Key Post Can I force the bank to allow me to sell my home in negative equity?

[Brendan Burgess]

Ross Maguire SC of New Beginning has very kindly answered a number of questions I have submitted to him which arise frequently on Askaboutmoney.

This particular point is so important, that I have made a Key Post of it.

Please feel free to post follow up questions. As it's an FAQ, please keep to general questions which have a wide application to other cases rather than case specific questions which have little relevance for others.



4. How can I force the bank to let me sell a house in negative equity? I am not in arrears but I am in deep negative equity and cannot pay the shortfall. The lender is refusing to give me permission to sell. Can I force them to allow me to sell?

There is a new provision under the new Conveyancing and Law Reform Act, 2009 which permits a mortgagor i.e, the borrower, to apply to the court to direct the sale of a property. This applies to all housing loan mortgages but does not apply to other types of mortgage. It is always possible to surrender the property.

The English case mentioned is now of relevance in Ireland, given the provisions of Section 94 of the Conveyancing and Law Reform Act, 2012 which gives the court a wide discretion to direct a sale of a mortgaged property even if the mortgagee, i.e. the lender, objects to the sale.

It should be noted that this has not yet been tested in Irish law.

 

[44brendan]

4. How can I force the bank to let me sell a house in negative equity? I am not in arrears but I am in deep negative equity and cannot pay the shortfall. The lender is refusing to give me permission to sell. Can I force them to allow me to sell?

There is a new provision under the new Conveyancing and Law Reform Act, 2009 which permits a mortgagor i.e, the borrower, to apply to the court to direct the sale of a property. This applies to all housing loan mortgages but does not apply to other types of mortgage. It is always possible to surrender the property.

The English case mentioned is now of relevance in Ireland, given the provisions of Section 94 of the Conveyancing and Law Reform Act, 2012 which gives the court a wide discretion to direct a sale of a mortgaged property even if the mortgagee, i.e. the lender, objects to the sale.

Very interesting. Much needed legislation requred here! A test case should quickly establish the principle in law and this will facilitate a lot of people who are currently unable to move on from negative equity properties due to Bank intransigence

 

[Brendan Burgess]

From the Land and Conveyancing Reform Act 2009 Explanatory Memorandum

Section 94 puts in statutory form a jurisdiction which has probably long existed under the courts’ inherent equitable jurisdiction. It
entitles a mortgagor to seek an order for sale of the land whenever an action is brought by him or her in relation to the land, such as for
redemption. The mortgagor may wish to obtain a sale in order to reduce mounting debt, but the court is given a wide discretion under
subsection (2) as to whether to make an order and the terms of any order made. Subsection (3) sets out a variety of orders which the
court may make. Subsection (4) provides that except in the case of a housing loan mortgage, section 94 will take effect subject to the
mortgage.

Actual text of the Act

Court order for sale.

94.—(1) This section applies to any action brought by a mortgagor for—
(a) redemption, or
(b) sale, or
(c) the raising and payment in any manner of the mortgage debt, or
(d) any combination of these in the alternative.

(2) In any action to which this section applies the court may, if it thinks fit, direct a sale of the mortgaged property on such terms as
it thinks fit.

(3) Without prejudice to the generality of the court’s discretion under subsection (2), it may—
(a) allow any time for redemption or payment of the mortgage debt,
(b) require lodgment in court of a sum to meet the expenses of a sale and to secure a performance of its terms,
(c) give directions as to costs and require the giving of security for costs,
(d) direct a sale without previously determining priorities of incumbrances,
(e) give the conduct of the sale to a particular party,
(f) make a vesting order conveying the mortgaged property to a purchaser or appoint a person to make such a conveyance.

(4) Except in the case of a housing loan mortgage, this section takes effect subject to the terms of the mortgage.

 

[paddy19]

Anthony Joyce Solicitors have successfully used this Section of the Act

We have had another high profile case in the media this week where we represented Caroline and Robert Carass in their dealings with Permaent TSB. You can read about the court case in today’s Irish Times and Irish Independent using the links below. In this case we were left with no option but to force the bank into court in order to allow the Carass’s to sell their property for less than the mortgage oustanding with the bank. The case was settled with bank yesterday. Below we have also outlined how other people in negativity can undertake a what is called a forced short-sale, which is where the value of the property sold for less than the mortgage that is outstanding.

[broken link removed]

 

[paddy19]

Finally my learned Barrister listened to the actual question I asked!

Effectively the bank has a veto on any negative equity sale.

The vendors solicitor has to give an undertaking that she will discharge the mortgage from the proceeds of sale. In a negative equity sale she would provide a letter of consent from the bank allowing the mortgage to be redeemed for an amount less then the purchase price.

The obligation on the purchaser's solicitor is to check the title in relation to mortgages and other burdens. If they exist, he should ensure there is a mechanism for their removal from title on closing of the purchase.

So if a bank won't give it's consent the buyer would be mad to complete the purchase. Wala BANK VETO!

This is why section 94 of the 2009 act is so powerful, it formally gives the court wide authority to force banks to allow sales where mortgages are unsustainable.

The courts seem to be taking the view the if the mortgagor wants to sell the property that is unsustainable then they should be allowed to do so.

The bank hate these rulings because they are left with unsecured debt and have much less leverage over the mortgagor.

The threat of using section 94 can help consumers to sell their property if they don't went to become long term serfs to their banking masters!

Has anybody used the threat of section 94 to get the bank to allow the sale of unsustainable property?

 

[44brendan]

A good solicitor could be in a position to force through some agreements with Banks who are reluctant to take this course of action. Which Bank is going to risk going to Court on this issue, losing the case and setting the precedent for a floodgate of similar requests. The problem for the Banks is that by agreeing to this course of action they are in effect crystalising their bad debt. This means that if they have under provided in their books for the negative equity loans, they will now be forced to increase provisions, which leads to consequences for their capitalisation.

 

[paddy19]

It's the threat not the action that will help.

As with most situations in life the threat is more useful than the action.

It's important that people understand Section 94 because it enhances their negotiating position.

We know that the banks (including the Central Bank) have stacked the deck in their favour so everything that helps balance the relative power position is to be welcomed.

Great to hear if anyone has taken this position and what has happened.

 

[Bronte]

this will facilitate a lot of people who are currently unable to move on from negative equity properties due to Bank intransigence

But if you don't repay your mortgage does that not force the bank to sell? The bank will surly not just let you stay in the property with zero payment? How does that make sense? Is it particular banks only?

 

[Time]

The banks are very slow to throw anyone out of their house. Unless they have a buyer lined up there is no point if they can't sell it.

 

[44brendan]

But if you don't repay your mortgage does that not force the bank to sell? The bank will surly not just let you stay in the property with zero payment? How does that make sense? Is it particular banks only?

I'm referring to negative equity properties in general and not just those that are not being serviced. Albeit that Time is correct in saying that banks are extremely slow to take re-posession proceedings in the case of PDH exposures.