Ronan Ryan and Pamela Flood’s legal win shows strength of insolvency system

High Court ruling on family home a milestone in Irish insolvency legislation

Pamela Flood at home in Clontarf, Dublin. File photograph: Dave Meehan

Pamela Flood at home in Clontarf, Dublin. File photograph: Dave Meehan

 

When it comes to the family home Ireland has probably the world’s strongest and most citizen-friendly insolvency laws. This is a direct result of our common belief in the sanctity of the home.

This is reflected in the Constitution, where the dwelling of every citizen is said to be “inviolable”. This is the highest law of the land declaring that nobody can enter your home except in accordance with law.

There is, of course, a balance to be struck.

When somebody borrows from a bank and pledges their home as security for the debt by way of a mortgage, they are, in effect, promising to hand over the property if they default on the loan.

A strict application of this promise would have meant tens of thousands of people vacating their homes at a time when the economy was in free-fall and unemployment was rampant. It would have added special injury to many self-employed people and owners of small businesses across the country who were not protected by the security of holding permanent State jobs.

Loopholes

When I co-founded New Beginning in 2010, we deliberately sought to frustrate the system by finding loopholes in the law to create time and space for economic recovery to occur and for new laws to be implemented to deal with mortgage arrears.

The new laws enacted in 2013 and subsequently amended give borrowers the best chance to rehabilitate their circumstances. This is about looking forward, not about looking back.

For people such as Ryan and Flood there was now the opportunity to use their obvious talents to dig themselves out of the hole of debt

Yesterday’s High Court decision in the case involving Ronan Ryan and Pamela Flood is an important milestone in the legislation and shows how the law can and should work.

Ryan was offered a deal by his bank in 2013 in the form of “fight or flight”. If he was willing to sell his home the bank would take the proceeds in full and final settlement. Over the years he sought to sell the home on numerous occasions but each time the bank asked that he hold back – presumably because property prices were increasing.

Years passed, but in those years another thing happened: the economy recovered and for people such as Ryan and Flood there was now the opportunity to use their obvious talents to dig themselves out of the hole of debt.

By 2018 they were able to pay their mortgage, but at that stage there were serious arrears on the loan and the bank had issued legal proceedings for repossession. It is not difficult to understand why the lender could only assume that their position was hopeless and the best that was available was to hand over the home and walk away. But they were wrong.

Under Irish law, even despite years of arrears, if a borrower’s circumstances have changed the past can be forgiven and a new, restructured mortgage can be enforced on the banks or the funds, meaning that people can remain in their homes. This is the strength and uniqueness of our personal insolvency system.

You are entitled to such a process only once in your life, but for those tens of thousands who have been devastated by the 2008 great recession it is the way to financial redemption.

And nobody loses here. The banks or funds get a sustainable loan which is an asset on their balance sheets and, as in the case of the funds, can be sold on at great profit to long-term holders of performing debt – such as banks.

Society benefits

Society does not lose, because a family can remain in their home – in fact, by any reasonable measure society greatly benefits.

And a family, especially those with young, school-going children, achieves a stability based around continued occupancy of their home on a sustainable basis.

Politicians of all hues should speak less about impending doom and recommend that people seek the expert advice and help that exists

We can be critical of government policy across a range of matters but in this area the policy has been brave and citizen-focused – and is now bearing fruit. Talk of tsunamis of repossessions is just that: talk.

The importance of the Ryan-Flood case is obvious to them as a family but more importantly its message may give hope and permeate out into wider society, especially to those people who are suffering in silence and who believe that there is no help.

Politicians of all hues should speak less about impending doom and recommend that people seek the expert advice and help that exists. This may not get the politician as many headlines, but it will bring great advantage to their constituents.

And the local judges who deal with repossession cases need to be ever mindful of the repeated exhortations from the High Court expressing the social importance and common good underlying the legislation which overtly and unashamedly protects family homes.

The banks and the funds are resisting this legislation at every turn and employ armies of lawyers to do their bidding. But the message is loud and clear: the past can be undone by taking immediate steps in the present to deal with your debts. Take the expert advice, make the payments and all can be well.

Vincent P Martin is a senior counsel and co-founder of New Beginning

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