Sale of homes blocked as ‘innocent spouses’ did not sign for loans

Credit union wanted to sell properties used by men as security for development funds

A credit union cannot sell the jointly-owned family homes of two men to recover judgments against them because their wives had nothing to do with the loan transactions,  the Court of Appeal has ruled.

A credit union cannot sell the jointly-owned family homes of two men to recover judgments against them because their wives had nothing to do with the loan transactions, the Court of Appeal has ruled.

 

A credit union cannot sell the jointly-owned family homes of two men to recover judgments against them because their wives had nothing to do with the loan transactions and never signed any document providing their homes as security, the Court of Appeal has ruled.

The significant ruling was made following the courts’ first consideration of principles governing the possible partition and sale of a family home under the Land Law and Conveyancing Act 2009.

Judge Gerard Hogan, giving the three judge court’s unanimous judgment, found the homes could not be sold because the wives of the two borrowers were not parties to the relevant loans which gave rise to the judgments and never formally consented to them.

The court should not permit the homes being sold “over the wishes of the innocent spouse who was not a party to the loan transaction”, he said.

The judgment concerned an appeal by Muintir Skibberreen Credit Union against the High Court’s refusal to make orders, under Section 31 of the 2009 Act, for sale of the family homes of Cornelius Crowley and Brendan Hamilton.

Mr Crowley, a father of three, owns his home jointly with his wife Breda Crowley, Baltimore Road, Skibbereen, Co Cork, while Mr Hamilton, also a father of three, jointly owns his home with his wife Breda Hamilton, Caheragh, Drimoleague, Co Cork, Judge Hogan noted.

Property development

He said both men had engaged in “relatively small scale” property development in the west Cork region and got loans from the credit union for that purpose. After the 2008 property collapse, they were unable to repay those loans.

In October 2011, the credit union obtained judgment for €562,500 against Mr Crowley which was later registered in the Land Registry. It also obtained judgment for the same sum against Mr Hamilton.

The Crowleys married in 1993 and Mrs Crowley never signed any documents providing the family home as security for the commercial loan at issue, the judge said. Nor was she involved in any way in her husband’s loan application.

The Hamiltons married in 1978 and have three adult children, he said. Both suffer ill-health, he also noted. As was the case with Mrs Crowley, Mrs Hamilton never signed any documents providing the family home as security and was not involved in her husband’s loan application.

All other properties which the two men previously owned have been sold and the only properties available to satisfy the judgments are the family homes, he noted.

Serious debts

Both families have serious debts and 50 per cent of the net proceeds of any sale of the family home due to the wives would not provide sufficient funds so either could purchase another family home, he also noted.

Having analysed the relevant law, Judge Hogan said, while it was true the credit union’s rights as judgment mortgagee are liable to be defeated if the homes were not sold, the credit union’s entitlements could not prevail against the rights of the two innocent parties, Mrs Crowley and Mrs Hamilton.

Whatever “might” possibly be the situation if sale of a family home would leave an innocent spouse with sufficient funds to buy another property, that possibility did not arise in these two cases and would have to be decided in an appropriate case, he said.

In these cases, while the credit union was perfectly entitled to previous orders charging its judgment against both family homes, the High Court was correct to refuse it orders permitting the sale of either home, he concluded.