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

Question proposed: "That the Bill be now read a Second Time."

On behalf of the Minister for Justice and Equality, Deputy Flanagan, I am pleased to have the opportunity to introduce the Land and Conveyancing Law Reform (Amendment) Bill 2019. I have worked closely with the Minister to bring this Bill before the Oireachtas and I look forward to our discussion of its provisions here today.

The principal objective of this Bill is to provide further protections for homeowners in mortgage arrears who are facing the prospect of repossession proceedings. It does so by broadening 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. For this purpose, the Bill proposes to insert a new section in the Land and Conveyancing Law Reform Act 2013. This Bill, which has its genesis in a Private Members’ Bill I initiated prior to my appointment as Minister of State, will, I 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 everyone in this House will agree with me that repossession of a borrower’s principal private residence should be a last resort when all other possible remedies have failed.

This Government remains committed to helping borrowers in mortgage arrears to remain in their homes wherever possible. Moving to the main provisions of this Bill, I want to stress 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, ECB, has been consulted on the Bill’s proposals. The ECB 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 inserts a new section 2A, containing nine subsections, into the Act of 2013. Subsection (1) defines the scope of this new section.

The Bill’s provisions will not only apply 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. It will also apply in cases where, prior to or following commencement of the proceedings the borrower has already 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: proceedings where the court had already 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; 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 did adjourn them and notwithstanding such adjournment, there is no resulting PIA; and proceedings which have not been adjourned under section 2 of the 2013 Act but the borrower has, prior to the court hearing, participated in good faith in a scheme to assist borrowers in mortgage distress to remain in his or her home 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, in 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. The court must take the following into account.

Subparagraph (a) provides that the court must consider whether the making of the possession order would be proportionate in all the circumstances of the case. In providing for this matter, the legislation 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. Subparagraph (b) provides that the court must always take into account the circumstances of the borrower and any dependents. Subparagraph (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 dependents could remain in their home. Subparagraph (d) makes it clear that the court must 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 dependents, to remain in the home or, alternatively, to secure other accommodation.

The Minister for Justice and Equality has asked me to stress that consideration of proposals which would allow the borrower to remain in his or her home will include examination of any proposal for participation by the borrower in a scheme to assist persons in mortgage distress to remain in his or her principal private residence. Subparagraph (e) provides that the court must take into account the response, if any, of the lender to the borrower’s proposal to remain in his or her home. This will place an onus on lenders to engage in a constructive manner with any proposals made by the borrower. Finally, subparagraph (f) relates 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 and constructive manner with the lending institution in order to find such a resolution.

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. I should add that 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 case may arise because a proposal for a PIA has not been made, or 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. The procedure will be considered to have ended: 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 regarding 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; and where, in a case under section 11A, there is only one creditor and the creditor does not approve the proposal under section 11A(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 11A(9).

It will also be considered to have ended where the court upholds an objection to the PIA under section 120 and the process 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 section 115A; or 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 purposes 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 that 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 the 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.

Finally, 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 wish to underline again the importance of this short Bill. When enacted, it will provide important additional protections for borrowers by broadening the range of matters that a court must take into account when deciding whether to grant a possession order to a lender in respect of a borrower’s home. The position of the Government has been and continues to be that repossession of a borrower’s principal private residence must always be a remedy of last resort. I commend the Bill to the House.

Fianna Fáil is supporting the Bill. It is happy to support any measures that will, in principle, help distressed mortgage holders. It is welcome that the purpose of the Bill is to broaden the scope of matters that courts must take into account. We believe that loans should not be sold to vulture funds. Such practices are causing great distress to people across the country. Apart from this Bill - with the greatest of respect to the Minister of State, I believe Fine Gael is advancing it to appease him - the Government has practically abandoned distressed mortgage holders across the country. All Members are aware of such situations from people in our constituencies and hearing awful stories of people in great distress.

Fianna Fáil brought forward legislation to regulate vulture funds for the first time in this country which was signed into law in late 2018. However, more progress needs to be made on the insolvency regime side. In the absence of a fair and functioning regime, it is the courts and not the Government which offer some bit of protection to distressed mortgage holders. Fianna Fáil has brought forward a Bill which would remove the veto which banks currently hold and establish a mortgage resolutions office which would provide fair and sustainable solutions to mortgage holders and allow those making a real effort to pay their mortgage to stay in their home. That is the only solution in the absence of proper social housing building across the country. That is the real nub of this issue. People are staying in their homes and trying to work through their mortgage distress because they have no alternative; they do not want to be out on the streets with their children. Fianna Fáil believes the Government needs to make substantial progress in that regard.

I wish to warmly welcome the Minister of State to the House. He has become a regular visitor here. As far as I am aware, although I am open to correction, he is the only Minister or Minister of State in my eight years in this House to have initiated a Bill prior to entering office and then come to the House to bring it over the line. This is the second time in a matter of weeks that the Minister of State has had that unique distinction. That is a phenomenal achievement because it comes from having a finger on the pulse of the people who need the help of politicians and the Government more than anybody else, those who do the right thing, engage, embrace the system, talk to banks but find themselves in the awful position of not being co-operated with.

I agree with Senator Clifford-Lee in regard to vulture funds. What went on in this country was appalling whereby we allowed banks to sell to vulture funds which had no compunction whatsoever in terms of how they dealt with people. They lacked any kind of decency or humanity. The vast majority of people who end up in such situations want to do the right thing as best they can. The Bill proposes giving them the protection of the State when they try to do the right thing. It certainly does not accommodate those who refuse to engage or are trying to circumvent the system in some way.

It is not a large Bill, but, as I often say, small is beautiful. It will potentially make a phenomenal difference to people's lives in real terms. I am delighted that Fianna Fáil is not opposing the passage of the Bill on Second Stage. I suspect none of our other honourable colleagues will do so either. If there are issues that need to be looked at, that can be done on Committee Stage. However, the genesis of what the Minister of State was trying to achieve in his Private Members' Bill and which the Government is now trying to achieve through this Bill is what we all should want to do as politicians.

Irish people are very proud of their homes. We have one of the highest rates of home ownership in the world per head of population. People invest most of their hard-earned money into acquiring and maintaining a house which becomes a home. Most people want to hold onto their home at all costs. Financial institutions should not be allowed to unilaterally disregard the genuine efforts of decent, honourable, hardworking people who find themselves in a difficult situation. I welcome the Bill and look forward to its passage through the House in the not-too-distant future, becoming law and being signed by the President. There is not much more to say except that it is excellent legislation and I sincerely hope that it does not fly under the radar of the public and the media. The media are discussing the work being done by the Government in responding to the needs of people. Yes, we have a lot to do, but this legislation is responding to the needs of the most vulnerable in our society, those who could become homeless as a result of a lack of co-operation by financial institutions. I wish the passage of the Bill every success. I will certainly endeavour to ensure that there is no obstacle on the Fine Gael side to its passing through the House in as swift a time as possible.

Cuirim fáilte roimh an Aire Stáit. Tá mé sásta go bhfuil an deis agam cúpla focal a rá ar an Bhille seo inniu. Like Fianna Fáil, Sinn Féin will not be opposing the passage of the 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. 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 situation of someone who may be facing repossession and the loss of a home.

I will focus on section 3 given that it is the meat and drink of the Bill. Subsection (1) broadens the protections of the borrower, if the borrower has previously engaged the services of a personal insolvency practitioner, PIP, 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 that 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. They 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. It is somewhat disingenuous in the first instance and ignores the principle of 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 way to prevent a further increase in the number of children who are currently homeless in the State, which is 4,000.

We must bear in mind that while this Bill represents progress, the other policies of the Government are still causing misery and adding to the housing arrears crisis. The vulture culture it is fully behind is causing huge stress and concern. What is it about helping the banks solve their problems and to hell with the affected families' problems? The UN is condemning the policy, and rightly so.

I hope the no-consent no-sale Sinn Féin Bill to empower borrowers comes in and makes a difference, despite the scaremongering. We must also express frustration at the Central Bank decision and Government acquiescence to amend the code of conduct on mortgage arrears. This was a key commitment of the programme for Government that has been broken, and broken brazenly. Where are the special courts that the programme for Government also promised?

I wish to put on record reservations and draw attention to subsection (3)(f), which the explanatory memorandum tells us means that 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 in meaningful engagement with the lender to find such a resolution. There is a danger here that we will be introducing a double edge, where for the first time, as far as I am aware, the behaviour of a borrower can be held against him or her. The problem is that there be may be many reasons a borrower will not engage, including pure fear or lack of capacity to face a bank on an equal footing. This subsection needs close scrutiny and possible amendment. Who decides, for example, what "meaningful engagement" is?

Subsection (6) deals with personal insolvency agreements. Subsection (7) deals with the ability of the Minister to establish a scheme to assist the borrower who is at risk of losing his or her home. 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 residence with assistance that is reasonably likely to enable them to address these difficulties and facilitate, as far as possible, him or her remaining in his or her principal private residence. Potentially, it is an interesting proposal which may be of benefit to the borrower. I will reserve judgment on this, however, until further details are provided and perhaps the Minister of State could touch on that in his concluding remarks.

More broadly, I wish to echo some of the sentiment expressed by my party previously, in stating that I am appalled at the changes to the legal aid rules brought in at the end of January. These create a further inequality in representation between the banks and vulture funds on one hand, and the person applying for insolvency on the other. Until now, if one was applying for personal insolvency or appealing the refusal of the banks to grant one, then one could avail of the advice of a solicitor and a barrister. As of 31 January, the Government has removed the right to a barrister for the debtor in court, other than in exceptional circumstances. It has also halved the fees for solicitors and personal insolvency practitioners. This will make it much easier for banks and vulture funds to repossess homes. I fear that people will be left completely to the wolves. Bear in mind that they will be taking on banks which will have the very best legal representation available and will be dealing with complex legislation. This is, to all intents and purposes, an attempt to disarm the debtor who may be fighting possession. A very significant proportion of appeals against a refusal by the bank to engage in the insolvency process are successful. If the banks are facing strong legal opposition, they may then agree to engage in the first instance. If, however, the banks are facing much more limited resources, with the bank potentially having senior and junior counsel and the debtor not having any barrister, what then is the incentive for banks to engage? The Government appears to be driven to undermining the protections which the mortgage holders have and to assisting the banks and vulture funds. That is shameful, is mór mo náire air.

This Bill is being framed as an attempt to rectify the very serious imbalance that exists, and despite being welcome, does not do enough when contrasted with such decisions as I outlined above. The Government is essentially giving crumbs to the homeowner on the one hand and giving banks and vultures a feast with the other.

I wish to conclude by briefly commenting on the role of the Garda, and the perception of it assisting unregulated bailiffs in making repossessions on behalf of the lender. I understand that this issue is still outstanding, with private security firms remaining unregulated as of today. I know the Minister has committed to looking at the regulation of such firms but nothing has emerged since that announcement. My colleague, Deputy Ó Laoghaire, published the Regulation of Private Security Firms Bill in January, and has placed it on the Order Paper. I ask the Minister to look at this Bill, consider advancing it, or a similar piece of important and crucial legislation, as a matter of urgency.

I welcome the Minister of State to the House. I also very much welcome this Bill. As someone who is involved in the political and the legal arenas, I am very familiar with the issues that can arise. One of the concerns I have on occasion is the lack of engagement by the lending institutions with the borrowers, in particular where there are a number of properties involved and where one section of the bank may be dealing with business loans while another section is dealing with personal loans. I find the two sides will not meet when one wants to sit down and hammer out a deal. That is one of the most frustrating things I have come across.

I have also come across the very poor situation of receivers being put in charge of properties. I can give the Minister of State an example of a case I am involved in where a receiver from Dublin was put in charge of a property in a country town in County Cork. After two years later, we found that property had gone to rack and ruin because the receiver did not do its job. Should the borrower carry the cost of the devaluation of that property? Properties have gone up in value over the last three to four years, yet this property has gone down substantially in value, by approximately 66% in real terms. There are other borrowings in this case. We have found that the lending institution is impossible to deal with and will not talk to us about the mess it created. It is wrong that people are dealt with in this way. Different legal practices are acting for the different arms of the same bank and we have found that the two or three sides will not meet to deal with the issues that have arisen.

I very much welcome this Bill in respect of certain issues concerning the repossession of family homes. We need to have a more comprehensive mechanism in terms of engagement. One of the most frustrating things for people is the inability to communicate with someone in the lending institution. That is the biggest challenge I have found. I am dealing with three or four of these cases. I am trying to tie someone down in terms of arranging a meeting on a particular day and at a particular time so that we can go through the issues. I find this extremely frustrating.

There is another side to this which I find frustrating. I was in the High Court last Tuesday week. People are using the court system to delay resolution and that is not helpful either. I was not there on a borrowing matter but on another matter but I witnessed what I would consider was not proper co-operation on both sides, which is not helpful either.

It is important that in the case of a family home, particularly where there is a young family, every opportunity is given to try to come to a resolution of the issue.

I have indicated figures to the Minister of State and we are fortunate as deposits in Irish banks and financial institutions now exceed the amount of lending. We are therefore now in a better position than we were a number of years ago. Our net household borrowing is approximately €150 billion but deposits are slightly higher than that now in real terms, which is a welcome change.

My understanding is we are now down to approximately 57,000 households in negative equity. That figure will probably continue to improve and one newspaper recently indicated that within the next six to eight months, there will be very few households in negative equity. A person may not be in negative equity but the question remains as to whether there is still the capacity to repay the borrowings that remain; those are separate matters. The question is whether banks will move on properties when they realise there is no longer the risk of negative equity but there could be major consequences for a family with that move. It is something we must deal with. Have we got any figures on the overall numbers of people not engaging with banks? It is still a little unclear as to what is occurring there if for some reason people do not engage with banks. As a result, all we are hearing about is people going to court, so it would be helpful to have some kind of information on that. Most people want to engage and deal with the matters allowing them to stay in a family home.

There is also the matter of cases where parties have separated, meaning just one party might be dealing with the bank while the other party has opted out of the process. This presents a major challenge and nine times out of ten we will find the party who wants to engage and is in the family home is also the party looking after children. It is a challenge we must also deal with and it needs to be taken into account. Trying to get the person who has decided to opt out back in so as to ensure he or she can make a contribution to support the family is important.

I welcome the Bill, which will be helpful in trying to deal with issues presented to families in courts.

I thank all Senators for their contributions and I am particularly thankful for the support from Fianna Fáil and Sinn Féin, as well as Senators from the partners in government, Fine Gael. I am no different from anybody else in the House and I travelled the length of Longford and Westmeath trying to get into Dáil Éireann and saw so many people who found themselves in so much difficulty. So many people have found themselves in arrears. This Bill is short but it will make a big difference. It is unfair to say that the Government has not acted. Although the Bill was introduced nearly three years ago, it had to pass through the Houses and that is why we are here today. I welcome the views and points of all Senators. One or two questions were put to me and I will get back to the Senators in writing on those. I really appreciate the support. Although this is a short Bill, it will make a big difference to people.

All day yesterday people were sending emails and texts to my office wondering about the Bill. It is most important for people who want to work with the banks. We are not leaving an open door for those who are not engaging with banks. This deals with people who have found themselves in difficulty and who want help. The Government is here to do that and I thank all the Senators for their support.

Question put and agreed to.

When is it proposed to take Committee Stage?

Committee Stage ordered for Tuesday, 2 April 2019.
Sitting suspended at 1.25 p.m. and resumed at 2.30 p.m.