Mortgages

Mortgage

Security for lending over real property which permits the mortgagee to repossess the property in the event of default.

Negative Equity

Someone borrows 400k secured by a mortgage.

Value of the property drops to 300k and the property is in negative equity because the value is less than the debt secured on it.

Conveyance of fee simple subject to proviso for redemption

Pre-LCLRA 2009 Mortgage

- Property would be transferred to the mortgagee and then once the mortgage was redeemed, the Mortgagor could receive the title.

Date for redemption had to be in the contract.

Very common for a property to be mortgaged numerous times, ie. to fund renovations, all mortgages thereafter would need to be equitable.

s 62 Registration of Title Act 1964

Pre-LCLRA 2009 Mortgage

Legal charges replace mortgages re. registered land.

Charge certificate was only issued upon registration.

More streamlined way of acheiving the result - only applied to registered land.

s 89 (1) / (2) LCLRA 2009

Legal mortgage can only be created by a charge by deed

Old forms of mortgage would not be effective to create a legal mortgage

Mortgage of an Equitable Interest

if someone holds 50pct of the interest which they contributed to the purchase price, they can only create an equitable mortgage.

This is because their interest is equitable.

Failure of Formailities

means of creating an equitable mortgage

Contract for a mortgage may result in the creation of an equitable mortgage.

Deposit of Title Deeds

means of creating an equitable mortgage.

see Fullerton v Provincial Bank of Ireland and O'Keefe v Russell.

s 73 Registration of Deeds and Title Act 2006

Abolished issuance of land and charge certificates, existing ones ceased to have effect unless registered within three years.

Protections for the Mortgagor

- Unfair Terms in Consumer Contract Regulations 1996

AIB v Counihan confirmed applicability in Irish law.

National court will make it's own assessment on the fairness of the term - per Aziz.

ICS Building Society v GRant

Lands purchased by the defendant for future development.

Lands were valued in some documents as high as 1.1mm, and the defendant continued to borrow against the land.

Property prices collapsed and the properties were reposessed and sold for just 350,000.

Mortgagor claimed the sale discharged him of the debt.

Court held that sale did not discharge him of an undertaking in his name.

PTSB v Mallon

Important distinction between core and non-core terms in Irish law.

Condition 7 of their mortgage agreement stated that the total debt should become immidiately payable to PTSB if the mortgagor defaults in the making of two monthly payments

Contested that the terms of the loan facility violated the Unfair terms in consumer contracts regulation 1995.

The appellants were served a notice of their obligations, and signed that they had received independent legal advice pertaining their mortgage, meaning that they could not plead that the terms were unfair.

Grant v County Registrar for Laois

Loan agreement between the Plaintiffs and Notice party (Pepper finace) stipulated that the lender could demand early payment of the principal and accrued interest in the event that there was a late payment.

Plaintifs pleaded that this was an unfair term.

Held a registrar or circuit court judge has a duty to scrutinise the terms, per Aziz.

Code of Conduct on Mortgage Arrears 2013

Central Bank Act 2013 set out a code of conduct for lenders.

Mortgage Arrears Resolution Process is required for all borrowers in arrears for their primary residence.

Lender should be flexible and clearly communicate.

Borrower should give notice of arrears/pre-arrears.

there should be alternative repayment options.

three-month moratorium on repossession proceedings.

Stepstone Mortgages v Fitzell

Clear evidence that the lender had not followed the Code of Conduct on Arrears.

Lender had not considered alternative repayments w/ the borrower.

Laffoy J held that if there was non-compliance and the mortgagee came to court seeking repo/sale but could not show compliance - the court could refuse to grant the relevant order

Strong judicial support for the code - would be paired back however.

Irish Life and Permanent v Duff

Some oscillation on the courts after fitzell.

Hogan J followed Laffoy J in Fitzell.

Questioned whether or not it was for a court to decide which repayment option was suitable.

Irish Life and Permanent v Dunne

NB Moratorium Period

Court had to answer whether or not the Fitzell approach to the code was correct.

Supreme Court took a more compromising approach

SC noted that if the code had the effect suggested in Fitzell then in every case where there was a legal dispute between a borrower and a lender, the court would be forced to assess compliance.

Moratorium section of the code was held to be clear and binding.

However, nothing on alternative payments should be enforceable through the courts.

Place of the oirechtas to recalibrate the law.

Nothing in the code that distinguishes the mortatorium period being more important but the court elevated it.

Consumer Protection Code 2012

Warnings are provided to all borrowers by lenders on the nature of the lending, the interest rate, and the consequences of going in to arrears.

Assessment of suitability will be given to the borrower from the lender.

Stress-Testing borrowers income on a 2pct interest rate rise

Property will be rigorously valued. `

Bank of Ireland v Quinn

Defs argued contract did not comply with regulations in s30 of the consumer credit act.

Loan should have been struck out as unenforceable.

If lenders do not follow steps in the code, should they be allowed to take enforcemnt action?

Case did not resolve this question of law. Judgment mortgage was enforced?

Dellway Investments v NAMA

defining the equity of redemption - Finnegan J held:

A mortgagor's interest in the mortgaged property is the equity of redemption, the right at any time to redeem the mortgage.

Any express stipulation in a mortgage which is inconsistent with the right of redemption is void. A mortgage may not be made irredeemable, nor can the right to redeem be limited to particular persons or to a particular period'

the essence of what is being used as security in a subsequent mortgage is the equity of redemption.

the law protects the equity of redemption vigorously and courts scrutinise postponement of redemption vigorously.

Postponement of the right to redeem

Guarantees the mortagor's interest.

Position of the courts is that if a postponement of redemption is such as to render the equitable right to redeem ilusory, they will not enforce the postponement.

Biggs v Hoddinott [1898] 2 Ch 307

Mortgage in question could not be redeemed for five years

Romer J held that this provision was not problematic or oppressive in a 5 yr postponement.

If postponement was too large or for other reasons oppressive, then it would be a different scenario.

Fairclough v Swan Brewery Co Ltd [1912]

Concerned a 20 year leasehold estate, but redemption could not take place until 6 weeks before the estate was due to expire..

too oppressive - Court.

Knightsbridge Estates Trust v Byrne

Postponement period in the context of a commercial agreement for a mortgage

Mortgage could not be repaid for 40 years, and set an interest rate at 5.5pct

Was 40 years too long?

Court emphaised it was a commercial contract.

Held it appropriate to hold the parties to their agreement.

Held it would not be unreasonable.

Collateral Advantages

term which is contractually bundled up with the agreement but independent of the core mortgage.

Mortgagee acuires the right of somethign more than the repayment of capital / interest

Biggs v Hoddinott (Collateral advantages))

Mortgagor was required to buy alcohol for their hotel from the mortgagee.

Lender was a vendor of alcohol and used the contract as a guaranteed market for their product.

Chitty LJ - Reasonable bargain between two business persons.

Noakes & Co v Rice

Mortgage granted over a pub.

Mortgagee/Lender was a brewer and the Mortgagor agreed over the duration of the mortgage to sell exclusively the lender's beer regardless of whether or not the mortgage was up.

Court held - Mortgage is security for repayment and once the mortgage is paid, the mortgagor is entitled to the property free of any clauses. - Collateral advantages cannot persist after redemption

Browne v Ryan

Irish Authority - same position as Noakes.

"When a transaction appears, or has been declared to be

a mortgage...the mortgagor is entitled to get back

his property as free as he gave it, on payment of

principal, interest, and costs, and provisions

inconsistent with that right cannot be enforced."

Options to Purchase

Right for a mortgagor to purchase some property from the mortgagor, or the property itself which is security

Much like postponements, courts are more flexible.

Krelinger v New Patagonia Meat and Cold Storage

Mortgagor was restrained from selling sheep skins to anyone but the Mortgagee without paying a commission to the mortgaee.

Condition of the loan but did not interfere with Equity of Redemption.

Because this was a commercial agreement, it was allowed.

Dellway re. options to purchase

If the mortgage gives the mortgagee an option to purchase the term, it is void even if not oppressive to the mortgagor.

Cityland and Property Holdings Ltd v Dabrah

Case concerns unconsionable interest rates

Loan of 2,900 which cost 4,900 to pay off.

Cost of paying off the loan was out of proportion to all rates.

Secured Property Loans v Floyd (First Irish case)

Owner of a pub took out a 1 year loan secured by the pub with the aim of clearing her tax liabilities.

Loan was 125,000 at 19.1pct APR.

Mortgage agreement should have been unenforceable according to the plaintiff, because of the rate.

Held there was no evidence brought to bring this to Irish law.

BOI Mortgage v Cody [2021] IESC 26

Case concerned the family Home Protection Act 1976

Appellant was an innocent party to lending and argued that the lender failed to establish that security could be created.

argued they did not have the express and informed consent of Ms. Cody.

Held that the lender's proofs were limited and straighforward,

registration, debt, and default.

Fraud cannot defeat a lender's prima facie entitlement to a plenary hearing.

AIB v DX and TX

Vunerable man took out credit facility from AIB.

Parents guaranteed child's loan

argued rate and lending was unconsionable.

Held to be no moral impropriety.

S 97 LCLRA 2009

Authorises mortgagee to repossess property with court order

Holohan v Friends Provident.

Court held that the mortgagee has a duty of reasonable care to ensure the property is advertised and the best possible price at the time of sale is sought.

Silven Properties v Royal Bank of Scotland.

No duty of care for the mortgagee to await better market conditions before executing sale of repossessed property .

Quennel v Maltby

Mortgagee's power to repossess can only be used in good faith.

IN this case, it was used to remove a tenant.

Can only be used to realise the security

Four Maids v Dudley

Right to possession arises as soon as the ink dries on the mortgage agreement.

Irish Life v Dunne

Repossession does not violate inviolability of the dwelling in Art 40.5 Bunreacht na hEireann.

Equitable maxim on power balance between mortgagor and mortgagee

"necesitious men are not truly speaking free men and to answer a present exigency, will submit to any terms that the crafty may impose upon them"

acknowledge mortgagee is more necesitous.

s 107 LCLRA 2009

Statutory provision for the appointment of a receiver.

s 108 / 109 LCLRA 2009

Receiver can manage the property to pay down relevant debts

Receiver has a duty to maintian the property - but need not make positive improvements.

Downside Nominees v First City Corp.

Recognised a duty on the part of the receiver - an equitable duty to act in good faith.

ss 19 / 20 Conveyancing Act 1881

Mortgagee's Power of Sale