A recent High Court decision in a residential mortgage repossession case, Start Mortgages v Gunn, has made it difficult for lenders to obtain repossession of residential property. Irish property is divided up into registered land (approximately 60%) and unregistered land (approximately 40%). The statutory procedures for repossession of registered land and unregistered land differ. Until 1 December 2009 the procedure for registered land was set out in section 62(7) of the Registration of Title Act 1964. Legislation in December 2009 repealed section 62(7) without making any transitional provisions relating to mortgages completed prior to 1 December 2009.
Start Mortgages v Gunn decided that where proceedings for possession of registered land mortgaged before 1 December 2009 were commenced after that date and where no prior demand was made (whether because the borrower did not go into arrears before that date or otherwise), such proceedings cannot continue and must be struck out. Further, where a demand was made before 1 December 2009 which did not call for repayment of the principal monies due (for example, where the demand was in respect of repayment of arrears only), then proceedings cannot be taken on foot of that.
The decision is hugely significant as clearly where a lender cannot itself repossess property, its remedies in default situations are greatly diminished. It should be stressed that a lender can still appoint a receiver to take possession (where the mortgage deed allows it to do so) but receivership is very rarely used in residential cases for cost and other reasons. As receivership is almost universally used in commercial property enforcement, the Start Mortgages decision has less ramifications for commercial registered land. The decision does not affect repossession of unregistered land.
The Start Mortgages decision has been appealed to the Supreme Court but the appeal may not be heard for some time. The Irish Government has not shown any intention of implementing correcting legislation and will probably not do so unless its hand is forced by the Supreme Court upholding the High Court decision. In the meantime, prospective buyers of distressed residential debt need to carry out detailed due diligence on this particular aspect.
