of a mortgagor who has defaulted in repayments should be a last resort, where all other avenues to resolve the arrears situation have been exhausted. However when the recourse to court action for repossession becomes absolutely necessary, it is also absolutely necessary that our legal system provides, and is seen to provide, processes which work properly to give effect to a lender’s age-old right to repossess where there is serious default. In passing the Land and Conveyancing Law Reform Act 2009, it was always the intention of the Oireachtas to ensure that our legal system did in fact provide for this.
The primary purpose of the 2006 Bill, which became that 2009 Act, was to introduce major reform and modernisation of our land and conveyancing law. Part 9 of the Bill contained proposals to simplify the law relating to mortgages, especially mortgages on unregistered land and clarified the respective rights of borrowers and lenders and was generally intended to strengthen the rights of borrowers while safeguarding a lending institution’s right to protect its security.
In passing the 2006 Bill into law, the Fianna Fail led Government and both Houses of the Oireachtas clearly determined that the repossession arrangements which had existed for centuries should continue in place. Even in the later stages of the passage of the Bill, in July 2009, after it had become absolutely clear that the property bubble had burst and the Celtic Tiger had expired, when various changes and amendments were proposed by the previous Government and made to Part 9 of the Bill, nothing was done by it to alter the security of a lending institution.
However, the High Court, in 2011, decided that the law is now not as it was intended to be in the 2009 Act. There is, as one High Court Judge put it, a lacuna in the existing law and this must be corrected. The High Court interpretation has left us in a situation of doubt regarding the availability of the intended legal repossession remedies. This must be corrected simply because our legal system must provide full legal certainty in relation to the repossession rights of lenders when there is a serious default by the borrower.
I have to say that, sadly, it came as no surprise that the current leader of Fianna Fail, in his recent Ard Fheis address to the party faithful, committed his party to opposing this Bill. Essentially, what the Fianna Fail party is doing, in opposing this Bill, is opposing the reinstatement of provisions in our law that it itself, in Government, proposed, drafted and supported throughout the passage of the 2009 Act through the Oireachtas.
It is political opportunism and hypocrisy of the worst kind for Fianna Fail and Deputy Micheal Martin to oppose this Bill. It is the type of politics Fianna Fail has, over the years, specialised in but which Deputy Martin assured everyone he was abandoning. It is feigning a concern for the plight of home owners burdened by unsustainable debt, in mortgage arrears, whose difficulties Fianna Fail, in Government, ignored following the property collapse in 2007 and the fiscal and economic crisis of 2008. In this context, no one should forget that, in their fourteen continuous years in Government and, more particularly, in the 2007 to 2011 period when Deputy Martin was a senior Minister in Government, he and his Cabinet colleagues did nothing to reform our out-dated insolvency laws to assist those in unsustainable debt. Moreover, when enacting the 2009 Act, the-then Fianna Fail dominated Government failed to include in it any protective measure such as that contained in the Personal Insolvency Act for those overwhelmed by debt, at risk of having their homes repossessed and of eviction. This Bill contains such a protective measure. It is of immense importance to mortgage holders struggling under the burden of unsustainable debt that the provisions of this Bill are linked to the possibility of entering into a Personal Insolvency Arrangement and a person so indebted continuing to reside in his or her family home.
Unfortunately, we are becoming all too accustomed to this type of strategy from a Fianna Fail party which presents with political amnesia with regard to its period in office as it desperately tries to persuade or seduce the Irish people into believing that it should, at some future time, be again elected to Government and entrusted with stewardship of the Irish economy. Deputy Martin, in his disingenuous Ard Fheis critique of this Bill, dishonestly engaged in a game of political charades and attempted a confidence trick at the expense of those for whose indebtedness he and his party are substantially responsible as a result of their cataclysmic failure in Government. And this is the man who promised constructive opposition.
On this particular Bill, no credibility should be given to any commentary by Fianna Fail either inside or outside this House. I have great confidence that the Irish electorate will see through the type of self-serving politics currently practiced by Fianna Fail. Deputy Martin, having asserted he would no longer engage in a parliamentary Punch and Judy show, presented himself on this issue last Saturday in the guise of Pinnochio.
As I said, it is clear that the intention of the Oireachtas, during the passage of the 2009 Act, was to ensure that our legal system had repossession processes in place. However, the High Court interpretation of the legislation enacted in 2009 has left us in a situation of doubt in this regard. The main purpose of the legislation before the House this evening is to restore the position to where the law intended it to be.
In addition to correcting the legal uncertainty to which I have already referred, this Bill will ensure that, in any future repossession proceedings concerning a borrower’s principal private residence, the court may adjourn proceedings so that a proposal for a Personal Insolvency Arrangement (PIA) may be fully explored as an alternative to repossession. This will mean that lending institutions will not be allowed to proceed directly to the repossession stage without first engaging in good faith in the alternative measures provided for in the Personal Insolvency Act 2012. Where they do not do so, they will know that, should they seek to repossess a family home, the court may adjourn court proceedings to enable the possibility of the difficulties being resolved by the conclusion of a Personal Insolvency Arrangement.
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, which I mentioned earlier. In this case, the High Court found that the repeal, in the 2009 Act, of section 62(7) of the Registration of Title Act 1964 in the 2009 Act had the unintended consequence in certain cases of restricting lending institutions from exercising their repossession rights via the courts. 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 to say the least and represents, as already mentioned, a lacuna in our law. The Bill now before the House confirms the simple point that the law in force prior to commencement of the 2009 Act on 1st 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. Without lending institutions obtaining such security, loans would and could not be given for home or other property purchases. Such security is a normal part of all such loan transactions throughout the world.
The Land and Conveyancing Law Reform Act 2009 was the result of a joint law reform project undertaken by the Department of Justice 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 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 intention behind the 2009 Act was 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 both default by the borrower 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. Section 1 of this Bill, therefore, is the key provision in this context and it does nothing other than restore the position intended by the Oireachtas when enacting the 2009 Act.
As a specific ‘late intervention’ provision to protect a borrower who is in court facing a repossession action involving a principal private residence, the Bill also provides for the adjournment of the action 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 this House in the course of discussions on the Personal Insolvency Bill last year.
As I have already said the clear intention is that repossession will continue to be a last resort and so there has to be strong focus on what is done to help with and to manage mortgage defaults before repossession arises.
One of the main priorities of this Government is to put in place the best solutions we can for people living under the burden of unsustainable debt. When I took office as Minister for Justice and Equality in March 2011, it became immediately clear that little work had been undertaken to reform or modernise legislation in the areas of 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. The recent launch of the Public Information Campaign by the Insolvency Service of Ireland is another major step forward in the Government’s plan to deal with debt and to help people in distress.
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 insolvency arrangements have the capacity to provide certainty for those crippled by unsustainable debt. They provide fair and equitable solutions for those who have no prospect of repaying their debt. The guidelines on reasonable expenses provide an essential defensive shield to ensure that neither financial institutions nor other creditors attempt to deprive debtors of funds they need for reasonable household and family expenditure or deprive debtors in employment from benefitting from continuing in employment where a debt settlement or personal insolvency arrangement is completed.
Included in the Personal Insolvency Act 2012 is a specific provision for a Personal Insolvency Arrangement (PIA), involving a resolution process for secured debts up to €3.0m and any unsecured debts. There is also a provision in the Act which protects the family home of a debtor where this is possible and feasible. I should add that for debtors to be in a position to seek a PIA arrangement they must also demonstrate that they have had prior engagement with the creditors in attempts to resolve the situation under the arrears resolution process
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.
In addition to bankruptcy and insolvency reform, as deputies will know, extensive other measures are also in place including the statutory Central Bank Code of Conduct on Mortgage Arrears (CCMA) and, within that Code, the Mortgage Arrears Resolution Process (MARP). The recent Government statement on resolving the mortgage arrears crisis outlines a range of actions that have been taken, or will be taken, including the setting of time-bound targets set for the banks to make arrangements with mortgagors in default.
As the House will see, by providing a range of interconnecting measures which are well ‘upstream’ of repossession, the clear intention of the Government is that repossessions will be the last resort which I already referred to and will only be sought as such. However when repossessions are sought, as I have also said, there is a necessity that the law provides the working processes for dealing with the repossession actions.
Of course 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 inclusion of Section 2 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. Section 2 will apply only to the principal private residence of the borrower; it will not apply in relation to buy-to-let properties or commercial properties.
Provisions of the Bill
In line with the aim of the Bill as 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 2009 Act. As I said earlier, the intention is to remove the uncertainty which has arisen in relation to lending institutions’ remedies in 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 to make it clear that 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 which 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 borrower’s 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 is to ensure that lending institutions do not resort to repossession proceedings without considering the PIA option under the 2012 Act. The section will not apply to investment or commercial properties.
Subsection (1) makes it clear that the provision relates only to principal private residences. It also covers situations where the mortgage is in the name of one person only but that person has, for whatever reason, ceased to reside there and the Family Home Protection Act 1976 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 issue, that 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 significant has been made in preparing a PIA.
Subsection (5) 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 (6) contains relevant definitions.
Section 3 of the Bill is a standard provision containing the short title and a commencement provision in relation to section 2.
Ceann Comhairle,
This Bill is a short but important Bill. It will not, as erroneously and disingenuously suggested by the leader of the Fianna Fail party in his recent address at his party’s Ard Fheis, "make it easy for the banks to repossess family homes". The Bill makes it no more easy for a lender to repossess than did our law up to 2009 nor than did the 2009 legislation which was enacted during the term of the last Fianna Fail-led Government. In circumstances in which cases before the courts have raised doubts about specific statutory provisions this Bill, in Section 1, simply restates the law that has existed over the centuries which enables a lending institution to rely on its security in relation to a mortgage.
I again reiterate that home repossessions should be a last resort. Financial institutions have an obligation to engage constructively with home owners whose mortgage payments are in arrears. It is of crucial importance that they do so and that full information on the options available to them be provided to people who find themselves in such difficulties. It is also of importance that letters, sent by such institutions to indebted home owners in mortgage arrears, detail the options available to them in dealing directly with the financial institution and, where appropriate, in engaging with a Personal Insolvency Practitioner, to consider the possibility of negotiating a Personal Insolvency Arrangement. It is also of crucial importance that those in genuine financial difficulty with mortgage arrears engage with their lenders and I again encourage them to do so. 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.
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