knowledge | 7 August 2019 |

Keeping People in their Homes? New Considerations for Courts in Possession Proceedings

New legislation requires courts to take into account certain matters when deciding whether to grant a possession order to a lender in respect of a borrower’s principal private residence.

Introduction

While not as extensive as the “Keeping People in their Homes Bill” introduced by Independent Alliance Minister Kevin “Boxer” Moran in 2017 (and which did not ultimately find favour), the Government’s Land and Conveyancing Law Reform (Amendment) Act 2019 (the “Act”) is stated to implement the Government’s policy objective that repossession of a defaulting borrower’s principal private residence should remain an action of last resort. The Act was signed into law on 10 July 2019 and commenced on 1 August 2019. 

New Considerations

In addition to any other matters it considers appropriate, the matters which a court must take into consideration when deciding whether to make or refuse a possession order in respect of a borrower’s principal private residence (and may take into consideration when deciding whether to make any other order it considers appropriate in the circumstances) are:

(a) whether the making of the order would be  proportionate in all the circumstances and in respect of which the court may have regard to: 

(i) the total amount of debt outstanding on the mortgage concerned or associated loan agreement;

(ii) the amount of arrears payments due on the mortgage concerned; and 

(iii) the advised market value of the principal private residence at the date on which the proceedings were commenced;

(b) the circumstances of the borrower and his or her dependants for whom the property the subject of the proceedings is their principal private residence;

(c) whether the lender has made a statement to the borrower of the terms on which it would be prepared to settle the matter in such a way that the borrower and his or her dependants could remain in the principal private residence;

(d) details of any proposal put forward by or on behalf of the borrower either:

(i) to enable him or her, or any dependants, to remain in the principal private residence; or

(ii) to secure alternative accommodation;

(e) any response of the lender to the borrower’s proposal to remain in the principal private residence; and

(f) the conduct of the parties in any attempt to find a resolution to the borrower’s mortgage arrears.

In what Circumstances must the New Considerations be Applied?

The new range of considerations will apply in all cases in which:

(a) the court has adjourned proceedings to facilitate consultation with a personal insolvency practitioner with a view to concluding a personal insolvency arrangement in respect of the borrower (“PIA”) under the Personal Insolvency Act 2012;

(b) the court has adjourned proceedings of its own motion but there has been no resulting PIA;

(c) the court has refused to adjourn proceedings in response to a request from one of the parties, or did adjourn them, and there is no resulting PIA;

(d) the proceedings have not been adjourned but the borrower has, prior to the court hearing:

(i) participated in a good faith scheme to assist borrowers in mortgage distress to remain in their principal private residence; or

(ii) engaged the services of a personal insolvency practitioner to assist him or her to resolve his or her mortgage arrears problem and despite such engagement, there is no resulting PIA.

Scheme for Eligibility

The Minister for Justice and Equality may designate a scheme for the purposes of establishing eligibility to benefit from these new statutory obligations on the courts. The objective of any such scheme must be to provide borrowers in arrears on mortgages over their principal private residences with assistance that is reasonably likely to enable them to address those difficulties and facilitate, as far as possible, their remaining in the principal private residence. 

Conclusion

While the impact of the Act in practice remains to be seen and many of the new considerations are ones that a court already takes into account, the Act reinforces the special status of a person’s principal private residence in mortgage arrears proceedings. Lenders will need to take note and ensure that their current enforcement practices and procedures take appropriate account of that.

This briefing is for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.

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