Land and Conveyancing Law Reform (Amendment) Bill 2019 [Seanad]: Second Stage

Minister of State at the Department of Public Expenditure and Reform (Deputy Kevin Boxer Moran)

I move: "That the Bill be now read a Second Time."

On behalf of the Minister for Justice and Equality, I am pleased to introduce the Land and Conveyancing Law Reform (Amendment) Bill 2019 in this House following its passage through the Seanad and I look forward to our discussion of its provisions here. I was very pleased with the strong support for the Bill from all sides in the Seanad and I trust that this support will also be evident in this House during our discussion.

Put simply, the principal objective of this Bill is to provide further protections for homeowners in mortgage arrears who are facing the risk of repossession proceedings in respect of their homes. For this purpose, the Bill proposes to insert a new section in the Land and Conveyancing Law Reform Act 2013. The Bill broadens the range of matters that a court must take into account when deciding whether to grant a possession order to a lending institution in respect of the borrower’s principal private residence. This Bill, which has its genesis in a Private Members’ Bill that I introduced prior to my appointment as Minister of State, will I firmly believe prove to be an important addition to the suite of Government measures to protect those who find themselves in mortgage arrears and are facing the prospect of court proceedings for repossession of their homes.

I am sure that everyone here will agree that repossession of a borrower’s principal private residence should be a last resort when all other possible remedies have failed. The Government remains committed to helping borrowers in mortgage arrears to remain in their homes.

Moving to the main provisions of this Bill, I want to reiterate that the Government’s objective is to broaden the range of matters that a court must take into account when deciding whether to grant a possession order to a lending institution in respect of a borrower’s principal private residence. The court may also take this broader range of matters into account where, for whatever reason, efforts to secure a personal insolvency arrangement, PIA, have failed or where despite the borrower’s participation in a scheme designed to enable borrowers with mortgage arrears to remain in their home, the court repossession proceedings have continued.

As required by Articles 127(4) and 282(5) of the Treaty on the Functioning of the European Union, the European Central Bank has been consulted on the Bill's proposals. The ECB has published its opinion of 18 February on its website.

Section 1 contains a definition of the Act of 2013, which is required for technical reasons, while section 2 makes a number of technical, consequential amendments to section 2 of that Act.

Section 3 is the key section of the Bill and it inserts a new section 2A, containing nine subsections, into the 2013 Act. Subsection (1) defines the scope of this new section. It means that the Bill's provisions will apply not only to those cases in which the court has previously adjourned proceedings under section 2 of the 2013 Act in respect of the borrower's principal private residence, but also in cases where, prior to or following commencement of the proceedings, the borrower has engaged the services of a personal insolvency practitioner, PIP, to assist in the resolution of his or her mortgage arrears, or the borrower has participated in good faith in a scheme designed to enable indebted borrowers to remain in their homes.

This means that section 2A will apply in the following cases: proceedings where the court had adjourned the proceedings of its own motion under section 2(2)(a) of the 2013 Act but, notwithstanding such adjournment, there is no resulting PIA; proceedings where the court refused to adjourn proceedings in response to a request of one of the parties under section 2(2)(b) of the 2013 Act, or adjourned them and notwithstanding such adjournment, there is no resulting PIA; proceedings that have not been adjourned under section 2 of the 2013 Act but where the borrower has, prior to the court hearing, participated in good faith in a scheme to assist borrowers in mortgage distress to remain in their homes, or engaged the services of a PIP to assist him or her to resolve his or her mortgage arrears difficulties and, despite such engagement, there is no resulting PIA.

Subsection (2) provides that when considering whether to make, or refuse to make, an order for possession in repossession proceedings in respect of a borrower's principal private residence, a court must take account of the matters referred to in subsection (3). The court may also do so when considering whether to grant any other order it considers appropriate in the circumstances of the case, for example, an adjournment, or further adjournment, of the proceedings.

Subsection (3) specifies the matters that the court must take account of in considering whether to make or refuse to make a possession order. Paragraph (a) provides that the court must consider whether the making of the possession order would be proportionate in all the circumstances of the case. This is a significant development. In providing for this matter, the Bill recognises the essential role of the court in balancing the interests of both the borrower and the lender when considering whether to make, or refuse to make, an order for possession. Paragraph (b) provides that the court must always take into account the circumstances of the borrower and any dependants who are resident in the home. Paragraph (c) provides that the court must take into account whether the lending institution has made a statement to the borrower of the terms on which it would be prepared to settle the arrears problem in such a way that the borrower and his or her dependants could remain in their home. This means that there will be an onus on lenders to clarify their positions. Paragraph (d) makes it clear that the court must also consider the details of any proposal put forward by or on behalf of the borrower, whether prior to or following commencement of the proceedings, which would enable him or her, and any dependants, to remain in their home or, alternatively, to secure other accommodation. The Minister has asked me to stress that consideration of proposals which would allow the borrower to remain in their home will include examination of any proposal for participation by the borrower in a scheme to assist persons in mortgage distress to remain in their principal private residence. Paragraph (e) provides that the court must take into account the response, if any, of the lender to the borrower's proposal to remain in their home. This will place an additional onus on lenders to engage in a constructive manner with any proposals put forward by, or on behalf of, the borrower. Paragraph (f) makes specific reference to the conduct of the parties in any attempt to find a resolution to the borrower's mortgage arrears difficulties. The provision makes it clear that the court must take account of a lending institution's refusal or reluctance to engage in attempts to find a resolution of the mortgage arrears problem, and also of any borrower's refusal to engage in a meaningful manner with the lending institution.

Subsection (4) specifies certain additional information that the court may take into account when considering whether the making of an order for possession would be proportionate in all the circumstances of the case. These include the overall amount of debt outstanding on the mortgage concerned, the level of arrears due on foot of the mortgage concerned, and the advised market value of the principal private residence at the date on which the legal proceedings commenced. The Minister has provided a definition of "advised market value", AMV, in subsection (9). This definition, based on the corresponding definition in section 2 of the Property Services (Regulation) Act 2011, will ensure that the market value of the property is valued in a professional, objective manner. This AMV must be provided by the holder of a current licence issued by the Property Services Regulatory Authority, PSRA, under that Act.

Subsection (5) has a technical purpose. It clarifies that the fact that there is no PIA in a specific case may arise because a proposal for a PIA has not been made or, alternatively, such a proposal has been made but the procedure has ended without a successful outcome.

Subsection (6) identifies the circumstances in which, under the Insolvency Act 2012, the PIA procedure is considered to have ended. This applies in the following cases: where a PIP has prepared a proposal for a PIA and the debtor has consented to that proposal and the calling of a creditors' meeting, but that meeting does not take place before the expiry of the protective certificate as set out in section 106(3) of the 2012 Act; where, under section 108(8)(b), at the taking of a vote at a creditors' meeting in regard to a PIA proposal, the proposal is not approved by a majority of creditors in accordance with section 110 or deemed to be approved, and the PIA procedure has terminated; where, in a case under section 111A, there is only one creditor and the creditor does not approve the proposal under section 111A(8), or the personal insolvency practitioner fails to give the creditor a written notice of the proposal before the expiry of the protective certificate under section 111A(9); where the court upholds an objection to the PIA under section 120 and the procedure is deemed to come to an end in accordance with section 114(3); where, under section 115A(9), the court refuses to make an order confirming the coming into effect of the proposed PIA following a court review under that subsection; where the debtor is in arrears with his or her payments for a period of six months of the PIA and it is deemed to have failed under section 123.

Subsection (7) permits the Minister for Justice and Equality to designate a scheme for the purpose of subsection (1 )(c)(i) and subsection (3)(d)(i). Any such scheme would have to comply with the following conditions: the objective of the designated scheme must be to provide those borrowers with mortgage arrears difficulties in respect of their homes with assistance that is reasonably likely to enable them to address these difficulties and facilitate, as far as possible, their remaining in their homes, and it is reasonably likely that such assistance will in fact be provided under the scheme.

Subsection (8) provides that an advised market value must be set out in a statement provided by a licensee under the Property Services (Regulation) Act 2011.

Subsection (9) is a standard provision containing a number of relevant definitions for the purposes of this new section.

Section 4 contains standard provisions relating to the Short Title, collective citation and commencement provisions.

On behalf of the Minister for Justice and Equality, I underline again the urgency attaching to this short Bill. Its key objective is to provide further protections for homeowners in mortgage arrears who are facing the possibility of repossession of their homes. When enacted, the Bill will provide a clear checklist of factors that a court must take into account when deciding whether to grant a possession order to a lending institution in respect of a borrower's principal private residence. The measures provided for in this Bill are worthy of support and will prove to be an important addition to the suite of Government measures to protect those who find themselves in mortgage arrears and are facing the risk of court proceedings for repossession of their homes. I commend the Bill to the House.

Deputy Jim O'Callaghan

The Minister of State was correct when he concluded by stating the provisions of the Bill are worthy of support. For that reason, Fianna Fáil will support this legislation. As the Minister of State has indicated, the purpose of the Bill is to broaden the range of matters that a court must take into consideration before it grants a possession order on a person's dwelling. However, I do not necessarily agree with him that this will have a significant impact on the way possession applications are dealt with at present. It is the case that any time an application for repossession comes before the courts, the courts are very sympathetic to the house owner - the person who is living in the house and who has received a mortgage from a financial institution which is now seeking possession of the property. In fact, I would say the courts will give the individual concerned as much leeway as possible. Anyone with experience of how the courts deal with possession cases will know that if the borrower is making any reasonable effort to repay the loan on an ongoing basis, the court will take that into account and, in general, will not grant the order for repossession sought by the financial institution. Obviously, it is difficult to be prescriptive in every case but, in general, the Judiciary is sympathetic to the position of persons who find themselves in mortgage arrears and who are brought before the courts by financial institutions.

Everyone agrees with the Minister of State that possession orders should be the last resort. Fortunately, those possession orders are not particularly high in percentage terms in Ireland. However, that does not take away from the fact there are very many people who find themselves in mortgage arrears and, through a lack of advice or inability to deal with their financial problems, find themselves before the courts. Therefore, any measure which puts further obligations on the court to take such matters into consideration at the time of a possession application is to be welcomed.

Although we are supporting this legislation, that support should not disguise the fact we still have a significant problem with mortgage arrears in this country and it is a problem that, regrettably, the Government has failed to deal with. This Bill will broaden the measures available to a court but, in reality, it is not really going to improve the difficult situation in which many Irish people find themselves in respect of mortgage arrears. It is important to put on record the statistics in respect of mortgage arrears that exist in Ireland at present. We know there are 19,300 mortgage accounts in arrears up to 90 days, amounting to some €32 million; 5,000 mortgage accounts in arrears between 90 and 180 days, amounting to €27.5 million; 5,300 mortgage accounts in arrears between 181 and 360 days, amounting to €58.8 million; 6,700 mortgage accounts in arrears between 361 and 720 days, amounting to €130 million; and 28,000 mortgage accounts in arrears over two years, amounting to €2.4 billion. There is a significant problem that persists in respect of significant mortgage arrears.

At present, the options available to those people are very limited. They may seek protection under the personal insolvency legislation but we know that legislation needs to be reformed. It was novel legislation when it was introduced but there are many practical problems with it that need to be resolved by the Oireachtas to make it more effective, particularly for people in mortgage arrears. Many years ago, Deputy Michael McGrath introduced legislation seeking to establish a mortgage resolution office. It was commendable legislation that sought to take away the veto from the banks so an independent statutory body could determine applications in respect of people's mortgages. That was rejected by the Government and, to this day, the banks and financial institutions retain a veto when it comes to the issues concerning people in mortgage arrears. In fact, the only real protection those people have is the courts. Sometimes this is not recognised. Sometimes it is believed the courts are there simply to rubber-stamp the applications of the financial institutions but that is not correct. The courts are the protector of the citizen and of the individual. If there are rights available to those individuals, then the courts will vindicate them. However, the Government needs to ensure that the protections available to those individuals are increased and improved.

We also need to recognise, and I am sure the Minister of State will agree with me, that vulture funds went unregulated for too long. However, as a result of legislation that Fianna Fáil introduced, the loan owners, which were previously unregulated, have been regulated for the first time. That was signed into law late last year and some 18,000 mortgage holders will have their loan owners regulated by the Central Bank, with that figure likely to rise.

Obviously, there was a significant financial crisis in this country. Very many people got into mortgage difficulties because they bought properties between 2005 and 2008 and they have mortgages which, for many, remain unsustainable. Many of these people have made valiant efforts to continue to pay off their mortgages and they deserve to be commended for that. We need to recognise there is a public interest in trying to ensure we do not have a significant number of people who are drowning in mortgages that they cannot meet and which are dominating their lives. There is a public interest in trying to resolve that issue.

Unfortunately, the Government, since it came to power in 2011, has done little to address the issue. I know the Minister of State is bringing forward this legislation because he is trying to improve the position of those individuals. As I said at the outset, I believe the provisions within it are worthy of support but it is not the answer to the ongoing problem of mortgage arrears in this country. That is a problem that can only really be resolved through greater statutory intervention proposed by the Government and enacted by this House. Unfortunately, it is something we are going to keep talking about until such time as there are proper measures in place to deal with it.

Deputy Donnchadh Ó Laoghaire

Sinn Féin will not be opposing the passage of this Bill on Second Stage. However, there are several points which I wish to put to the Minister of State and which it is important to put on the record of the House. I note that no amendments were brought to the Bill in the Seanad and we hope to see it progress swiftly.

The Bill provides for matters relating to mortgage repossession proceedings and related court matters. My understanding is that it requires judges to have regard to the overall proportionality of repossession and the family circumstances of someone who may be facing repossession and the loss of a home. I will focus on section 3, given it is the substantive section of the Bill. Subsection (1) broadens protections for the borrower, if the borrower has previously engaged the services of a personal insolvency practitioner to assist in the resolution of his or her mortgage arrears problem, or the borrower has participated in good faith in a scheme designed to enable indebted borrowers to remain in their principal private residences. This is welcome, given good faith is generally a ground on which banks contest. I know anecdotally of cases where the banks have said they have engaged with the borrower but where they have outlined completely unrealistic deals to ensure payment and then stated that the borrower had failed to engage as he or she could not meet the demands of the institution. That is somewhat disingenuous in the first instance and ignores the principle of what is really meant by good faith.

Subsection (2) provides that when considering whether to make or refuse to make an order for possession in repossession proceedings, a court must take account of the matters referred to in subsection (3), some of which are of particular note, namely, whether the order is proportionate, if the borrower has children, and the conduct of the parties in any attempt to find a resolution to the borrower’s mortgage arrears difficulties. These are all welcome measures and it is also welcome that the State seems to be, albeit late in the day, giving weight to cases where minors, in particular, are involved. I am sure all of us hope this will go some small way to preventing a further increase in the record number of 4,000 children who are homeless in the State.

We must bear in mind that while this Bill represents progress, the other policies of this Government are still causing misery and adding to the housing crisis and the mortgage arrears crisis. The vulture funds, which the Government seems very happy to facilitate, are causing huge stress and concern. I hope the No Consent, No Sale Bill 2019, which Fine Gael voted against and which would have empowered borrowers, comes to pass in some way, shape or form in the not too distant future. We also express frustration at the Central Bank's decision to amend the code of conduct on mortgage arrears and the Government's acquiescence thereto. This key commitment of the programme for Government has been broken.

In expressing some reservations about the Bill, I draw attention to section 2A(3)(f). According to the explanatory memorandum, this provision means the court may take account of a lender’s refusal or reluctance to engage in attempts to find a resolution of the arrears issue and of a borrower’s refusal to engage meaningfully with the lender to find such a resolution. There may be a danger here that we will introduce a double edge whereby, for the first time, the behaviour of a borrower can be held against him or her. There may be many reasons a borrower will not engage, including pure fear or a lack of capacity to face a bank on an equal footing, which is seldom the case in any event. This subsection needs scrutiny and possible amendment. Who is to be the arbiter of “meaningful engagement”?

Section 2A(6) deals with personal insolvency agreements. Section 2A(7) deals with the ability of the Minister to establish a scheme to assist borrowers who are at risk of losing their homes. The objective of such a scheme, as stated in the explanatory memorandum, must be to provide those borrowers with arrears difficulties in respect of their principal private residences with assistance that is reasonably likely to enable them to address these difficulties and facilitate them in remaining in their principal private residences, that is, their homes. This is potentially an interesting proposal which may be of benefit to the borrower. I will reserve judgment on this until details are provided, but perhaps the Minister could address that in his concluding remarks.

More broadly, I echo some of the sentiments expressed previously by me and my party colleagues. I am very concerned by the changes to the legal aid rules introduced at the end of January. There is already plenty of inequality between the bank and the homeowner. These changes create a further inequality in representation between the banks and vulture funds, on one hand, and persons applying for insolvency, on the other. Until now, if someone was applying for personal insolvency or appealing the refusal of the banks to grant one, he or she could avail of the advice of a solicitor and barrister. On 31 January, the Government removed the right to a barrister for the debtor in court other than in exceptional circumstances. It also halved the fees for solicitors and personal insolvency practitioners, making it much less likely that people will take cases. This will make it much easier for banks and vulture funds to repossess homes. Members should bear in mind that borrowers are taking on banks which will have the very best legal representation available and will be dealing with very complex legislation. To all intents and purposes, this is an attempt to disarm the debtor who may be fighting possession. It is a serious inequality of arms.

A very significant proportion of appeals against a refusal by a bank to engage in the insolvency process are successful. If the banks are facing strong legal opposition, they may be more likely to agree to engage in the first instance. However, if a bank is facing much more limited resources, with the bank potentially having senior and junior counsel and the debtor not having any barrister, what is the incentive for the bank to engage? The Government appears to be driven to undermine the protections which the mortgage holders have and to assist the banks and vulture funds, which is shameful. The Bill is being framed as an attempt to rectify the very serious imbalance that exists. While this legislation is welcome, it does not do enough when contrasted with the various policy decisions I have outlined. The Government is essentially giving crumbs to the homeowner, on the one hand, and giving banks and vultures a feast, on the other.

I once again express my support for the Bill despite those criticisms of Government policy generally. It is welcome although it is very modest. We will support it and I hope it can progress through the remaining Stages relatively swiftly.

Minister of State at the Department of Public Expenditure and Reform (Deputy Kevin Boxer Moran)

I thank the Deputies for their support. I recognise the points they have made. It is said that the Government is not doing anything. Deputy O'Callaghan spoke about the legislation introduced by Deputy Michael McGrath before Christmas. The Government supported that Bill. I was in this job for less than two years when I introduced this legislation. Many a person in this House has brought in legislation that did not get as far as the Office of the Attorney General. The Government is proactive.

I have worked with Ms Julie Sadlier, a solicitor, and Dr. Padraic Kenna on this Bill. Everybody in the House is out canvassing at the moment. We meet people who find themselves in mortgage arrears. There are 28,000 such households. If we assume there are four members in each of those families, more than 100,000 people are affected by this. The Government is moving in the right direction with this legislation, which will go a long way to supporting those families and helping the people I have spoken to throughout the country, particularly judges who are looking for help. People who have contacted me in recent months are waiting on this piece of legislation. I ask Deputies to trust me; plenty of those people email me daily to check the Bill's progress. I am delighted it has come to this. I am also pleased to have the support of colleagues across the House and thrilled that this is the second Bill I have introduced in the House in less than two years.

Question put and agreed to.

Dáil Éireann díospóireacht - Tuesday, 21 May 2019