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knowledge 8 May 2023 |

Court of Appeal clarifies further advances are captured by liens over Land Registry property

Introduction

The Court of Appeal has clarified that certain registered liens over Land Registry property continue to secure further advances.  This reverses an earlier decision of the High Court and, while something of a niche issue, it is an important clarification for lenders, loan purchasers and credit servicing firms dealing with secured property.

Background

Historically, an informal method of creating security over Land Registry property was for the property owner to deposit a “land certificate” with a lender.  Land certificates (and this method of creating security) were abolished by the Registration of Deeds and Title Act 2006 (the “2006 Act”).  The 2006 Act allowed a three-year transitional period (expiring 31 December 2009) during which a secured lender could register a statutory lien with the Land Registry to replace the deposit of land certificate. 

While somewhat historic, these arrangements are still relevant today as evidenced by the Court of Appeal’s recent judgment (reversing earlier High Court judgments) in Promontoria (Oyster) DAC v Fox & anor.1

The Court of Appeal was asked to consider two appeals relating to the High Court’s refusal2 to grant well charging orders to Promontoria over Land Registry properties in respect of which Promontoria held registered liens (pursuant to an earlier loan sale). The complicating factor in Promontoria’s application was that the original lender had advanced new monies (which Promontoria argued were secured by the lien) after the date on which the lien was registered.

Question considered by Court of Appeal

Pilkington J considered only one question in her Court of Appeal judgment:

“The specific question for determination in the present proceedings is whether a creditor can rely on a registered lien as security for further advances to a debtor, i.e. as security for additional loans advanced after 31 December 2009. The legislation is silent on this point…”.3

Like the High Court, Pilkington J’s judgment focuses on the legislative intention of the 2006 Act in abolishing land certificates and allowing for the registration of liens in their place.

Pilkington J agreed with the High Court that the legislative intention was to move towards a universal land registration system.  However, based on detailed analysis of the relevant legislation, she ultimately reversed the decision of the High Court and held:

“After 2009 the only way to create security is by charge as it is no longer possible to create a lien. But it does not follow that existing liens cannot secure advances after 2009…

In my view additional monies advanced subsequent to the date of the registration of`the liens as burdens on the relevant folios and after the time fixed for registration of those liens on 31 December 2009, in compliance with the terms of s.73 of the 2006 Act, can be, and, if agreed by the parties, are secured by the registered liens.”4

Conclusion

The outcome of this judgment should provide welcome clarification to lenders, loan portfolio purchasers and credit servicing firms who continue to rely on registered liens as security over Land Registry property.

Also contributed to by Jack Cullen

  1. [2023] IECA 76.
  2. Promontoria (Oyster) DAC v Fox [2022] IEHC 97 and Promontoria (Oyster) DAC v Lynn  [2022] IEHC 99
  3. Paragraph 46 of the Court of Appeal’s judgment (quoting the High Court judgment).
  4. Paragraphs 67 and 76 of the Court of Appeal’s judgment.

This document has been prepared by McCann FitzGerald LLP 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.