Dermot Ahern (Louth, Fianna Fail)

The third group of amendments relates to Part 7 of the Bill dealing with appurtenant rights, that is, rights that permit one landowner to do something on a neighbour's land, or entitle that landowner to prevent the neighbour from doing something on that neighbour's land.

The amendments to section 33 arise from discussions on the acquisition of easements by means of the doctrine of lost modern grant. Following a review of the relevant provisions, an element of flexibility currently available under lost modern grant is re-introduced.

The proposed new subsection (3) to be inserted in section 33 by amendment No. 33 provides that where the relevant user period was not immediately before the commencement of the action to establish the existence of the easement, the court may none the less make an order declaring the existence of the easement if it is satisfied that it is just and equitable in all circumstances of the case. This will permit the court to have regard to factors such as long use of the easement, even if that use has been discontinued prior to commencement of the action. The purpose of amendment No. 34 is to clarify the provision relating to incapacity.

Amendment No. 38 makes it clear that the adjoining owner may apply to the court for an order requiring that any damage be made good if the building owner fails to do so within a reasonable time. Alternatively, if the building owner fails to reimburse the costs and expenses of doing so within a reasonable period, the adjoining owner may recover the costs and expenses as a simple contract debt. This provision received some discussion in the Dáil.

Amendments Nos. 39 and 40 substitute revised text for sections 46 and 47, which deal with the enforceability of freehold covenants. Amendment No. 41 makes it clear that a person may apply for a court order in respect of freehold covenants which were entered into before, as well as after, the commencement of the legislation. The purpose of the new section 42(4), to be inserted by amendment No. 43, is to provide that any orders made by the court under this section to discharge or modify a freehold covenant are registered in the Land Registry or Registry of Deeds, as appropriate. This will ensure that any intending purchasers of the land will be aware of changes made under such an order to covenants affecting the land.

The fourth group of amendments relates to Part 9, dealing with mortgages, and Part 10, dealing with judgment mortgages. The effect of the changes to section 86(2) in amendment No. 59 is that any attempt to mortgage land by any method other than a charge by deed shall not create a legal mortgage. The advantage of this approach is that it will greatly simplify the law by requiring a charge by deed for all legal mortgages of land. An exception to this rule is made in the new section 86(3) for transactions under a statutory provision.

Amendment No. 62 provides a new text for section 89 which deals with restrictions on consolidation. Regarding amendment No. 63, concerns were expressed to my Department that the original scope of section 91 was too broad and might have unintended consequences. The intention behind this section is to put into statutory form the right of a borrower, not a lender, who may be facing financial difficulty to seek a court order to sell the mortgaged property to reduce his debts or to prevent them from mounting further. The text has been redrafted to make this clearer. In addition, a new section 89(4) has been added which will mean that except in the case of a housing loan mortgage, this section will take effect subject to the mortgage. These changes address the concerns which had been raised about the original text of this section.

The purpose of the amendments to Chapter 3 is to strengthen protection for borrowers with a housing loan mortgage. Under current law, the rights of borrowers are subject to the express terms of the mortgage. If a mortgage deed contains express provisions with enhanced powers for the lending institution, protection for the borrower is reduced and the impact of statutory protections is weakened.

The revised text of the section on powers and rights generally, as amended by amendment No. 64, makes it clear that the statutory powers and rights of lending institutions set out in Chapter 3 of Part 9 will apply in full to housing loan mortgages, irrespective of any other powers and rights included in the mortgage by the lending institution. In other cases, such as commercial developments where very large sums may be involved, it will remain possible to include express provisions which override the statutory provisions. It is usual in such cases to have professional support and advisers to ensure that the mortgage deed fully reflects the intentions of the parties. Amendment No. 67, which deletes subsections (3) to (6) of section 94, and amendments Nos. 72 and 73, which replace the text of section 97 and insert a new section 98, respectively, contain related changes.

The most significant change here is the new provision in amendment No. 72, which provides that the power of sale will in future be subject to obtaining a court order. It is a rather curious anomaly of current law that a court order is required to obtain possession of property with a view to selling it, but the power to sell can be exercised without such an order. In practice, a lending institution will find it very difficult to sell residential dwellings without vacant possession and this means that a court order for possession is generally sought in advance of sale. I am also including a provision in section 97 requiring that consent be given within the seven day period prior to the taking of possession or within the seven day period prior to exercise of the power of sale, as the case may be.

Amendment No. 67 deletes subsections (3) to (6) of section 94, which give the court a wide margin of discretion to adjourn proceedings where a lending institution is seeking an order for possession of mortgaged property. These subsections reappear in the new section 98. In that section, the scope of these subsections is extended to cases in which the lending institution is seeking an order for the sale of the property. The new section 98 gives the courts discretion to adjourn proceedings, or to attach conditions to any order it may make, where an order for possession is sought under section 94 or an order for sale under section 97.

I have been concerned for some time that certain lending institutions appear to be commencing proceedings for the repossession of dwellings on a routine basis in the High Court rather than the Circuit Court, and that this is deterring the borrowers in question from defending the proceedings and benefiting from the margin of discretion which the courts have in such proceedings. I have particular experience from my constituency about this. This practice has been condemned by the Master of the High Court. Before he said anything in public, I had asked my officials to look at this issue as I am aware of a number of cases involving people who should not have been given a loan and were refused by the main banks, but who went to what are known as sub-prime lenders. The sub-prime lenders gave them the money and the people ultimately defaulted on their payment for relatively small amounts of money, and ended up with a High Court summons. That is grossly unfair, so I asked my officials to bring in an amendment making it a requirement that proceedings for repossession by lending institutions have to be commenced in the Circuit Court, rather than in either court. Several High Court judges also expressed their dismay in cases where borrowers do not make an appearance and enter a defence.

People from outside Dublin are reluctant not to respond to a High Court summons. Bringing them before the Circuit Court is a bit closer to home and might cause some embarrassment to them, but to be fair to the media and to the county registrars and the judges who operate this in the Circuit Court, there is an understanding that these are difficult cases and little publicity is given to them. I urge that this continue.

In future, it will be obligatory for lending institutions to commence repossession proceedings in the case of housing loan mortgages in the Circuit Court rather than the High Court. Proceedings for repossession other than those relating to housing loan mortgages may continue to be taken ab initio in the High Court. This change will encourage borrowers who are experiencing genuine difficulties in keeping up with their mortgage repayments to enter an appearance and benefit from the margin of discretion and flexibility which the courts exercise in this area. The purpose of all these amendments is to strengthen consumer protection.

The existing text section 104(1), dealing with the appointment of a receiver, refers back to provisions in section 97(1) and this has caused some confusion. Amendment No. 78 drops the cross-reference to section 97. Amendment No. 84 rearranges the contents of subsections (1) and (2) of section 110 to clarify their meaning.

Part 10 of the Bill, dealing with judgment mortgages, replaces with substantial modification the provisions of the Judgment Mortgage (Ireland) Acts 1850 and 1858. Senator Norris spoke yesterday about the Enforcement of Court Orders Bill. I gave an example where I registered a judgment mortgage when I was in practice, and he was delighted with the interesting aspect of that. A creditor who has obtained a judgment against another person will have to apply to the Property Registration Authority to register a judgment mortgage against that person's estate or interest in land.

It is intended to drop section 112 which had provided for an update of section 4 of the 1850 Act. On further reflection, this provision is no longer required and the 1850 Act is repealed in its entirety in Schedule 2. To avoid any misunderstanding, the revised text of section 113(1), inserted by amendment No. 88, makes it clear that a creditor who has obtained a judgment against another person has to apply to the Property Registration Authority to register a judgment mortgage against that person's estate or interest in land. The existing wording could be misinterpreted to mean that the registration could be affected without application to the authority. Amendment No. 89, which replaces the existing text of section 114, incorporates a cross-reference to section 29 of the Bill into section 114(1) of the Bill. This will alert a judgment mortgagee to the fact that the application must be made under section 29 rather than section 114 in the case of co-owned land.

The fifth group of amendments inserts a new part into the Bill to make provision for the registration of a lis pendens. It updates and streamlines several provisions which are contained in statutes dating back to the 19th century and facilitates the repeal of those provisions. The existing section 121 of the Bill makes provision for the protection of purchasers where registration of a lis pendens has not taken place. It has become apparent since the Bill was published that the general law in this area is confusing and needs to be codified. Codification has an added advantage of facilitating the repeal of various provisions in statutes dating back to 1844, 1867 and 1871. The new section 117 contains the relevant definitions.

Section 118 makes provision for keeping the register, which is already maintained in the central office of the High Court. Under section 118(4), a lis pendens already registered under the 1844 Act and not vacated when this legislation comes into force will continue to have effect as if the 1844 Act had not been repealed. It will be deemed to form part of the register to be maintained under section 118(1). This will avoid the Courts Service having to re-enter it in a new register. Section 119 allows for the cancellation of an entry in the register, while sections 120 and 121 permit the court to vacate an order under certain conditions. Section 122 contains the provision which is currently in section 121.

The sixth group of amendments deals with miscellaneous matters. Senators will be aware of the difficulties being encountered in the retail sector as a result of the current economic circumstances. The practice of including upward-only rent review clauses in commercial leases, which has become commonplace, has not arisen from any legislative requirement. Parties have always been free to agree that more neutral review clauses should be included in their leases. Even where upward-only review clauses are provided for, the parties can agree that a flexible approach should be taken to the amount of rent payable and the way it should be paid. The advice of the Office of the Attorney General suggests it would be problematic, if not impossible, to interfere in a wholesale way with existing lease agreements. In consequence, the amendment that was introduced deals with rent review clauses only in the context of future leases. Accordingly, leases entered into prior to the commencement of section 131, or indeed, agreements for such leases, will not be subject to the new regime. By virtue of that regime, future rent review clauses will be subject to the construction that the rent payable on review may be fixed at an amount which is less than, greater than or the same as the amount payable immediately prior to the date on which the rent falls to be reviewed. This applies even if such a clause were to be couched in terms of upward-only movement. Amendment No. 105 to section 122 addresses the concerns raised in the Seanad about the abolition of a sheriff's powers to seize a tenancy. The Irish sheriffs association has expressed concerns about the proposal to abolish the seizure power. These concerns are shared by the Revenue Commissioners. When officials from my Department met representatives of the sheriffs association and the Revenue Commissioners to discuss the situation, it emerged that the seizure power is still used in the case of business tenancies where the objective is not to sell the leasehold itself but to occupy the premises for the purposes of selling the stock. This means they do not have to move the stock to other premises for a salvage sale. Amendment No. 105, therefore, proposes to retain the seizure power in the case of business tenancies.