Amendment No. 1 has been ruled out of order as it is in conflict with the principle of the Bill as read a Second Time.
Land and Conveyancing Law Reform Bill 2013: Report and Final Stages
Amendment No. 1 not moved.
Amendments Nos. 2 and 4 are related and may be discussed together by agreement.
I move amendment No. 2:
In page 4, to delete lines 3 to 5 and substitute the following:
"2. (1) This section applies to land which is the principal private residence of—
(a) the mortgagor of the land concerned, or
(b) a person without whose consent a conveyance of that land would be void by reason of—
(i) the Family Home Protection Act 1976, or
(ii) the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010.”.
Section 2(1) defines the scope of the section. It currently covers land which is the principal private residence of the mortgagor or a person whose consent for a conveyance would be required under the Family Home Protection Act 1976. On Committee Stage, I undertook to broaden the scope of section 2 to cover the shared homes of civil partners under the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010. The purpose of amendment No. 2, therefore, is to put family homes under the 1976 Act and shared homes under the 2010 Act on the same footing under section 2 of the Bill. Amendment No. 4 is a purely drafting amendment designed to improve the introductory wording of section 2(2).
Amendment agreed to.
Amendments Nos. 3 and 5 are related and may be discussed together.
I move amendment No. 3:
In page 4, to delete lines 6 to 17 and substitute the following:
"(2) In any proceedings brought by a mortgagee seeking an order for possession of land to which the mortgage relates in a case to which this section applies, and where no previous engagement with a personal insolvency practitioner has taken place the court, shall:
(a) adjourn proceedings for a period of at least six months;
(b) instruct the mortgagor to consult with a personal insolvency practitioner with a view to the making of a proposal for a Personal Insolvency Arrangement;
(c) instruct the personal insolvency practitioner to make a proposal for a Personal Insolvency Arrangement under the Act of 2012; and
(d) instruct the mortgagee to cover the initial costs of the personal insolvency practitioner from its own resources, including any costs arising from consulting with the personal insolvency practitioner with a view to making an application for a personal insolvency agreement and any costs resulting for the mortgagee rejecting a proposal from the personal insolvency practitioner.".
I apologise on behalf of Deputy Pádraig Mac Lochlainn who tabled the amendment. He was unable to attend because he is chairing a meeting of the Joint Committee on Investigations, Oversight and Petitions.
The purpose of amendment No. 3 is to ensure that where a bank seeks repossession of a property, the court must insist that the borrower seek the services of a personal insolvency practitioner and that a proposal for a personal insolvency arrangement be made to the lender. This would mean a repossession could not be made prior to the involvement of the personal insolvency service. It would also ensure that the bank would bear any initial costs that arise in the course of making such an agreement.
Amendment No. 5 is a straightforward proposal to change the period of the adjournment from a maximum of two months to a minimum of six months.
As I have previously stated, the intention behind section 2 is to provide that a court may, of its own motion or on request, adjourn proceedings to allow a personal insolvency arrangement to be considered where, for example, none had previously been attempted, as with the requirement in bankruptcy petitions. The purpose is to make an appropriate link with the insolvency provisions contained in the 2012 Act. In contrast, what amendment No. 3 seeks to do is replace the carefully worded proposal contained in the Bill with a much broader proposal, which would have the effect of rewriting the relevant provisions of the Personal Insolvency Act 2012. There is no provision in the Personal Insolvency Act which would allow a court to direct that a personal insolvency arrangement be considered. A provision of that nature would undermine the voluntary nature of the personal insolvency process.
Under the 2012 Act, the court has no power of instruction in regard to a voluntary process. A personal insolvency arrangement can only be proposed by a debtor through a personal insolvency practitioner where a debtor meets the eligibility requirements for such an arrangement and there are sufficient funds available to make some payments to ground a proposal. The proposed amendment does not have regard to either the context or appropriateness of such a proposal over the debtor's repayment capacity. In any event, the proposed amendment could not have any lawful effect in binding a creditor.
In addition, the amendment seems to consider the personal insolvency practitioner to be an officer of the court, which is a fundamental misreading of the legislation. The personal insolvency practitioner has no role or standing in an application for repossession. There is no provision in the law to provide for the court to appoint the practitioner as an officer to essentially force a settlement on creditors.
The provisions outlined in paragraph (d) of amendment No. 3 seek to impose a duty on the court with regard to the costs of a personal insolvency arrangement. Again, this approach would run counter to the provisions of the Personal Insolvency Act. There is no lawful provision to allow for such an approach, nor could one be imposed.
With regard to amendment No. 5, which proposes an increase in the two month time limit for the adjournment, I remind the House that the Bill includes a provision at section 2(4) which allows the court to consider granting a further adjournment if, by the end of the two month period, it sees real evidence of progress towards a personal insolvency arrangement. The wording of subsection (4) is as follows: "On the expiry of any period of adjournment granted under subsection (2), the court may grant a further adjournment of the proceedings concerned where it considers that significant progress has been made in the preparation of a proposal for a Personal Insolvency Arrangement." I emphasise that the subsection provides that a court may grant an adjournment, not where a proposal has been agreed but "where it considers that significant progress has been made in the preparation of a proposal". As Deputies will note, the wording refers to the preparation of a proposal for a personal insolvency arrangement, in other words, the personal insolvency practitioner has been engaged with the debtor and would have the expertise to ascertain the eligibility of the debtor. In the two month period of the adjournment, the practitioner may examine the overall background financial circumstances and, where he or she considers that a personal insolvency arrangement is possible, he or she can start preparing a proposal.
As I indicated, the provision does not stipulate that the personal insolvency arrangement has to be agreed with the person's creditors. It is a two month period to engage with the personal insolvency practitioner who effectively starts the process of preparing a proposal for a personal insolvency arrangement. The further adjournment provided for in subsection (4) is not time limited in the manner of the adjournment in subsection (2) but is at the discretion of the court. If it is clear at the end of the two month period that there is no prospect of preparing a proposal because there is no reasonable proposal that could be presented which would facilitate the workings of a personal insolvency arrangement, there will not be a second adjournment. However, the opportunity exists for this to happen.
To put the matter simply, the purpose of the two month period is to enable the debtor to engage a personal insolvency practitioner with a view to the consideration of an application for a personal insolvency arrangement and, within the personal insolvency arrangement process, to apply for a protective certificate under section 96 of the Personal Insolvency Act. Deputies should be aware that the effect of the protective certificate, which will operate for a period of 70 days, with a possible further extension of 40 days from the date of issue, will be to prevent the creditor whose debts are covered by the certificate from initiating proceedings or continuing with proceedings, even where such proceedings were initiated before the application for the protective certificate was made. Again, this is an important issue as it provides additional time for matters to be addressed and resolved.
I stress that what is proposed in this section is something that has never existed in the law in this area in the past. What we are doing is enacting a provision that provides an additional protection for home owners to bring into play when there is an application for repossession of their principal private residence. Rather than providing that the courts may grant a repossession order, as they have done under the legislation that was in place until 2009, we are introducing a possibility for the courts to adjourn the case and instruct the debtor to consult a personal insolvency practitioner. The personal insolvency practitioner can examine the debtor's overall financial circumstances and consider whether there is a reasonable possibility of making a proposal for a personal insolvency arrangement. Moreover, the practitioner can obtain a protective order in the courts which gives the debtor additional protection. If a proposal is prepared or in the process of being prepared, albeit not necessarily finalised, proceedings to repossess can be adjourned again. This is a very important protection and reform and one I undertook to introduce when we were dealing with this issue during our discussions on the Personal Insolvency Bill.
In that context, some of the amendments that have been tabled are unnecessary because we have provided a format that is workable. When one factors in the protective certificate and interaction with the insolvency legislation, this provides the protection necessary for anyone who has a reasonable prospect of entering into a personal insolvency arrangement. For all of those reasons, I cannot accept these amendments.
I apologise again for the absence of Deputy Mac Lochlainn who is chairing a committee meeting. He has indicated he wishes to press the amendment.
Question put: "That the words proposed to be deleted down to and including "relates" in line 7 stand part of the Bill."
The Dáil divided: Tá, 86; Níl, 40.
Tá
- Bannon, James.
- Breen, Pat.
- Bruton, Richard.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Carey, Joe.
- Coffey, Paudie.
- Collins, Áine.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Conway, Ciara.
- Coonan, Noel.
- Corcoran Kennedy, Marcella.
- Costello, Joe.
- Creed, Michael.
- Daly, Jim.
- Deasy, John.
- Deenihan, Jimmy.
- Deering, Pat.
- Doherty, Regina.
- Donohoe, Paschal.
- Doyle, Andrew.
- English, Damien.
- Feighan, Frank.
- Ferris, Anne.
- Fitzgerald, Frances.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Heydon, Martin.
- Hogan, Phil.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Kathleen.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McGinley, Dinny.
- McHugh, Joe.
- McLoughlin, Tony.
- McNamara, Michael.
- Maloney, Eamonn.
- Mitchell, Olivia.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Eoghan.
- Nash, Gerald.
- Neville, Dan.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- O'Sullivan, Jan.
- Penrose, Willie.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Quinn, Ruairí.
- Rabbitte, Pat.
- Reilly, James.
- Ring, Michael.
- Ryan, Brendan.
- Shatter, Alan.
- Sherlock, Sean.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Adams, Gerry.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Collins, Niall.
- Colreavy, Michael.
- Crowe, Seán.
- Daly, Clare.
- Donnelly, Stephen S.
- Ellis, Dessie.
- Ferris, Martin.
- Fleming, Sean.
- Fleming, Tom.
- Grealish, Noel.
- Healy, Seamus.
- Healy-Rae, Michael.
- Kirk, Seamus.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Mattie.
- McLellan, Sandra.
- Martin, Micheál.
- Murphy, Catherine.
- Naughten, Denis.
- Nulty, Patrick.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- Ó Snodaigh, Aengus.
- O'Brien, Jonathan.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Shortall, Róisín.
- Smith, Brendan.
- Stanley, Brian.
- Tóibín, Peadar.
- Troy, Robert.
- Wallace, Mick.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Aengus Ó Snodaigh and Seán Ó Fearghaíl.
Question declared carried.
Amendment declared lost.
I move amendment No. 4:
In page 4, line 7, to delete “in a case to which this section applies” and substitute “and which land is land to which this section applies”.
Amendment put and declared carried.
I move amendment No. 5:
In page 4, line 12, to delete “for a period not exceeding 2” and substitute “for a minimum of 6”.
Question, "That the words proposed to be deleted stand", put and declared carried.
Amendment declared lost.
Amendment No. 6 arises out of committee proceedings. Amendments Nos. 6 to 8, inclusive, are related and may be discussed together by agreement.
I move amendment No. 6:
In page 5, to delete line 7 and substitute the following:
“(7) In this section and section 3—”.
On Committee Stage I indicated my intention to examine the possibility of requiring that all repossession applications in respect of principal private residences in the case of mortgages created prior to 1 December 2009 be taken in the Circuit Court. The Land and Conveyancing Law Reform Act 2009 already requires this in the case of mortgages created after 1 December 2009. The new section, which I am proposing in amendment No. 8, provides that in the case of mortgages created prior to 1 December 2009 in respect of principal private residences, any repossession proceedings must be commenced in the Circuit Court. This means that such cases must be commenced in the Circuit Court irrespective of the date of creation of the mortgage. I consider that this meets the intention of Deputy Mac Lochlainn as indicated in amendment No. 7.
However, in order to avoid legal challenges in respect of proceedings which have already been commenced, section 2(4) provides that where other such proceedings relating to the enforcement of a mortgagee's rights have been commenced in the High Court but have not yet been determined, then notwithstanding section 2(2), proceedings for repossession of a principal private residence may be taken in that Court. This provision will also help to avoid the risk of enforcement proceedings being taken in two separate courts simultaneously which would lead to increased costs for the parties concerned. It will also avoid any constitutional difficulties arising with regard to the implementation of this provision. Amendment No. 6 is a technical amendment which ensures that the definitions in section 2(7) will apply to the new section 3 which is being inserted by amendment No. 8.
I have two quick questions. The first relates to the definition of a principal private residence. The question probably applies to the entire Bill. Will the Minister clarify one point? When we use the term principal private residence most of us believe it refers to the home a person is living in. However, there is a group of people who, due to the mortgage crisis, are in a somewhat unusual position. They have a principal private residence but, since their family has grown, they have moved to another place. They are renting the residence because they might be in negative equity or whatever.
Essentially, they are renting out their principal private residence and are living in rented accommodation. In the context of the Minister's amendment and the Bill, does "principal private residence" afford the same protections in section 2 to a place if people are renting and renting as if they were simply living in it? Second, the Minister should set out the specific reason he is referring these matters to the Circuit Court, as opposed to the District or High Courts, in the amendment and the advantages thereof.
I will deal with the second question first. The proposal was that these matters be dealt with in the Circuit Court as they are appropriate to the Circuit Court and not to the District Court. That is the position in the context of post-1 December 2009 mortgages, as contained in that particular legislation. There is already experience and expertise in the Circuit Court in dealing with these issues and the suggestion arose in the course of Committee Stage that there should be a synergy and the same approach to both pre-1 December 2009 mortgages and post-1 December 2009 mortgages. It was my view that this was reasonable. When the Bill was being drafted, an issue was originally suggested to me that to so change the law might give rise to some constitutional issue because there might be some vested right, for example, in the lenders to take their proceedings in the High Court. I did not think that was a particularly strong issue and have had the matter looked at again. Consequently, I have proposed this amendment, which I hope will be welcomed because it was an amendment urged on me on Committee Stage for which I expressed support, provided the Attorney General's office confirmed to me it could be implemented. This is the reason we are heading down that route.
In the context of all my experience as a lawyer over the years, principal private residence would primarily mean the residence in which someone is residing and this would be the consistent legal interpretation thereof. As it does not normally mean a residence that is being rented to someone else, regardless of circumstances, I am very anxious not to mislead the House in that way. There is a difficulty where it is a rental property as opposed to a property that - if I can put it this way - genuinely is an individual's family home. However, in the exceptional circumstances that have arisen, there may be some area of appreciation or discretion where, bearing in mind the unusual individual circumstances of an individual or a couple, the court may extend that definition. The phrase "family home" has not been used. The phrase "principal private residence" has been used with some deliberation in these circumstances. However, Members also must ensure they do not create a situation in which, for example, someone buys a property with the intention of using it as an investment property and lives in it for two or three months before renting it out and asserting these special procedures should apply. I have dealt with this issue in the manner I believe to be the best way it can be dealt with. It is clearly intended largely to apply to individuals who are in mortgage difficulty or living in the home in respect of which they have mortgage difficulties.
The Deputy, like me, is aware of individuals who for a number of reasons have moved out of homes in which there are mortgage difficulties. Families in two-bedroom apartments simply have found they have grown beyond that original residence they might have acquired in 2004 or 2005. Such people may now have two children who are growing up and, consequently, they have moved out and rented the property. They now are either renting another property or those who are in employment may well have purchased property because of the collapse in values. Consequently, one could not have two principal private residences. They may be renting it as a matter of convenience or they may be renting it to avoid incurring losses on their original investment. A myriad of different circumstances arise but this principally is about individuals living in a property, that is, residing in that property and in mortgage difficulty with that property, to ensure as best as possible that everything is done to try to avoid their loss of the roof over their heads. Obviously, this is part of an issue. If one is renting somewhere else and if the property one is renting out, which one originally purchased as a principal private residence, is lost in a repossession case, one still has a roof over one's head, namely, the property one now is renting. However, there may be some circumstances in which the courts might be willing - but that will depend very much on individual circumstances that do not lend themselves to definition in legislation - to give some area of discretion or appreciation. The Deputy and I probably could invent at least half a dozen examples to which this might apply but in the context of drafting the legislation, I am advised this is the appropriate terminology that can be used. It is the best that can be done in this context and, hopefully, it will have the intended impact.
I refer to both the Circuit Court issue and the application of the personal insolvency protections, the adjournment of court proceedings and the facility to give people an opportunity to re-engage or to engage with a financial institution when confronted by repossession. I am conscious these all are issues about which Deputy Donnelly had concerns, that were featured in his own Private Members' Bill and which he and I discussed a considerable time ago in the context of the insolvency legislation. Consequently, I am doing what I can in this area to be of assistance to individuals. The Circuit Court obviously is a better venue because whether one is a creditor or the person in debt who has not paid his or her mortgage, the legal costs are less onerous than would be incurred in the High Court. Consequently, there is an important cost issue in keeping it at Circuit Court level. The District Courts have never traditionally had this particular area of jurisdiction. They do not have the background expertise in dealing with it and for that reason, I proposed this amendment.
I thank the Minister for his reply and for leaving open the door that people who are renting and renting may have the protections afforded to them under section 2. The Minister referred to my Family Home Protection (Miscellaneous Provisions) Bill from 2011 and I wish to take this opportunity to acknowledge the Minister's good faith in this regard. During the debate in 2011, the Minister asked that I withdraw the Bill to avoid forcing a division in the House on something for which there was cross-party support. At the time, the Minister indicated he would consider ways to have what the Family Home Protection (Miscellaneous Provisions) Bill was trying to do brought into the law. Essentially, section 2 is the result of that and I wish to acknowledge publicly the good faith under which the Minister has laboured. It is greatly appreciated.
I take the Minister's point that this might be available in some situations. The reason I emphasise this issue is because a great number of people are in this position. Most of my friends are in this situation, as I imagine are a great many other people in their mid-30s. Such people bought tiny homes for far too much money that they could not afford and did not really want but by 2008, 2009, 2010 or 2011, they had kids, would no longer live in a one or two-bedroom apartment and have moved out. However, although they would love to do so, they cannot sell. Obviously, the original idea would have been to sell and to buy themselves a three bedroom semi-detached house in which to raise their family and so on. However, they are stuck for a few reasons, the first of which is that the tax position changes completely. Once one leaves one's home and one rents, one no longer gets the mortgage interest supplement. One cannot deduct the full costs from the rental income in respect of tax, as this was reduced from 100% of interest to 75%. Moreover, these same people will now be charged PRSI on the rental income. Consequently, the financial and taxation hit for being obliged to move out is huge and it would be a great pity if such people could not be afforded the protections afforded under section 2.
The purpose of section 2 essentially is to stop the bank from repossessing homes when a sensible personal insolvency arrangement, PIA, could be constructed. Financially, and economically, that is just as important for people who are renting and renting. I do not refer to people who have bought their home-----
The Deputy's time has expired.
I will conclude on this point. I do not refer to those who have bought a new home and are renting. I am talking only about people who bought a home, have moved out of it, who still nominally only own one home and are renting and renting. I ask the Minister to keep this under review because I consider this group of people to be just as deserving of the protections afforded under section 2 as those who are living in their principal private residences.
As I said to the Deputy, this would create major drafting problems to travel the route in full that he is suggesting. We will see how the courts applying interpret the legislation. Linking the two issues - getting stuff out of the High Court into the Circuit Court and also the personal insolvency arrangement, PIA, issue - provides certain possibilities but if anyone is in genuine financial difficulty and if there is a risk of proceedings being brought to repossess, within a matter of days the insolvency legislation will be up and running and they should take the initiative before court proceedings of any description are taken and talk to a personal insolvency practitioner. That is what I would hope many people will do. I hope that people who have the possibility of an engagement that could produce a productive outcome will not wait until they are at the receiving end of repossession proceedings, both for their own peace of mind and to avoid unnecessary expense being incurred.
Amendment agreed to.
Amendment No. 7 not moved.
I move amendment No. 8:
In page 5, between lines 20 and 21, to insert the following:
“Proceedings relating to certain mortgages to be brought in Circuit Court
3. (1) This section applies to land which is the principal private residence of—
(a) the mortgagor of the land concerned, or
(b) a person without whose consent a conveyance of that land would be void by reason of—
(i) the Family Home Protection Act 1976, or
(ii) the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010,
and the mortgage concerned was created prior to 1 December 2009.
(2) Subject to subsection (4), proceedings brought by a mortgagee seeking an order for possession of land to which the mortgage relates and which land is land to which this section applies shall be brought in the Circuit Court.
(3) The jurisdiction of the Circuit Court to hear and determine proceedings referred to in subsection (2) where the land concerned is land to which this section applies shall be exercised by the judge of the circuit where the land or any part of it is situated.
(4) Subsection (2) does not preclude a person initiating proceedings in the High Court where other proceedings relating to the enforcement of the mortgagee’s rights under the mortgage concerned have been commenced in that court prior to the coming into operation of this section where those other proceedings have not been determined.”.
Amendment agreed to.
Amendments Nos. 9 and 14 are related and may be discussed together.
I move amendment No. 9:
In page 5, between lines 20 and 21, to insert the following:
“3. In any proceedings brought by a mortgagee seeking an order for possession of land to which the mortgage relates in a case to which this section applies the court, when making its decision whether to grant a possession order shall consider:
(a) whether a mortgagee has fully complied with the Central Bank’s Code of Conduct on Mortgage Arrears;
(b) whether a mortgagee has behaved in a manner deemed reasonable by the court. In determining whether the mortgagee has behaved reasonably the Court will consider any responses by the mortgagee to proposals from the mortgagor or a personal insolvency practitioner aimed at resolving outstanding arrears;
(c) whether, in cases where the mortgagee has rejected a proposal from a personal insolvency practitioner, the mortgagor has been given adequate opportunity to appeal the substantive decision of the mortgagee to reject the proposal; and
(d) the intentions of the mortgagee with respect to the residual portion of the debt that remains after any possession and sale of the property and the impact this plan may have on the financial circumstances of the mortgagor.”.
I am filling in for Deputy Mac Lochlainn. The amendment does a number of things. It requires a judge, before granting a repossession order, to take into account a number of issues, including whether the bank has behaved reasonably, whether the bank has rejected a proposal from a PIP, whether the borrower was given adequate opportunity to appeal any rejection by the bank and whether the bank has fully complied with the code of conduct on mortgage arrears. If the judge is not satisfied that the lender has behaved reasonably on any of those grounds, he or she may reject the application for repossession.
These amendments both seek to make substantial changes to the Personal Insolvency Act. As I have stated previously, this is not the intention of the Bill or of section 2, which provides a necessary link to the personal insolvency process.
Amendment No. 9 contains an astonishing proposal, in paragraph (c), that the court should consider whether, when a personal insolvency arrangement, PIA, has been rejected by creditors, the mortgagor has been given adequate opportunity to appeal the substantive decision of the mortgagee to reject the proposal. This completely misunderstands the way in which the PIA process works. As I have said many times, it is a voluntary process and where the necessary approval of creditors cannot be obtained on the proposal, the process then ends. There is no appeal to the court in this regard. There exists a possibility that the mortgagor could, through his or her personal insolvency practitioner and where time permits under the protective certificate period, propose a new arrangement which could meet with the approval of creditors. That may be a possibility for some. With regard to amendment No. 14, I repeat that the amendment seeks to rewrite provisions of the Personal Insolvency Act, which is not the purpose of this Bill.
The House should be aware that the protection to a mortgagor proposed by this Bill is to require that the court allow for a personal insolvency arrangement to be considered where, for example, none previously had been attempted, as with the requirement now in bankruptcy petitions, and not that the court should direct a first or a new PIA and effectively determine its outcome. Once a 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 ends as a mediator or negotiator for the debtor.
However, members should also remember that where a proposal is rejected at a creditors' meeting and where the protective certificate period still exists, as I said earlier, this does not stop a personal insolvency practitioner making a different proposal that creditors may 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.
Amendment No. 14 ignores the fact that the personal insolvency legislation is designed to allow agreed settlements to be reached as an alternative to court ordered settlements. It is my view this amendment would overturn this carefully calibrated approach. I must add that the Deputy's proposed provision that a PIA proposal should only offer to repay the current value of a property would represent a huge interference in contractual and property rights and would be likely to be subject to swift challenge in the courts. Indeed, it could give rise to constitutional issues. The amendment makes no reference to the repayment capacity of the debtor, which it seems essentially would be determined by the current value of the property. This would have obvious negative consequences for banks, other financial institutions and ultimately for taxpayers.
I believe this 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 current value. This would seriously risk a complete collapse of the property market and would threaten the solvency of the financial institutions and indeed the economy. Finally, I consider that this amendment would run the risk of turning every proposal for a PIA into a costly preliminary to repossession. For those reasons, I cannot accept the amendment.
I thought the Acting Chairman might have called me to speak to the amendment before calling the Minister.
My apologies for that.
No problem. We tabled this amendment on Committee Stage also and we discussed it in some detail but I want to reiterate our position on it for the record. I note the Minister is not accepting the amendment. That does not come as a surprise. We discussed this on many occasions in regard to the personal insolvency legislation. The thrust of legislation is all the time recalibrating the balance of power away from the borrower into the hands of the lender, but unfortunately we have seen over the years, and day in, day out in our constituency offices, that the banks adopt quite a high-handed and draconian approach to dealing with people in distress. That is the issue we raised during the debate on the personal insolvency legislation. That is the reason we sought to have an independent appeals process. That is why we pointed out the issue in regard to what we have described as the bankers' veto. We had it again this week in regard to the new code of conduct launched by the banks, with Government support, whereby the protection being afforded to borrowers in distress and in arrears has been watered down and people will now be subjected to more vigorous pursuit by the banks.
Taking all that in the round and remembering also that the bona fides of the banks have to be called into question, have they acted reasonably? The answer is "No". Will they act reasonably from now on with the passage of this legislation? I believe the answer is "No". The Minister mentioned in rejecting this amendment that it would promote delinquent behaviour. The banks can act in a delinquent fashion also.
The effect of our motion was to try to stem the erosion of protection which the borrowers have enjoyed to a certain degree but, unfortunately, the Minister has already said he will not accept that. I note that but I wanted to take the opportunity to speak to the amendment.
I take the Minister's points on board but I support Deputy Collins's amendment. I would disagree with the Minister's economic analysis. He may be right but I do not think he is for two reasons. Last year, the IMF conducted a 100 year review of the way countries have successfully got out of mortgage crises and it concluded that the only two countries where it ever worked were Iceland and Norway. In Iceland and Norway they did something similar to what Deputy Collins spoke about, which is a very broad write-down of mortgage debt. I met two Icelandic Members of Parliament yesterday to ask them how they managed to do that without destroying their banking system.
They informed me that they had split their banks in two, namely, into good banks and bad banks and that the former retained the functioning assets. I am currently involved in drawing up a paper on a debt-for-equity product which would allow something similar to happen here but without the banks being obliged to take a write-down. I disagree with the Minister's economic analysis. I believe the opposite is the case, namely, that job creation and economic growth will only occur and that emigration will only be stemmed when the quantum of household debt is brought back down to a sustainable level. The latter will require the banks to play ball in a way in which I have no faith in them doing.
In the context of the mechanism under discussion, I would like to consider the case of a couple who engage with a personal insolvency practitioner who then engages with their bank on their behalf in circumstances where a reasonable personal insolvency arrangement can be arrived at. Some banks are already engaging in this fashion. To its credit, AIB has made some very positive noises in this regard. Let us imagine that there is equity in the house owned by the couple to whom I refer but they cannot pay off their mortgage. With some restructuring, they could retain their house but their bank indicates that it has no interest in retaining them as borrowers for the next ten, 15 or 20 years. It then states that it is taking in the house and calls in the full mortgage. The bank proceeds to seek repossession and, as a result of the provisions in section 2, the judge states that there is a deal to be done and that the parties should try to arrive at a personal insolvency arrangement.
The bank then states that while other financial institutions are restructuring in circumstances such as those I have outlined, it is not doing so. It further indicates that it is not interested in such arrangements, that it no longer wants the debt on its books and that it is taking the house and is going to sell it on. The personal insolvency practitioner informs the judge at the next court hearing that it is his or her opinion that there is a personal insolvency arrangement to be arrived at, that such arrangements are being arrived at by other banks and that the bank in question is refusing to play ball. The bank then states that the latter is the case and insists on taking possession of its asset. Can anything else be done at that stage or is this how the Minister sees matters playing out in the context of the powers the banks retain to ignore reasonable personal insolvency arrangements and repossess properties? I am of the view that banks will repossess in circumstances where the house on which a mortgage is held is not in negative equity. Will the Minister outline whether that is his understanding of how the banks might enforce their rights?
There is a very simple answer to the questions posed by Deputy Donnelly. Section 2(4) states: "On the expiry of any period of adjournment granted under subsection (2), the court may grant a further adjournment of the proceedings concerned where it considers that significant progress has been made in the preparation of a proposal for a Personal Insolvency Arrangement." Let us assume that any progress has been made on one side and that the creditor has not adequately engaged. Section 2(3)(d) refers to the conduct of the parties to a mortgage in any attempt to find a resolution. I am of the view that this is going to guide the courts in certain circumstances. Obviously, this legislation has not yet been enacted but despite the fact that there is no statutory obligation on them, even now judges are adjourning proceedings in order to give individuals experiencing difficulties an opportunity to resolve them. In recent cases a number of judges actually encouraged engagement. Section 2(2) states that in any proceedings brought by a mortgagee seeking an order for possession of land to which the mortgage relates in a case to which this section applies, a court - without prejudice to any other power which a court may have to adjourn proceedings - may, of its own motion, etc., adjourn proceedings. The courts have an inherent power to adjourn proceedings.
In circumstances where if I were the owner of a principal private residence and my lender informed me that it wanted to repossess and if I consulted a personal insolvency practitioner and made an eminently sensible proposal, it must be remembered that in the background there are directions to the banks to engage with those who are in difficulty. They must engage not only in the context of considering the possibility of debt forbearance, but also, in appropriate cases, debt forgiveness. A borrower who is experiencing problems and who is able to truthfully inform a court about a constructive proposal he or she has put forward which makes sense in the overall background circumstances may find that a lender who has not been willing to properly engage may get into great difficulty with the courts. In such cases the courts may simply adjourn proceedings and tell everyone to go away and reconsider matters for a period of three or six months. What the courts cannot do is force a personal insolvency arrangement on anybody. This is because the fact that there must be agreement is the very essence of the personal insolvency legislation.
We are referring here to debt settlement and personal insolvency arrangements and the emphasis is on the term "arrangement". Of course, where a mortgage is involved it will be a personal insolvency as opposed to a debt settlement arrangement which will apply. Judges have all sorts of wonderful ways of relaying messages to people whom they believe to be recalcitrant. I am of the view that the Bill creates the legal backdrop to facilitate them in this regard. Judges may show reluctance to grant orders of possession in circumstances where the lender is behaving unreasonably. I accept that I have been talking for far longer than should have been the case but these are important issues.
I hope the architecture we are providing will facilitate that to which I refer. Ultimately, there is a matter of Central Bank oversight. The Central Bank has now required lending institutions to specifically engage in respect of this matter. There have been a number of years of debt forbearance, resulting in medium or short-term relief for many individuals who are in difficulty with their mortgages. The Central Bank requires that the institutions must engage in order to put medium and long-term arrangements that are viable in place. I do not believe it envisages that wholesale repossessions will occur in respect of family homes or principal private residences in circumstances where practical and sensible financial arrangements can be entered into, particularly in situations where, if a sale is forced and if there is negative equity, the lender will not recover its money in full and where there are certain matters which should be addressed. We are putting in place an interesting and important architecture which will allow the courts to assess the bona fides not just of those against whom repossession orders are sought, but also of those who seek such orders.
Amendment put and declared lost.
Amendments Nos. 10 to 13, inclusive, are related and may be discussed together by agreement.
I move amendment No. 10:
In page 5, between lines 20 and 21, to insert the following:
"3. Where the court grants an order of possession the court shall instruct the mortgagee to abide by the full terms of any tenancy agreement in place with respect to the property and for the mortgagee to assume the full responsibilities of the landlord as stipulated in that tenancy agreement.".
This amendment is designed to ensure that where a repossessed property is a buy-to-let concern with a tenant in situ, the tenancy agreement will be respected in full. Amendment No. 11 is designed to ensure that where a repossession order is granted, the existing owner and tenant or tenants will be given six months to arrange alternative accommodation or nine months where children are resident in the house.
Amendment No. 12 relates to a situation where a bank is repossessing a family home and states that any outstanding debt on that property should become the liability of the bank and that the borrower cannot be pursued in respect of it. This will only apply in the case of family homes and not buy-to-let properties.
Amendment No. 13 is designed to ensure any costs arising from the repossession hearing or from the subsequent sale of any family home that is repossessed will be borne by the lender and not the borrower. Again, this amendment will only apply in the case of family homes and not buy-to-let properties.
These amendments, which are being taken together, to a large extent fall outside the scope of the Bill. Amendment No. 10 relates to situations where tenancy agreements are in place and seeks to invest the court with the power to require mortgagees to abide by the terms of such agreements.
Repossession is not the only option in such situations. Where rents are being paid and where it is viable, the mortgagee may opt to appoint a receiver of rents rather than seek repossession. Where, however, the mortgagee wishes to sell the property, the mortgagee is under an obligation to obtain the best price reasonably attainable, which would normally require vacant possession of the property. In those circumstances, the proposal in amendment No. 10 would work to the disadvantage of the borrower and impede operation of the terms of the mortgage contract between the borrower and the mortgagee. For that reason, I cannot accept the amendment.
In regard to amendment No. 11, which seeks to instruct the court in regard to the orders, it may make in reaching its judgment on a repossession action, I will, once again, point out that the court has a general power to stay proceedings, and on a regular basis, the courts stay orders for possession for a period of time to enable people to reorder their lives, obtain alternative accommodation or, as happens on occasion, allow children to sit examinations. In those circumstances, I do not think it necessary to legislate on this issue as proposed in the amendment and, therefore, I will not be accepting it.
Turning to amendment No. 12, if we were to go down this route, which would in effect introduce non-recourse mortgages to this jurisdiction, we would, in the current circumstances where non-recourse mortgages are not available in this country, encourage strategic default and compound our current difficulties. While I stated on Committee Stage that I, on a personal level, would favour the introduction of a non-recourse mortgage product, the fact remains that such products are not available nor can we prescribe them by legislation. To accept this amendment would create even more serious difficulties for both financial institutions and the State and I cannot accept the amendment for that reason.
Amendment No. 13 seems to indicate that the Oireachtas should legislate to provide that the cost of the repossession should be paid by the mortgagee. Again, I cannot agree that such a provision should be enshrined in primary legislation and I cannot accept the amendment.
Amendment put and declared lost.
I move amendment No. 11:
In page 5, between lines 20 and 21, to insert the following:
"3. Where the court grants an order of possession the court shall provide for a stay of at least six months where there are adults living in the property and of at least nine months where there are children resident in the property.".
Amendment put and declared lost.
I move amendment No. 12:
In page 5, between lines 20 and 21, to insert the following:
"3. Where a possession order is granted by the court to land which is the principal private residence of the mortgagor the mortgagee assumes full liability for all debts relating to the mortgage on that property and agrees not to pursue the mortgagor for any outstanding liabilities on that mortgage.".
Amendment put and declared lost.
I move amendment No. 13.
In page 5, between lines 20 and 21, to insert the following:
"3. Where a possession order is granted by the court to land which is the principal private residence of the mortgagor the mortgagee assumes full liability for all costs related to the repossession of the property and any costs related to the subsequent sale of the property.".
Amendment put and declared lost.
I move amendment No. 14:
In page 5, between lines 20 and 21, to insert the following:
“Power of Court to determine the rejection of a proposal for a Personal Insolvency Arrangement as unreasonable
3. (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.
(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;
(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.
(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:
(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.
(9) A copy 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.”.
Amendment put and declared lost.
Amendment No. 15 arises out of Committee proceedings.
I move amendment No. 15:
In page 5, to delete lines 23 and 24 and substitute the following:
"(2) Sections 2 and 3 come into operation on such day or days as the Minister for Justice and Equality may by order or orders appoint and different days may be so appointed for different purposes or provisions.".
This is a technical amendment which will allow the commencement of sections 2 and 3 on different dates. I envisage that both sections will be commenced on the same dates so this provision is purely a precautionary measure.
Amendment agreed to.
Bill, as amended, received for final consideration.
Question put: "That the Bill do now pass."
The Dáil divided: Tá, 91; Níl, 42.
Tá
- Breen, Pat.
- Bruton, Richard.
- Butler, Ray.
- Buttimer, Jerry.
- Byrne, Catherine.
- Byrne, Eric.
- Cannon, Ciarán.
- Carey, Joe.
- Coffey, Paudie.
- Collins, Áine.
- Conaghan, Michael.
- Conlan, Seán.
- Connaughton, Paul J.
- Conway, Ciara.
- Coonan, Noel.
- Corcoran Kennedy, Marcella.
- Costello, Joe.
- Creed, Michael.
- Creighton, Lucinda.
- Daly, Jim.
- Deasy, John.
- Deenihan, Jimmy.
- Deering, Pat.
- Doherty, Regina.
- Donnelly, Stephen S.
- Donohoe, Paschal.
- Doyle, Andrew.
- Durkan, Bernard J.
- English, Damien.
- Feighan, Frank.
- Ferris, Anne.
- Fitzgerald, Frances.
- Fitzpatrick, Peter.
- Flanagan, Charles.
- Gilmore, Eamon.
- Griffin, Brendan.
- Hannigan, Dominic.
- Harrington, Noel.
- Harris, Simon.
- Hayes, Brian.
- Heydon, Martin.
- Hogan, Phil.
- Howlin, Brendan.
- Humphreys, Heather.
- Humphreys, Kevin.
- Keating, Derek.
- Kehoe, Paul.
- Kelly, Alan.
- Kenny, Seán.
- Kyne, Seán.
- Lawlor, Anthony.
- Lynch, Ciarán.
- Lynch, Kathleen.
- Lyons, John.
- McCarthy, Michael.
- McEntee, Helen.
- McGinley, Dinny.
- McHugh, Joe.
- McLoughlin, Tony.
- McNamara, Michael.
- Maloney, Eamonn.
- Mathews, Peter.
- Mitchell, Olivia.
- Mitchell O'Connor, Mary.
- Mulherin, Michelle.
- Murphy, Dara.
- Murphy, Eoghan.
- Nash, Gerald.
- Neville, Dan.
- Noonan, Michael.
- Ó Ríordáin, Aodhán.
- O'Donnell, Kieran.
- O'Donovan, Patrick.
- O'Dowd, Fergus.
- O'Mahony, John.
- O'Reilly, Joe.
- O'Sullivan, Jan.
- Perry, John.
- Phelan, Ann.
- Phelan, John Paul.
- Rabbitte, Pat.
- Reilly, James.
- Ryan, Brendan.
- Shatter, Alan.
- Spring, Arthur.
- Stagg, Emmet.
- Stanton, David.
- Tuffy, Joanna.
- Wall, Jack.
- Walsh, Brian.
- White, Alex.
Níl
- Adams, Gerry.
- Boyd Barrett, Richard.
- Broughan, Thomas P.
- Calleary, Dara.
- Collins, Joan.
- Collins, Niall.
- Colreavy, Michael.
- Cowen, Barry.
- Crowe, Seán.
- Doherty, Pearse.
- Dooley, Timmy.
- Ellis, Dessie.
- Ferris, Martin.
- Flanagan, Luke 'Ming'.
- Grealish, Noel.
- Healy, Seamus.
- Healy-Rae, Michael.
- Keaveney, Colm.
- Kelleher, Billy.
- Mac Lochlainn, Pádraig.
- McConalogue, Charlie.
- McDonald, Mary Lou.
- McGrath, Finian.
- McGrath, Michael.
- McLellan, Sandra.
- Martin, Micheál.
- Murphy, Catherine.
- Naughten, Denis.
- Nulty, Patrick.
- Ó Caoláin, Caoimhghín.
- Ó Cuív, Éamon.
- Ó Fearghaíl, Seán.
- O'Brien, Jonathan.
- O'Dea, Willie.
- O'Sullivan, Maureen.
- Pringle, Thomas.
- Ross, Shane.
- Shortall, Róisín.
- Smith, Brendan.
- Stanley, Brian.
- Tóibín, Peadar.
- Troy, Robert.
Tellers: Tá, Deputies Emmet Stagg and Paul Kehoe; Níl, Deputies Jonathan O'Brien and Seán Ó Fearghaíl.
Question declared carried.