An insight into difficulties and misery caused by bursting of property bubble

IN THE COURTS:IN THE Master's Court on the second floor of the Four Courts you get a good glimpse of how the bursting of the property bubble is creating difficulties for the banks, and misery for so many people.

There were more than 50 cases involving financial institutions looking for money on yesterday’s list, and a great many of them had to do with loans for the purchase of property.

The big two, AIB and Bank of Ireland, did not feature as much as other lenders such as the perhaps ironically named Smart Mortgages, although they did feature.

About 10 orders against home owners are being made every week in the High Court, but some 100 new summonses are appearing every week in the Master’s Court, the Master, Edmund Honohan, noted while hearing an application. “I don’t know what the housing market is going to be like next autumn.”

Smart Mortgages was asking that its case against two defendants be listed for hearing in the High Court. The case involved a house in Portlaoise and a loan for €195,000 which was €8,159 in arrears. The last payment had been made in March.

Mr Honohan noted that, at the time the loan was taken out, the defendants had taken out five other loans, from different institutions.

In another similar case involving Smart Mortgages, a middle-aged man had come up from the midlands to represent himself. He told the court he was a quantity surveyor but was currently out of work. The man explained that he and his wife had re-mortgaged their home some years ago, for business reasons. They have been living in the house for more than 10 years.

An agent had told him that morning, he said, that he might be going to get an offer of a job. He said he didn’t want to sell the house but wanted to pay off his debt. Mr Honohan adjourned the case to the autumn and said that, if the man got work abroad in the meantime, his wife should appear the next time the case was up.

The link between the housing market and the repayment of debts also had an airing during a case involving the Revenue Commissioners, which was looking for in excess of €300,000 in capital gains tax and income tax from a builder. The builder had five houses up for sale and had made a commitment to the Revenue that it would get €30,000 from each house.

The houses were “all he has”, his young barrister told the court, adding that the man’s bankers were looking for buyers and thought they might have found some.

“Everyone is waiting for the bottom of the market, but we have dropped the price of the houses by a huge amount,” she said. She also said she had been instructed that “the end is near for the rock bottom of the housing market”.

Mr Honohan declined the request for an adjournment and sent the case to the court lists.

Yesterday’s list in the Master’s Court included 10 cases involving Smart Mortgages, seven involving Bank of Scotland (Ireland), six involving KBC Mortgage Bank (formerly IIB Homeloans) and three involving IIB Homeloans. All the properties mentioned in court were outside Co Dublin.

As Mr Honohan remarked during another case, the court orders now being made would come into effect at the beginning of next year.

However, it wasn’t all banks and property owners. Yesterday’s list also included suppliers who had provided goods for which they had not been paid, and builders who had carried out work for which they had not been paid.

There was one optimistic note struck. A man who employed four people in a car repair business, specialising in Mercedes cars, told Mr Honohan business was “very good”. The Revenue was looking for €56,718 from him, but he wanted time to see if he could arrange a global settlement of his debts. The case was put back to October.

In its recent report on the Irish economy, the International Monetary Fund recommended that the legislation governing the National Asset Management Agency should not restrict it to dealing only with problems arising from large property development loans. Problems that may arise from other classes of debt, including residential mortgages, should also be capable of being catered for, it said. From the perspective of the Master’s Court, it seems like good advice.