LENDERS BEWARE


A lot of confusion for Lenders surrounds the recent judgments in the cases of Start Mortgages Limited & Others v Gunn & Others and Tom Kavanagh and Fergus Lowe v Jeremiah Lynch and St Angela’s Student Residents Limited. Both of these judgments deal with the repeal of what are vital legislative provisions by the Land & Conveyancing Law Reform Act 2009 (“the 2009 Act”).

Start Mortgages & Others v Gunn & Others

The judgment of Ms Justice Dunne in this case was delivered on 25 July 2011. All these cases involved Lenders who were trying to recover possession of properties and defendants who had been in default of payments on foot of their mortgages. The relevant statutory provision is Section 62(7) of the Registration of Title Act 1964 which is used to recover possession of registered land and which was repealed by the 2009 Act. Although four associated cases were heard at the same time the facts for each case were different as some of them involved demands which were made for payment before 1 December 2009 and some involved demands which were made after 1 December 2009. This was the date on which the Land & Conveyancing Law Reform Act 2009 came into operation.

Ms Justice Dunne referred to the fact that in each case the mortgage contained a covenant for payment by the borrower and each provided that the monies remaining unpaid by the borrower to the Lender and secured by the mortgage would become due and payable on demand on the occurrence of default. The mortgage then provided that the Lender could enter into possession of the mortgaged property and would have the statutory powers conferred by the Conveyancing Acts. It was accepted that if the Lenders in each of the cases could not rely on the provisions of Section 62(7) there was no real basis upon which an order for possession in a summary manner could be made.

She was of the view that a Lender had not acquired a right to apply for an order under Section 62(7) unless the principal monies had become due and that only occurs after demand has been made. If the principal monies had become due by 1 December 2009 following a demand then there was no bar to a Lender bringing proceedings to recover possession of lands.

Her findings can be summarised as follows:

1. Proceedings which were commenced prior to 1 December 2009 could be continued after that date.

2. Proceedings could be instituted after 1 December 2009 provided that the Lender had acquired the right to apply for an order pursuant to Section 62(7) by 1 December 2009. The lender will not have acquired this right unless the principal monies secured by the mortgage have become due. The principal monies do not become due until there has been a default or other events have occurred and a demand for repayment of the principal monies has been made.

3. If the demand for repayment was made after 1 December 2009 the lender had not acquired a right to apply for an order pursuant to Section 62(7).

There is no doubt but that this judgment puts both Lenders and Receivers of registered land who are unable to gain possession in an extremely difficult position where the demand for payment was not made until after 1 December 2009. It is important to note that the judgment does not affect unregistered land nor should it affect Statutory Receivers appointed by Nama who may recover possession under the Nama Act 2009 independently of the 1964 Act.

Tom Kavanagh and Fergus Lowe v Jeremiah Lynch and St Angela’s Student Residents Limited.

This case looked at the repeal of the Conveyancing Act 1881 (the 1881 Act)by the 2009 Act. Judgment was delivered by Ms Justice Laffoy on 31 August 2011. The Plaintiffs in this case were Receivers appointed by lending institutions. Proceedings were brought against the defendants on the basis that the defendants were preventing them from obtaining possession and receipt of the rents and profits of the property. The defendants contended that the receivers had not been validly appointed. Ms Justice Laffoy stated that the repeal of the relevant provisions i.e. Section 15 to 24 of the Conveyancing Act 1881 by the 2009 Act did not have the impact which was alleged by the defendants. She stated that in construing the extent of the mortgagee’s rights and powers, one must read into the mortgage and conditions the relevant provisions of the 1881 Act where they have been referred to in the relevant mortgage instrument.

She stated that there was clear distinction between the impact of the repeal of Section 62(7) of the 1964 Act and the impact if any of the repeal of the 1881 Act.

This judgment will certainly provide a relief to lenders who are concerned that the decision in the Start Mortgages v Gunn case affected their ability to appoint a receiver pursuant to the 1881 Act. It appears that if a mortgage expressly refers to the powers in the 1881 Act that these powers are enforceable by a mortgagee notwithstanding the repeal of the sections of the 1881 Act by the 2009 Act.

Conclusion

It is vital now that the position of both Lenders and Borrowers are clarified. This clarity would be best provided by legislation and it is hoped that this will be addressed urgently.

Jackie Buckley
Hayes Solicitors