Ireland: Breaking The Code: Failing To Comply With The Code Of Conduct On Mortgage Arrears

Last Updated: 9 November 2015
Article by Sara Carpendale and Gregory Glynn

A recent Supreme Court decision (May 2015) gives clarity to lenders on the impact of failing to comply with the Code of Conduct on Mortgage Arrears when seeking possession of a primary residence.

IRISH LIFE & PERMANENT V DUNNE

The case started in the Circuit Court in May 2011 when Irish Life & Permanent sought possession of the family home of two borrowers. The borrowers had defaulted on a 2007 loan, which was secured against their home.

The borrowers did not defend the court proceedings or take any part in them as they had been living overseas since 2010. As a result, no issue was raised as to whether the bank had complied with the code until the case came on for hearing in the Circuit Court.

The bank lost its application for possession in the Circuit Court due to its failure to issue a demand letter by a particular date. This issue was unrelated to the bank's compliance with the code, which was not fully considered by the Circuit Court. The bank appealed to the High Court. As a number of High Court judges had taken "differing views" on the consequences of non-compliance with the code, the High Court sought the opinion of the Supreme Court.

COULD THE BANK BREAK THE CODE AND STILL GET POSSESSION?

The Supreme Court had to consider whether a lender which fails to comply with the provisions of the code can nevertheless obtain an order for possession of a borrower's primary residence.

What is the Code of Conduct on Mortgage Arrears?

The code is issued by the Central Bank and it sets out the manner in which banks are to treat borrowers who are either in arrears or who are in danger of falling into arrears. The code only applies to principal residences and does not apply to investment properties. The current version of the code was published in 2013 and replaces the 2011 code. Provision 56 of the code contains the moratorium provision.

BREAKING THE CODE

The code requires lenders to go through a process with a borrower who is in arrears, or who is in danger of falling into arrears, in order to try and find a solution to the mortgage arrears problem. The code contains moratorium provisions which prevent lenders from bringing possession proceedings against cooperating borrowers until a certain period of time has elapsed.

The Supreme Court stated that the code's moratorium provisions are intended to give the lender and borrower a window to explore other solutions to the mortgage arrears problem. It said that if a financial institution ignores the moratorium and seeks possession as soon as the borrower defaults, then it is doing the very thing the code was designed to prevent.

"A court could not properly act to consider a possession application in those circumstances," the Supreme Court said. The Supreme Court found that "... where the breach of the Code involves a failure by a lender to abide by the moratorium referred to in the Code, but in no other case, noncompliance with the Code affects, as a matter of law, a relevant lender's entitlement to obtain an order for possession." This means that if a lender fails to comply with the moratorium provisions in the code, the court will not grant the lender an order for possession of a family home. However, breach of any other provision of the code will not affect a lender's entitlement to an order for possession. The reason for this is that the current legislation does not give the courts a role in assessing a borrower's proposal on arrears or a lender's debt resolution procedure. The Supreme Court said that if the law which enables a lender to obtain possession of a borrower's property is too heavily weighted in the lender's favour, it is for the Oireachtas (the Irish parliament) to address this.

HOW TO ESTABLISH COMPLIANCE WITH THE CODE

When a lender is seeking possession of a borrower's primary residence, it must prove to the court that it has complied with the code's moratorium provisions. The Supreme Court decision helpfully outlines the essential information that a lender should include in its court papers in order to show compliance with the moratorium provisions:

The lender's affidavit should state that the proceedings were started outside the moratorium period. Any correspondence evidencing this should be exhibited to the affidavit.

  • If the lender contends that the full or normal moratorium period does not apply, the affidavit should explain why this is the case.
  • If the borrower challenges the lender's evidence that there was no breach of the moratorium period or that it did not apply, the lender will need to provide further evidence in its affidavit in order to prove its case. The court hearing the case will have to consider what further evidence is necessary.

SUBSEQUENT CASES

The decision of the Supreme Court was applied by the High Court in the more recent cases of Danske Bank v Higgins and Stepstone Mortgage Funding Ltd v Hughes. In the Danske Bank case, the High Court awarded the lender judgment in the sum of €253,959.68 against the borrowers. The borrowers had argued that their account should have been dealt with under the code. The Court found that the moratorium provisions in the code only apply where the lender is seeking an order for possession. In this case the lender was not seeking possession, but was seeking judgment of the loan amount.

In the Stepstone Mortgages case, the lender sought possession of the borrowers' family home, which the High Court granted. The borrowers argued that the lender had failed to comply with the code. The Court found that as the lender had issued proceedings outside of the moratorium period, it had no discretion or power to consider or act upon a breach of any other provision of the code and the lender was entitled to possession.

CLARITY FOR LENDERS

The Supreme Court has clarified the law for lenders. It is now clear that the courts will refuse to grant an order for possession where the lender did not comply with the code's moratorium provisions. However, breach of any other provision of the code has no effect on a lender's entitlement to an order for possession.

It remains to be seen whether legislation will be enacted to give the courts wider jurisdiction in repossession cases.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.