Friday, 12 July 2013
Land and Conveyancing Law Reform Bill 2013: Committee Stage
Sinn Féin Members want to note that we still have some misgivings about section 2, particularly that subsection (2) allows a court to adjourn repossession proceedings for a period of two months to allow for the making of a proposal for a personal insolvency arrangement. We would like clarification as to what that will mean in reality. We believe a different approach is needed. We would protect the family home and establish an independent body to make banks pursue reasonable arrangements. We are looking at that again and reserve the right to table a number of amendments to section 2 on Report Stage. I will speak to the overall Bill later.
We dealt with this at length previously in the context of Second Stage. This is the section that allows the courts, where an application is made for repossession, to adjourn the proceedings so that the possibility of an individual entering into a personal insolvency arrangement can be looked at. This is a radical change to the law. There was no connectivity in the past between the court jurisdiction where an application is made to repossess a home and any possible alternative insolvency arrangement into which an individual might enter. The personal insolvency arrangement provisions in the insolvency legislation contain a specific provision to try to ensure, in the case of someone who is seriously indebted but where, by rearranging their finances, they can be put back into some sort of economic health over a period of years, that their family home or principal private residence could be protected in the context of any appropriate arrangement that might be entered into between a debtor and creditors with the assistance of a personal insolvency practitioner. When that legislation went through the House I said that when we dealt with this Bill, I would provide the connectivity between the two. This does that. It allows initially for a two month adjournment of the repossession proceedings to examine the practical possibilities of a personal insolvency arrangement being put in place and if, after the two month period, some work has been done on that and it appears that it could be feasible, there would be a further adjournment, and the legislation does not specify the length of that adjournment.
This is designed to ensure debtors can avail of this as a last resort if they are confronted by repossession but it is also designed to encourage those in debt and creditors to use the mechanisms under the insolvency legislation before anyone embarks on repossession proceedings in respect of an individual's family home.
This is very important reform. When the original legislation was enacted in 2009 it was not envisaged any change was being made to the law; it was assumed with regard to pre-2009 mortgages the law would continue as it had been in the preceding centuries. The technical issue which arose as a result of the judgment delivered in the Start Mortgages case has resulted in us having to bring forward this legislation. It has also given us the opportunity to provide for very important reform designed to ensure where an individual or family is in financial difficulty and the difficulties include mortgage arrears, and where it is possible financially over a period of time to resolve these arrears through concluding a personal insolvency arrangement, that homes will not be repossessed. Obviously where there is no possibility of entering into a personal insolvency arrangement the ordinary rules which apply to the recovery of a home in circumstances where it has been used as security for borrowings will be applied by the courts. I hope that rather than Members of the House having any difficulty with the provision, it will be very substantially welcomed.
I outlined on Second Stage some of our issues with this and our main concern is fact there is no incentive for the banks to engage with the personal insolvency process in a fair and reasonable manner prior to seeking repossession. The code of conduct is skewed against the mortgage holder and there are insufficient protections for families who are in the most distress. Neither is there sufficient scope in the Bill for judges to assess whether the banks are being reasonable in their assessment of cases. The Bill should be part of the solution and not the problem. Once again the Government has left the power in the hands of the bankers and we will table amendments on Report Stage.
Government amendment No. 1: In page 6, between lines 7 and 8, to insert the following:"Provision in respect of certain proceedings4. (1) Where after the coming into operation of this section a mortgagee commences proceedings seeking possession of land in which they rely upon the statutory provisions or the amended provisions, the proceedings shall be deemed to be commenced within time for the purposes of section 9 of the Civil Liability Act 1961 where the conditions specified in subsection (2) are met. (2) The conditions referred to in subsection (1) are that--(a) prior to the coming into operation of this section the mortgagee had commenced proceedings seeking possession of land relying on the statutory provisions or the amended provisions, (b) the proceedings concerned were commenced within the time limit applicable for the purposes of section 9(2) of the Civil Liability Act 1961, (c) the proceedings concerned were not determined before the coming into operation of this section, (d) the mortgage concerned was created prior to 1 December 2009, (e) the land the subject of the proceedings referred to in subsection (1) is the same land or a part of the same land as the land the subject of the proceedings referred to in paragraph (a).(3) Subsection (1) shall only apply to proceedings issued within 6 months from the coming into operation of this section. (4) In this section-- "Act of 2009" means the Land and Conveyancing Law Reform Act 2009; "amended provisions" means section 62(2) and (6) of the Act of 1964 as those provisions stood immediately prior to the coming into operation of section 8(1) and Schedule 1 of the Act of 2009; "mortgage" has the same meaning as it has in the Conveyancing Act 1881; "mortgagee" includes a person deriving title from a mortgagee and a receiver appointed by a mortgagee; "statutory provisions" means sections 2 and 18 to 24 of the Conveyancing Act 1881, sections 3, 4 and 5 of the Conveyancing Act 1911 and section 62(3), (7) and (8) of the Act of 1964.".
This is a technical amendment in which I seek to address a particular issue raised in submissions to the Department. It was submitted the possibility existed that proceedings against the estate of a deceased person, which had been issued prior to the Dunne judgment but had not been determined and were adjourned with liberty to re-enter pending the outcome of the appeal of that case would not be saved under section 1(5) of the Bill if the proceedings must be reissued following enactment. This potential difficulty arises from the provisions of section 9(2) of the Civil Liability Act 1961, which states no proceedings shall be maintainable in respect of any course of action whatsoever that has survived against the estate of a deceased person unless either proceedings were commenced within the normal limitation period and were pending on the date of death or are commenced within the normal limitation period, or within two years after death, whichever period first expires.
This issue has been discussed extensively with the Office of the Attorney General and the conclusion is there is need to make provision in the Bill for this situation. Amendment No. 1 therefore inserts a new section into the Bill, which addresses the issues raised regarding estates of deceased persons. Subsection (1) provides that where a repossession proceeding is commenced after the coming into operation of the section this proceeding will be deemed to be within time for the purpose of section 9 of the Civil Liability Act 1961 where the conditions outlined in subsection (2) satisfied.
Subsection (2) outlines the conditions which would allow the proceedings to be considered to be within the time limit specified in the Civil Liability Act. These are that proceedings had been commenced prior to the commencement of the section; that the proceedings were initially commenced within the time period specified in the 1961 Act; that the proceedings were not determined; that the mortgage was created prior to 1 December 2009; and that the land in the proceedings under subsection (1) is the same land in the proceedings mentioned in the proposed subsection (2)(a). Only where all five of these conditions are met will a derogation under subsection (1) apply. I am providing pursuant to subsection (3) that this derogation from the time limits to the 1961 Act will only apply to proceedings issued within six months from the coming into operation of the section. Subsection (4) is a standard provision relating to certain definitions used in the section.
I move amendment No. 2:
I will not push the amendment to a vote today but I would like the Minister to consider it, and my plan is to re-submit next week on Report Stage. In a nutshell, there seems to be a problem in that it is far too easy for a bank or building society to repossession a family home. The rules existed eight or ten years ago when things were crazy and the banks were throwing out money willy-nilly and people got into trouble. Much has changed since then, and the Minister knows well thousands of home owners have their backs to the wall and are doing everything possible to try to deal with the banks or building societies. There is also a percentage giving the two fingers to the banks but I do not speak for them. I am speaking for the genuine hard-pressed people who, perhaps because they have lost jobs, their income has been reduced or where there was two incomes there is now one, they are pulling out their hair trying to negotiate with the banks.
In page 6, between lines 7 and 8, to insert the following:"Power of Court to determine the rejection of a proposal for a Personal Insolvency Arrangement as unreasonable4. (1) Where in an application by a mortgagee for repossession of a property to which section 2(1) applies, a proposal for a Personal Insolvency Arrangement made pursuant to section 98(1)(c) of the Act of 2012 which included the debt of the property had been rejected by reason, in whole or in part, of a vote by the mortgagee at a creditors meeting held pursuant to section 109 of the Act of 2012, the Court shall, with the consent of the mortgagor, direct the Personal Insolvency Practitioner concerned to provide to it a report in writing which shall include the content of the proposal, and any amendments made thereto, for a Personal Insolvency Arrangement.(9) A copy of the Personal Insolvency Practitioner's report together with any responses received and any Order made under this section shall be provided to the Insolvency Service of Ireland.".
(2) The Personal Insolvency Practitioner shall cooperate in providing the written report to the Court within a period prescribed by the Court to be not more than 2 months. In making the report to the Court under this section the Personal Insolvency Practitioner shall provide an opinion as to whether the rejection by the mortgagee of the proposal for a Personal Insolvency Arrangement was reasonable.
(3) In providing an opinion pursuant to subsection (2) the Personal Insolvency Practitioner shall have regard to whether the proposal of a Personal Insolvency Arrangement constituted an offer to repay an amount, whether on a restructured basis or not, equal to the current value of the property and any other matter considered relevant by the Personal Insolvency Practitioner having regard to his or her experience in the proposing of Personal Insolvency Arrangements.
(4) The Court on receipt of the written report from the Personal Insolvency Practitioner shall cause to be made available to the mortgagor and to the mortgagee a copy of the report and shall provide a reasonable period of time for any response in writing to be provided by either party such period not to exceed one month.
(5) On receipt of any response provided by the parties the Court shall proceed to fix a date of a hearing for the purposes of determination by the Court of the reasonableness or unreasonableness of the rejection by the mortgagee of the mortgagor's proposal for a Personal Insolvency Arrangement.
(6) Any creditor being the subject of the proposal for the Personal Insolvency Arrangement shall be notified in advance of the hearing and shall, on request, be provided with a copy of the report of the Personal Insolvency Practitioner and any responses provided by the mortgagee or mortgagor and shall be entitled to make submissions at the hearing under this section.
(7) In determining whether or not the rejection of the proposal for a Personal Insolvency Arrangement was reasonable or unreasonable the Court may have regard to the following matters:(a) the report of the Personal Insolvency Practitioner and any responses received by the mortgagee or mortgagor;(8) If the Court determines that the mortgagee's rejection of the proposal for a Personal Insolvency Arrangement was unreasonable the Court may do any one or more of the following:
(b) the submissions of any creditor;
(c) whether the proposal of the Personal Insolvency Arrangement constituted an offer to repay an amount, whether on a restructured basis or not, equal to the current value of the mortgaged property;
(d) the housing needs of the mortgagor and his or her dependants;
(e) the conduct of both parties including the conduct of the mortgagee in underwriting the loan/s secured by the mortgage;
(f) any other circumstances or matters that the Court considers relevant.(a) adjourn the application for repossession for such time as is necessary to enable the mortgagor make another proposal for a Personal Insolvency Arrangement and for a vote on such proposal to be taken pursuant to section 109 of the Act of 2012;
(b) stay the coming into effect of the Order of repossession for a period not exceeding 24 months;
(c) without prejudice to the Courts discretion as to any order for costs it might make order that the mortgagee pay the costs or part costs of and incidental to the following, such costs to include the reasonable costs of the Personal Insolvency Practitioner:(i) the making of the proposal for a Personal Insolvency Arrangement;
(ii) the application for the Order of repossession;
(iii) the hearing under this section.
I am much older than some Members of the House and I have been dealing with banks since I was 17 or 18 years old and I have never seen them as intransigent and difficult than they are now. There is a reason for this, but a distinction must be made between commercial debts and second homes and apartments and genuine family homes. This is why I strongly feel the banks' powers have in no way been diminished in the past four or five years. When the Bill was originally planned the landscape was better for borrowers. As the Minister is aware this has completely changed, and we can blame governments or international trends for this.
This side of the House is deeply concerned the power of the banks, even today, is far too great to the detriment of the customer doing his or her best. The purpose of the amendment is to give greater leverage to the borrower and court system. If one goes to court against the banks very little by way of defence is available. I believe that at least 70% of what happened in the bubble, the property boom and the crash lies at the door of the banks and the regulator and we must be cognisant of this. Were it not for the Dunne case, which is now under appeal, many more repossessions would have taken place. It is disenchanting and difficult for the ordinary people who have a roof over their heads. In a case of repossession involving children the family must be rehoused by the local authority.
We should make no excuse for giving powers to the court in some instances to tell parties they must return in 18 months or two years, after sitting down with the customer and doing everything humanly possible to defer the debt. Nothing has changed in the past four or five years. In the same way as was done by the previous Ministers with responsibility for finance and justice, the banks are being empowered to the disadvantage of the unfortunate customers who find themselves in negative equity and arrears and not in a position to pay.
I have great sympathy with the amendment proposed by our colleagues and I welcome a full debate on it on Report Stage. There is considerable concern over the veto banks and lenders have both in the insolvency legislation and in the mortgage arrears resolution process. For example, in the updated MARP, a tracker mortgage may be withdrawn when a bank has made a proposal that it considers to be reasonable and affordable to the borrower. The determination as to what is reasonable and affordable rests with the lender and there is no independent arbitrator to determine whether an offer that has been made is reasonable and affordable.
As somebody who has worked for many years in the area of housing, I am well aware that we have been hearing a very distinct change in the rhetoric from the banks in recent months. It is an aggressive rhetoric that is epitomised by the observations of the CEO of Ulster Bank when talking about the category of borrowers he determines as "those who won't pay". None of us would stand over those borrowers who will not pay. However, from my personal experience, I have no doubt that the proportion that is suggested as in the category of "won't pay" is a gross exaggeration of what is happening in the real world. I have a very serious concern over the lack of an independent arbitrator, ombudsman or some mechanism either through the courts system or the creation of an independent body. To give the kind of confidence that people deserve to have in the process and to restore confidence in the banks and the legal system, there must be some recourse to the courts or to an independent ombudsman. I do not believe the final decision should rest with a lending institution.
On many occasions I have congratulated the Minister on introducing the personal insolvency legislation. Having listened to him on many occasions, I know he believes that the existence of the personal insolvency legislation will encourage banks to behave in a reasonable fashion in order to avoid persons entering into the personal insolvency process. However, as he knows, a person wishing to avail of the insolvency process must demonstrate that he or she has co-operated with the MARP. The determination of whether someone has co-operated rests with the lending institution.
I reiterate that far too much power rests with the lending institutions. Section 2 of the Bill before us provides that the court can determine whether a mortgagor has participated. That is the kind of change I would like to see permeated through all the provisions relating to mortgage debt.
My colleague mentioned the importance of the principal family home. I have made this point on a number of occasions and it is worth making again. The Governor of the Central Bank, Professor Honohan, has indicated that he does not foresee many principal private residences being repossessed. However, one in five families is living in a rented home and in Dublin it is one in three. There is a very significant cohort, 30,000, where mortgages are in arrears. Families in those homes stand to have their homes repossessed through the process without any MARP or other safeguards being put in place for those families.
I generally agree with what has been said. It is good that Senator O'Donovan notes that there was a kind of consensus between the banks and Fianna Fáil when it was in government. However, that is just being followed through with this Government. There is a very cosy relationship with the banks which are being given preferential treatment. It is a disgrace that the Government has not stood up to the banks after we pumped so much money into them and the Bill must be opposed.
I agree with everything Senator Hayden has said, but if she votes for the Bill she is making herself out to be a complete hypocrite because she is not standing on her principles.
It is very disingenuous to make those very valid points but then to support the Bill. The reality is that the Government has not grasped the dire situation in the market. One in four households, 180,000 in total, is in mortgage distress. These are real families who need to be taken care of and it is our job, as legislators, to ensure they are taken care of. There is no point in making heartfelt speeches and then supporting a Bill that will hammer them once more.
The banking veto is disgraceful and puts people under more pressure. As Senator Hayden mentioned, we have called for an independent body that would force the banks to accept reasonable arrangements on a case-by-case basis. We must oppose the Bill if we are to do the right thing by the people. We need to stand up for the people and oppose the Bill.
Senator O'Donovan's amendment is certainly worthy of consideration and I am sure we can have a frank and honest debate on Report Stage. I do not necessarily believe in the blame game although history and the facts will speak for themselves. We are here to try to do a job and try to have balanced and constructive debate. The contributions by and large are balanced and constructive. Ultimately, we need to have an effective working banking system while at the same time protect as many people as possible and keep them in their homes. The amendment is worthy of consideration, perhaps on Report Stage. I did not have a chance to study it ahead of coming in here because I was asked to do this at the last minute. Having reviewed it and listened to Senator O'Donovan's contribution, I have no doubt the Minister will reflect on it positively.
I wish to clarify in case there is any misunderstanding of what I said. This has been the case for decades if not hundreds of years. The problem is probably far more acute now because of the crash, but in reality we are dealing with a David and Goliath situation with the banks in the role of Goliath. They have a powerful legal system of barristers and lawyers behind them and a wonderful background team. I regard the Government through the Minister for Finance or the Minister for Justice and Equality as the middleman or referee to ensure fair play. Historically, whereas I would agree, I do not think there is any collusion between the current Government or a previous government with banks - that is a load of rubbish. The problem is that the Goliath has the power and strength. There is a duty on the Government and the regulator to ensure that the David gets some fair play, regardless of whether it is a rental situation or an unfortunate householder. The ongoing David and Goliath battle is probably now more acute because of the recession. That battle was ever there - the banks were always too powerful.
I know the Minister was not in the Chamber. I will reiterate some of the points briefly. I said that I felt the timing of the legislation was unfortunate for a number of reasons that I will not outline again. I am not like King Canute. I do not believe we can turn back the tide. We need a functioning mortgage market and a functioning banking system. This is a technical amendment relating to a bank or any other lender being able to rely on a mortgage document. Let us not lose the run of ourselves completely. On Second Stage I said that it is by and large a technical amendment, mistimed unfortunately owing to the lack of confidence in the banking system among the general public.
However, it is a necessary amendment. It is important that we have a functioning mortgage market, which we do not have at present.
Amendment No. 2 seeks to rewrite provisions in the Personal Insolvency Act, which is not the purpose of this Bill. The House should be aware that the protection to mortgage proposed by this Bill is to require the court to allow for a personal insolvency regime to be considered where, for example, none previously had been attempted, as with the requirement now in bankruptcy petitions, not that the court should direct first to a new personal insolvency arrangement and effectively determine its outcome, as is suggested in this amendment. Once the PIA proposal has been rejected by the creditors' meeting and no subsequent proposal is made during the protective certificate period, the personal insolvency practitioner's role as a mediator and negotiator for the debtor ends. It should also be noted, however, that where a proposal is rejected at a creditors' meeting and where the protective certificate period is still extant, this does not stop a personal insolvency practitioner from making a different proposal that creditors might accept. Therefore, once a proposal has been rejected and where there is no other proposal that can properly be made within the timeframe, the personal insolvency practitioner has no standing whatsoever in the repossession process and the law does not provide for the court to appoint him or her as an officer essentially to force a settlement on creditors, as such a practitioner cannot do that.
The amendment ignores the fact that the personal insolvency legislation is designed to allow agreed settlements to be reached as an alternative to court-ordered settlements. This amendment would overturn this carefully calibrated approach. In addition, the proposed provision that a proposal should only offer to repay the current value of a property would represent a huge interference in commercial contractual and property rights and is likely to be subject to swift challenge in the courts. Furthermore, it makes no reference to the repayment capacity of the debtor, which it appears essentially would be determined by the current value of the property. This would have obvious negative consequences for banks, other financial institutions and ultimately taxpayers in the country. The amendment could encourage delinquent behaviour on the part of all debtors, nearly 90% of whom are repaying their mortgages in order to get their mortgages reduced to present value. This would result in a serious risk of complete collapse in the property market and would threaten the solvency of the financial institutions and of the economy. In case there is any misunderstanding, I do not look favourably on the amendment.
Finally, this amendment would run the risk of turning every proposal for a PIA into a costly preliminary to repossession proceedings. I am conscious of the contributions all Senators have made, but they essentially are about reopening a debate we had on the insolvency legislation, and I will not do that. That legislation is now in place and is about to be implemented. Let us see how it works in practice. I reiterate what I said in this House and elsewhere previously - that, should there prove to be difficulties, we will address them if necessary.
I remind Senators that the provision in this Bill has the added value of seeking to encourage financial institutions to engage with debtors where there is some realistic prospect of matters being resolved and where the financial circumstances of the debtor give rise to a reasonable possibility of a personal insolvency arrangement. If a financial institution fails to do so, for example, and takes repossession proceedings, section 2(3)(d) is of importance. In considering how to proceed and whether to ultimately order repossession or whether to adjourn proceedings, one of the issues the court must have regard to is, as Senator Hayden mentioned, the conduct of the parties to the mortgage in any attempt to find a resolution to dealing with the arrears of payment due on foot of the mortgage. Without the enactment of this legislation there have already been cases in which the courts have adjourned repossession proceedings and encouraged parties, including financial institutions, to engage to resolve issues in which it looked as if there was a practical possibility of financial issues being resolved without the need for the court to make a repossession order.
Clearly, if a person who owned a family home was in financial difficulties and a repossession application was made to the court, and if it was clear that the person had funds out of which mortgage repayments could be made that were reasonable and realistic in the current environment, and the financial institution had refused entirely to engage with the person, under that provision it is inevitable that the court would adjourn the proceedings and would not grant repossession, and the financial institution would be required to engage. It would not be required to reach agreement but it would be required to engage, and the essence of engagement is that there is ultimately an agreed solution. If there is not, somebody in financial difficulties has another remedy, which I will not go into now because I do not wish to turn the debate on this Bill into a reopening of every section of the insolvency legislation.
I wish to propose a new section for consideration by the Minister on Report Stage. It arose out of the very interesting discussion we had with the Minister of State, Deputy Kathleen Lynch, on the last day. It is some measure of protection for those for whom a rented property is their principal private residence. I gather this market has been increasing extremely rapidly and they face the problem of receivers. I will come to what I have in mind shortly.
We will probably have to recapitalise the banks. I do not see a change in corporate culture. I wish I did, but I am afraid that is the situation. I am slightly worried to see in the briefing document we received that the repossession rate is too low, at 0.3%, when it should be 3.5%. There is some reference from the IMF to the need to strengthen the efficiency of the repossession regime. That is a totalitarian type of language. It refers to a more efficient way of getting people out of their houses. Contracts must be valid. With regard to tracker mortgages, if banks made a mistake, it is a binding contract and they should not try to inveigle people to depart from a contract which was legally entered into.
I am worried about situations in which receivers take possession of a block of houses and attempt to change the conditions under which those for whom the house is their principal private residence have been paying rent and so forth, and try to force them to leave, or increase rents. In my view, what they buy is a lot of rent books, an income flow and a set of duties and obligations to maintain the property and so forth. That is binding. It shows the indifference to the tenant that a different landlord has now bought it, regardless of whether the previous landlord went broke. I am trying to protect the tenant. In countries such as Switzerland and Germany there is a much higher proportion of rented properties. Ireland was traditionally an owner-occupancy society but the renting percentage is high in Dublin and particularly high in Galway. These people face pressures when the properties are sold.
We had a discussion about this with the Minister of State, Deputy Kathleen Lynch. If I had not been so involved in the debate about whether we should have a Seanad, I would have tabled an amendment on Committee Stage, but it does arise from the last debate. I wish to table one on Report Stage for the Minister's consideration. It would be a new section and would provide that where the property being repossessed is the subject of a residential tenancy, the protections afforded to tenants under the Residential Tenancies Act 2004 must be complied with by the financial receiver and that the receiver must comply with all legal obligations of landlords under that Act. Apparently this has become a problem where properties are sold on. It is the principal private residence for the tenant and in countries such as Germany, the tenant, under different lease arrangements, would have anticipated living there for 40 years, but they come under pressure from a different landlord to get out or to have their rents increased. Perhaps the Minister would consider some form of protection for them.
I realise what happens when there is a bank boom. The rough estimate is that in a period when incomes doubled property rose by 500%, so it was bound to catch people in the type of situation the Minister is now dealing with.
I greatly admire how the Minister transferred insolvency from the courts to an arbitration procedure. We have had several long evenings of debate and he was always willing to accept our amendments.
Unfortunately, insolvency is another part of this disastrous period in banking and I fear that the banks have not changed their corporate culture. I wish to give notice that I shall think of, file and submit an amendment for Report Stage to take account of insolvency. An insolvency programme will become more important and it already is with bodies like Threshold and New Beginnings. I hope that the Minister will consider my amendment on Report Stage.
- Ivana Bacik
- Paul Bradford
- Terry Brennan
- Colm Burke
- Deirdre Clune
- Paul Coghlan
- Martin Conway
- Maurice Cummins
- Michael D'Arcy
- John Gilroy
- Jimmy Harte
- Aideen Hayden
- Fidelma Healy Eames
- Imelda Henry
- Lorraine Higgins
- Caít Keane
- Denis Landy
- Marie Maloney
- Mary Moran
- Tony Mulcahy
- Michael Mullins
- Catherine Noone
- Susan O'Keeffe
- Pat O'Neill
- Jillian van Turnhout
- John Whelan
- Katherine Zappone