VINCENT MARTINcalls for a more enlightened legal approach to repossession and personal insolvency
NEW BEGINNING was established to provide legal representation and support to hard-pressed mortgage holders facing the frightening prospect of having their homes repossessed.
The sight of lenders repossessing the homes of taxpayers, the very people who bailed those lenders out, was not lost on us. The fact that the lenders were invariably represented in the courts by barristers and solicitors while at the same time borrowers had no representation and no means to procure them was the catalyst that launched New Beginning.
Over the past year New Beginning has acted in hundreds of cases on a no-fee basis. Latterly we have, on behalf of borrowers, negotiated full and final settlements with individual mortgage lenders; on some occasions the terms of settlement have involved writing off the outstanding debt.
In other cases, loan agreements have been renegotiated on more favourable terms to the borrower.
Several test cases have been instituted against the banks and other new legal challenges are at an advanced stage of preparation.
Perhaps the most notable success to date has been the ruling by Ms Justice Elizabeth Dunne in the Start Mortgages v Gunncases. She determined that the new Land and Conveyancing Law Reform Act 2009 (which became law on the December 1st, 2009) repealed older conveyancing legislation but failed to save elements of the Registration of Title Act 1964. The effect of this was that the mechanism by which lenders can obtain possession in cases of many mortgages made before December 2009 is hampered. This landmark ruling has saved hundreds of homeowners from immediate repossession.
A constitutional challenge to the draconian provisions of the Bankruptcy Act 1988 has also been launched.
In recent weeks, more than 85 residents evacuated from Priory Hall have received legal representation and assistance in obtaining mortgage moratoriums from their lenders. Lawyers elsewhere have detected prima facieevidence of fraud on the part of some lenders and mortgage brokers, as well as in respect of the miscalculation of interest charged on mortgages.
A stay, extended stay or an adjournment is like gold dust for a person desperately trying to hold on to their family home, because they know that if forced to sell their homes at the bottom of the market, the financial shortfall which remains to be paid will continue to enslave them as huge personal debt.
In some court cases where there is absolutely no prospect of winning, the circumstances of a borrower can be advocated by the barrister leading to a much-valued temporary reprieve. A family may, for example, be permitted to stay in their home for a time so as to avoid moving children from their school in the middle of a school term.
Each legal contest bears testament to the reality that despite one side being much more resourced, they cannot win the battle outright. It is abundantly clear that the court is not the appropriate place to litigate debt disputes involving family homes.
Before the release of the latest figures, 45,000 households were in arrears of more than 90 days (32,000 of these in arrears of more than 180 days) and a further 56,000 households with restructured loans (also known as interest only), the crisis has become a social and economic time bomb.
The court, however, is not the appropriate place to defuse it. While the court treats borrowers sympathetically, the law as it exists is stacked against them so the law must be changed as soon as possible.
The Law Reform Commission Report on Personal Debt Management and Debt Enforcement made 200 recommendations for reform including the creation of an independent debt-enforcement office, which, it proposed, would oversee new non-judicial debt-settlement arrangements.
This would provide an efficient, humane and cost-effective solution to personal insolvency which takes account of the individual rights of creditors and debtors. The commission also recommended that the draconian bankruptcy laws in operation should be radically overhauled. Any proposed change to the bankruptcy code must deal with the issue of personal mortgage debt.
There should be a distinct move away from the adversarial system which is part of traditional litigation. Elements of collaborative law, which has spread rapidly to most of the United States, Europe, Canada and Australia, in family law disputes should be piloted in mortgage debt disputes concerning family homes. New Beginning recently presented to the Oireachtas finance committee a feasible solution for the hundreds of thousands of mortgage holders who have become the negative equity generation, having no prospects of repaying their debt – many of whom are on the brink of having to default on their mortgages.
The sheer scale and tumult of these unprecedented economic times is putting at serious risk the cherished and inviolable position of the family dwelling.
If a homeowner voluntarily leaves his/her home, it becomes an alienable asset, just like voluntarily selling one’s clothes – but it is a different proposition when one is forcibly evicted from one’s home. This is akin to stripping one naked (physically and mentally), which amounts to a profound attack on one’s dignity and social stability.
To safeguard against this, a new approach is required. The law should seek to establish and then to protect the right of family homeowners (in the absence any mala fideson their part) to remain in their homes.
We have proposed legislation which would give a court the right to take into account other matters which we believe ought to be considered before making orders of repossession, including the conduct of the lender and the social and economic cost on individual families and on the State.
At the foundation of the State, we declared our right to the unfettered control of our destiny. In 1937 we declared the people as sovereign and the law subject to the common good. The family dwelling enjoys considerable protection under article 40.5 of the Constitution. The law has to change in order to protect and vindicate that common good.
The New Beginning project has given an opportunity to a whole new generation of young lawyers to use their skills in the superior courts and any lawyer worth his/her salt should relish the prospect of defending an individual citizen with a just cause – they are following in the long and time honoured pro bono tradition of the independent referral Bar, which must be retained in the much needed reform of legal services.
Vincent P Martin is a practising barrister who founded the Public Access to Law (PAL) group of lawyers in 1997 and co-founded New Beginning with Ross Maguire SC and David Hall in November 2010