The Department of Justice, Equality and Law Reform in collaboration with the Law reform commission started a joint project in the late 2003. The committee had an aim of making radical reforms in the land laws and conveyancing. The committee also wanted to review and modernise the existing laws that governed land laws and conveyancing. The modernised laws would suit the changing demographic, economic and social requirements that had been identified. This committee was particularly concerned with the huge range of pre-1992 statutes, which were related to the land laws and conveyancing. Most of these statutes were still an integral part of the legislation which was in force in the state. Therefore, it was convened with an aim of making proposals that would reform and modernise the land and conveyancing laws. The commission also sought to remove the numerous anomalies that were in the land laws. This would make the laws more accessible and easy to understand.
In the first phase of the project, the committee screened the pre-1992 statutes with an aim of identifying the statutes that could be revoked without replacement. Therefore, these were obsolete rules that would be inappropriate in the conditions of the 21st century. In this phase, the committee also identified the statutes which were relevant to the modern conditions. Those that were relevant were amended to make sure that they were more effective in the modern conditions. After going through these laws, the Law Reform commission released a consultation paper on the Reform and Modernisation of Land Law. The commission commented that the laws on mortgages were extremely outdated and complex, and they were in need of considerable reform. The Law Reform commission observed that the laws, which governed the creation of mortgages on land to acquire loan debts, had a long history, and they were outdated. They had unnecessary complications. The judgement mortgages were also full of technical complexities and inappropriate provisions.
A mortgage can also be referred to as claims on property or liens against the property. It is one of the most common ways of securing a debt where a person places a real estate property as collateral. Land is used as collateral in mortgages. There are two main forms of mortgages that have gained much significance over time in Ireland. The first one is the loan mortgage. In this mortgage, the borrower, who is the owner of a piece of land, gets a loan from a lender by mortgaging the land. This usually favours the lender more than the borrower. The second form of mortgage is the judgement mortgage. This is a specific statutory form created with the aim of enforcing a judgement debt.
In Ireland, mortgages play an extremely significant role in transactions involving land. This is because most people who buy land have to acquire a substantial amount of money that is required to buy the land. The loan is given by the lending institution called the mortgagee to the borrower, called the mortgagor. The laws, which governed these transactions when the commission was formed, were a complex mixture of the statute law and the equitable principles which were developed by the old court of chancery. Three broad areas were put under considerations by the commission, and they were later reviewed to form the Land and Conveyancing Law Reform Act in 2009. These three broad areas were the methods of creating the mortgages, the control of terms and conditions of the mortgage and remedies of the operation of the mortgagee.
Before the formation, of the commission, mortgages of unregistered land in Ireland could be created through different means that were developed by the conveyances over time. The most common way involved the mortgagor conveying or assigning land ownership to the mortgagee. This transferred the ownership of land from the mortgagor to the mortgagee until the loan was repaid. When the loan was repaid, the mortgagee would then transfer the ownership of land back to the mortgagor. In other incidences, mortgages of leasehold land were created by sub-demise. In this situation, a sublease was created for the mortgagee instead of transferring the ownership of the leasehold enterprise to the mortgagee. This happened when the mortgagee did not want to assume the obligations of the Lessee under the lease. Another form of mortgage was the equitable mortgage. In this form of mortgage, the mortgage was created when the involved parties deposited title documents with the lending institutions such as the bank.
These methods of creating mortgage were both archaic and complex. The method of transferring the ownership of land from the mortgagor to the mortgagee was not consistent with the intention of the mortgage transaction. The main reason for a mortgage is securing to give security for the loan transaction. However, this method depicted a scenario where the mortgagee had an intention of owning the land. The lender is expected to invoke the security of the loan as a last result i.e. only when the borrower has defaulted in serious ways, and any other possible resolutions have failed. The borrower should always have the full ownership of the land, but the lender should have all the remedies and remedies against this land, which are necessary to enforce its security. Through this, the mortgagor will have the adequate security rights over his or her land. The commission recommended an amendment of the mortgage laws. It prescribed that a legal mortgage on any unregistered land should only be done through charge, and it should operate in a similar way as the charge that governed registered land.
The Land and Conveyancing Law Reform Act in 2009 assimilated the recommendations of the commission into law. The Land and Conveyancing Law Reform Act in 2009 states that any legal mortgage can only be created by charge rather than through the demise of the legal estate or conveyance. Any other instrument, which would go against the provisions made by the Land and Conveyancing Law Reform Act, would not be considered as legal ways of transacting a mortgage. Because of this amendment, it would not be possible for any involved party to contract out of the provisions made by the statute in relation to the housing loan mortgages. More protection was also given to the holders of any housing loans. The Land and Conveyancing Law Reform Act ensured that the borrower is entitled to redeeming a housing loan. The borrower could do so without paying money to the mortgagee.
On the issue of equitable mortgages, the commission had recommended the retention of the methods that already existed. The commission did not have any reason to ban these types of mortgages, but it noted that they would soon be ineffective when the e-conveyance system became operational. The Land and Conveyancing Law Reform Act did not amend any of the laws that governed these equitable mortgages.
The commission also proposed amendments on the issue of control of the terms of mortgages. The court had been involved in the control of mortgage operations over a long period. This was because of the complexity of the rules and the terms used during such operations. Terms such as collateral advantages were in constant use. This prevented an unfair advantage being taken by the mortgagee on the mortgagor. The commission recommended the court to remove this statutory interference. It also recommended formulation of equitable jurisdiction to regulate and control the terms, conditions, and operations of mortgages. The Consumer Credit Act in 1995 had introduced an act that the commission recommended for amendments. In this act, the borrowers were supposed to given a copy of the lenders valuation report. The lender was also expected to give the option of insurance to the borrower. The mortgagee should also provide the borrower with any important information, health warnings and documentation. The mortgagee was also required to provide the borrower with information about the interest rates and restrict penalties for any early redemption by the borrower.
When the Land and Conveyancing Law Reform Act was made, the borrower was given a right to inspect and make copies, at reasonable times, the documents which were in the possession of the mortgagee. However, the mortgagor was required to pay an agreed amount of money to facilitate the exercise. The mortgagor was also given the right to redeem any housing loan mortgage. The mortgagor could do this without even having to pay any money that was due under any other mortgage, with the same mortgagee. This could occur irrespective of whether the other mortgage was of the same or another property.
Another section that the commission reviewed and issued recommendations was the mortgagee remedies. The commission noted that the law was partly complicated when dealing with the mortgages, and it was guided by the courts applications of the principles of equity. The legal date for redemption had been shortened to three and six months due to this practice. There was also not a clear line drawn between the time a lender assumed the statutory powers to sell or appoint a receiver, from the borrower. This undermined the whole aspect of mortgages. The commission recommended an emphasis to be made on the security nature of mortgages, and the ownership rights of the borrower to be protected. It recommended that the lender should be in possession of all the remedies from the time the mortgage was agreed, but cautioned that remedies should not be taken unless when there was a need to protect the mortgagee's security. The commission also recommended that a procedure should be formulated to cater for emergency cases. A mortgagee would take an emergency action so as to protect the security of the loan. Unless the situation was an emergency, no remedy should be exercised without the mortgagor receiving a prior written knowledge. This would help the mortgagor have time to try and save the situation. Therefore, the commission emphasised that remedies should be carried out to ensure that the mortgage was based on security reasons and land ownership would only change hands in case the borrower failed to honour made agreements.
The Land and Conveyancing Law Reform Act gave a guideline of how the lender was to act in case the mortgage law was violated by the borrower. The borrower may choose to assign the mortgage debt to a third party instead of the mortgagee discharging the property in order to pay the debts. The transfer of this mortgage has to be approved and directed by the mortgagee. The Reform Act also stated that the condition above applied to any action that may be brought by a mortgagor for the sale, redemption or raising and payment in any manner of the mortgagee.
Before the formation of the commission, there existed a traditional mortgage remedy called foreclosure. In this process, the mortgagee would obtain a court order to destroy the mortgagor’s right of redemption. Consequently, this would make the mortgagee the legal owner of the land. In this process, the fundamental concept of a mortgage transaction being a secured loan was violated. The mortgagee used it as a means of acquiring land. In most cases, the value of the land acquired far exceeded the amount of the outstanding debt. However, the Irish courts had stopped issuing these types of court orders. Instead, they would order the land to be sold land, and the money obtained divided between the mortgagor and the mortgagee as agreed. However, the Land and Conveyancing Law Reform Act abolished the mortgagee’s right of foreclosure. The mortgagee was given the authority to apply for a court order that would warrant the possession of the mortgaged property in certain conditions. Such instances included the information whether the mortgagee had reasonable grounds for believing that the borrower had abandoned the mortgaged property, and when the mortgagee believed that quick actions needed to be taken so as to prevent the damage or deterioration of property. When such an application was submitted, the court would make a ruling.
In the events before the Land and Conveyancing Law Reform Act, it was not clear whether a purchaser had a right to enquire about the status of a mortgage. Therefore, the purchasers would enquire if they would get a decent title from a selling mortgagee. In case the borrower failed to honour the agreement, the mortgagee would be quick to sell the land to the purchasers. The committee recommended that the rule concerning enquiries by purchasers should be made clear. The Land and Conveyancing Law Reform Act stated clearly that the mortgaged property would only be sold when both involved parties had an agreement. In cases where the mortgagor has bleached the agreement of repaying the debt, a twenty eight day’s notice should be sent to him/her as a warning for the possibility of such a sale. The sale of any mortgaged property would also not take place without a court order. However, a court order would not be necessary in case the mortgagor agreed to the selling of the property in writing form, seven days before the sale. After the property was sold, the mortgagee was not answerable to the mortgagor on matters concerning the property.
The commission also investigated and gave recommendations concerning the Welsh mortgages. These were commonly used in Ireland by different lenders. In this mortgage, the lender took possession of the land including the rents and interests generated from the land. This mortgage was inconsistent with the fundamental principle of mortgages that define a mortgage as a security for a debt. The commission recommended the abolishment of the Welsh mortgages under the new legislation. In the year 2009, the Land and Conveyancing Law Reform Act abolished the Welsh mortgage. This Act declared that any creation of the Welsh mortgage was not legal.
The clandestine mortgages act had been designed to protect subsequent mortgages. In this act, the borrower failed to disclose any information regarding previous mortgages that involved the same piece of land. The commission recommended an abolishment of this act without a replacement. The Land and Conveyancing Law Reform Act followed this recommendation and removed the clandestine mortgages act. It disallowed withholding such information when the agreement had been made.
The commission also reported on the controversial right of a mortgagee who held more than one property as mortgage for the same mortgagor. The mortgagee had a right to consolidate all the mortgages together and insist that they are redeemed together. This was especially common when one was well secured than the others. The mortgagor was forced to rescue the mortgagee which had some decent loans together with that which had substandard loans. The Land and Conveyancing Law Reform Act in 2009 also abolished this practise.
There was a clause before the amendments that deprived the mortgagor the right to lease the mortgaged property in order to raise money to repay the debt. The mortgagee who had taken possession of the property was entitled to lease the property whenever it was appropriate. The commission recommended that the mortgagor should not be given express permission to lease a property without the consent of the lender. However, such consent should not be withheld unreasonably, but reasonable conditions should be imposed that must be followed. The commission also recommended that the mortgagee be given authority to lease the property only in circumstances of sustaining the value of the property, protecting the mortgagee’s security, raising income to reduce the outstanding debt or when the borrower consents with the activity.
The Land and Conveyancing Law Reform Act stated that a mortgagor was only supposed to lease the land when a written consent was given by the mortgagee. However, the Act directed that the consent should not be unreasonably withheld by the mortgagee. The Act of 2009 also made the amendments that gave the mortgagee the authority to lease the property only in circumstances of sustaining the value of the property, protecting the mortgagee’s security, raising income to reduce the outstanding debt or when the borrower consents with the activity. The mortgagee can also lease the land if it is the most appropriate way to use it before it is sold.
The other laws that were reviewed are those that governed judgement mortgages. Judgement mortgage is a distinct method that allows a judgement creditor to recover a judgement debt. The judgement creditor does this by registering a judgement mortgage against the land of the debtor. The commission recommended an amendment of the judgement mortgage acts of 1850 and 1858. These acts were made up of terminologies and concepts that neither served the debtors nor the creditors well. The acts of 1850 and 1858 were also full of formalities which the judgement creditors were required to comply. This made the judgement mortgage rules extremely cumbersome and tedious leading to a long line of cases that had breached minor clauses in the law. The bleaches meant that the judgement mortgages were invalidated, causing a backlog of unsettled cases. The committee recommended that these acts be modified to allow for the smooth running of these cases. This would also allow a judgement creditor to make immediate claims to the extent of his judgement over the immobile assets of his judgement debtor.
The legislative basis that was used for judgement mortgages was reviewed in the Land and Conveyancing Land Reform Act. Before its review, the judgement mortgage was supposed to identify the interest of the judgements debtor in unregistered land by reference to its balcony or parish. This was a difficult task, and in case of any descriptive error, the registration was invalidated. However, the Land and Conveyancing Law Reform Act stated that, for the sake of avoiding doubt, there would be no requirements for re-registration of a judgement mortgage. This maintained the validity of the judgement mortgage against the land or its purchaser.
The commission responsible for the review of the judgement mortgage law had recommendations concerning the dates in a judgement mortgage case. The right of action in this cases accrued starting from the date that the judgement becomes enforceable rather than the date that on which it is registered as a mortgage. The amendments of the Land and Conveyancing Law Reform Act allowed the backlog of cases in the court to subside. The judgement mortgages were also treated like the normal mortgages, and hence their discrimination was erased.
The Land and Conveyancing Law Reform Act introduced in 2009 was straightforward and clear. This Act made the rules of mortgages and land conveyance easy to understand. It also abolished some of the archaic laws such as those governing the Welsh mortgages. These clearer rules made use of mortgages more common than before in North Ireland. More people appreciated the rule since it transformed the mortgage loan to its rightful place. A mortgage was not viewed as a way of acquiring land from the mortgagor, but it was a security for the loan. Therefore, most people who were reluctant to embrace mortgages took them up easily. The act was seen to defend the rights of the mortgagor as it also laid out clear guidelines on the rights and duties of the mortgagee. The rule was celebrated because of the requirement that the mortgagee must issue a court order within twenty eight days before selling a mortgagors property. This meant that the mortgagor to have enough time to find alternatives to clear the debt instead of selling the property. This act also laid out legislation concerning the leasing of a mortgaged property. This brought harmony between the parties involved in the agreement.
Despite all the benefits brought about by these amendments, some loopholes in the act have been discovered in court. On 25th June 2011, a high court in Dublin ruled against the G.E Money repossessing the houses of some of its clients in Ireland. These people had entered into a mortgage in December 2006 amounting to around four hundred thousand dollars. However, their account went into default in the month of November 2008. The G.E Money made a formal demand for payment and vacant possession of the property on 19th January 2010. The ruling judge, Justice Dunne, said that a lending institution had no legal right to apply for an order for possession because the mortgage was made before 1st December 2009. The judge said that the annulment of the old legislation had provided a gap in legislation. The judge also stated that the court was not mandated to fill this gap since it was not in the Land and Conveyancing Law Reform Act of 2009. A similar verdict passed by Justice Dunne affected lenders such as Secured Property Loans Limited and Start Mortgages Limited.
In conclusion, the Land and Conveyancing Law Reform Act of 2009 was able to meet its aim. It was able to harmonise the rules of acquisition of property during mortgages. This Act was also able to explain different Legislations involved in mortgage transactions. Through this Act, the cases surrounding mortgages were easily solved as the law was clear. By abolishing most of the archaic statutes that previously governed the land laws, the Act put up modernised legal system to govern the land laws. The Land and Conveyancing Law Reform Act was also able to bring harmony in the way the business involving mortgages were carried out. It protected both the mortgagors and the mortgagee and unified them under a common law.