Mortgage Issues

Partition by Mortgagor I

A co-owner may apply for partition or sale notwithstanding that the property is mortgaged.   However, it is a basic principle that partition will not be ordered to the prejudice of a third party, including a mortgagee.

If the mortgagee does not consent, the mortgage must be redeemed or the property may be ordered to be sold, subject to the mortgage.  However, the property will not be readily saleable, especially if it is in negative equity. The general principle is that if one owner wishes to redeem the mortgage, he must pay the entire, subject to asserting rights of contribution from others in due course.

Following partition, the mortgagors remain jointly and severally liable for the mortgage obligations.  The mortgage attaches to the entire property.  The debt cannot be partitioned or apportioned.

Seeking an order for partition may be an event of default, which entitles a mortgagee to enforce.  In theory, a  mortgage can be granted over an undivided share in land.  In practice, such a mortgage may have limited value.

A mortgage by one party effected severance so that the mortgagors became tenants in common, before the 2009 Act. This is no longer possible without the consent of the other co-owners under the 2009 Act.

A pre-2009 Act mortgage attaching to an undivided share may arise in the case of a judgment mortgage.  If there are more than two owners, the other owners may remain joint tenants as between themselves.  The non-mortgaging owners may retain their right to apply for sale or partition.

Partition by Mortgagor II

The consent of all co-owners or a court order is required for partition. If the mortgagee consents to partition, the divided share remains subject to the mortgage. If it does not consent, the mortgagor cannot compel partition without redeeming the mortgage.

Where one party has mortgaged, the other co-owners may seek partition.  The mortgagee must be a party to the action.  The mortgagee may seek sale.  Where an order of partition is granted, the mortgage attaches to the partitioned element and the other owners take their share free from the mortgage.

Where a mortgagee of an undivided share makes an application for possession and sale, technical difficulties may arise in relation to possession.  The courts have taken the view that a mortgagee is not entitled to possession against a co-owner, who is not subject to the mortgage.  In theory, the court will grant an order for possession in common with the co-owners, though this is likely to be impractical.  In theory, the undivided share could be sold under the mortgage.

Mortgagee Seeking Sale

A mortgagee of an undivided share may seek an order for sale.  An equitable mortgagee had the right to seek an order for sale under the Partition Act.Under the Partition Act, the mortgagee was obliged to first have an entitlement to possession, in order to make an application for sale.

Some courts have taken the view that an equitable mortgage is not entitled to possession, while other cases, take the view that such a mortgagee is entitled in equity to possession.   This formerly determined whether this pre-condition under Partition Acts for an order for sale existed.

The 2009 Act appears to change the position. Generally, a mortgagee is entitled to an order for sale, in order to secure its rights, even where the mortgage affects a part interest in the property only. A mortgagee may  not bring the application, until there has been default.  The mortgagee is in no better position than the co-owner to make the application.

A chargee of a co-owner’s interest did not have the same rights as a mortgagee under the Partition Acts. Where the charge is granted by all owners, the chargee is in much the same position as the mortgagee.  He may apply for possession and/or sale on foot of his charge.

A charge by one owner only did not sever the joint tenancy, even before the 2009 Act,  as there was no alienation. This applies to all charges after the 2009 Act. The consequence that the charge does not sever the joint tenancy, is that on the death of one co-owner, it passes to the other, free of the charge.

Judgment Mortgage

The consent of the non-owning spouse is not required under the Family Home Protection Act in the case of a judgment mortgage. The registration of the judgement mortgage is not a disposition by the other spouse, notwithstanding that it might have been as a result of unilateral and even deliberate action in incurring the judgement debt.

Formerly a chargee could not bring an action for partition.  A judgment mortgage operated as a mortgage of unregistered title land and as a charge of registered title land.

Where a judgment mortgage attaches to one co-owner’s interest only, registration of a judgment mortgage against unregistered title land caused severance of the joint ownership, prior to the 2009  Act.  However, in the case of registered title, it effected a statutory charge, which did not cause severance, even prior to the 2009 Act.

A judgment mortgagee has title to seek sale, in the case of unregistered title land.  In the case of registered title, it would appear that prior to the 2009 Act, it was obliged to seek an order under section 71 of the Registration of Title Act, although such an order may not be available.  It appeared prior to the 2009 Act the only option for a judgment mortgagee was to seek a sale of the undivided share.

Before the 2009 Act, the question arose as to whether registration of a judgement mortgage against one joint tenant severed a joint tenancy. The courts held that the effect of the mortgage was to sever the joint tenancy in unregistered (i.e. Registry of Deeds) title property. This was because prior to 2009, a mortgage was equivalent to a conveyance. Arguably, a judgment mortgage is not a mortgage, but a process of execution.

A judgment mortgage in respect of registered title did not sever a joint tenancy, even prior to the 2009 Act, because security over registered title takes effect by way of a charge.

Family Home Issues

A judgement mortgagee may apply to the court for a well charging order and an order for sale. The older legislation  caused difficulties after the economic crisis where judgement mortgages relating to one spouse, either the sole owner or a co-owner, were registered against the family home. Although the non-owning spouse did not have an economic interest,  modern case law suggested that the fact that a family home is involved should be a factor making a sale less likely.

Several judgments in the 2010s dealt with applications by holders of judgement mortgages registered against one co-owner, seeking the sale of the property. Several courts indicated that where the property was a family home, this was a relevant factor that ought to be considered when deciding whether or not to refuse a sale. The cases were under the Partition Acts in respect of pre-2009 mortgages. It is likely the same principle applies under the 2009 Act.

It is relevant that an innocent co-owner who had no judgement registered against him or her could suffer the loss of the family home. In another case where there was sufficient money to buy an alternative property, a sale was permitted.

Rights Issues

When the property is a family home, Constitutional and Human Rights issues arise. The Irish Constitution guarantees to protect family life and the inviolability of the dwellinghouse. The European Convention on Human Rights protects private life and due process. By themselves, these  provisions do not prohibit the sale, but they are factors that weigh towards declining consent to a sale in the case of a judgement mortgagee’s application

The. European Court of Human Rights has indicated that the decision-maker must consider whether repossession is proportionate. An automatic right of sale, in so far as the pre-2009 legislation seemed to mandate, the same would be inconsistent with this requirement.

2009 Act and Judgment Mortgagees

The provisions which apply in disputes between co-owners also apply to applications for a sale by a judgement mortgagee.Prior to the 2009 Act, the Partition Acts 1868 and 1876 provided a near presumption that the property should be sold on the application of a co-owner with 50% share or more, unless there was good reason to the contrary.

Under the post-2009 Act provisions, a judgement mortgagee may apply for an order for sale. The Partition Act provisions do not apply. The 2009 Act applies to posts 2009 Act charges and judgement mortgages. In practice, the courts are likely to take a similar approach to that taken in the above cases. As set out in a separate chapter, this new statutory jurisdiction is more flexible.

Section 31 states the following orders can be made by the court:

• an order for partition of the land amongst the co-owners,
• an order for the taking of an account of incumbrances affecting the land, if any, and the making of inquiries as to the respective priorities of any such incumbrances,
• an order for sale of the land and distribution of the proceeds of sale as the court directs,
• an order directing that accounting adjustments be made as between the co-owners,
• an order dispensing with consent to severance of a joint tenancy as required by section 30 where such consent is being unreasonably withheld,
• such other order relating to the land as appears to the court to be just and equitable in the circumstances of the case.

Post-2009 Act and Family Homes

The Court of Appeal in Muintir Skibbereen Credit Union v Cornelius Crowley and Another indicated that when considering applications for sale under section 31, the power must be exercised constitutionally having regard to the rights of the judgement mortgagor the judgement mortgagee and the former’s spouses. It is also relevant that the debt may be otherwise unsecured and personal to one co-owner. It is relevant that the other spouse may not have been consulted or consented to the borrowing.

In First National Building Society v Ring, the court indicated

“The premises herein are the family home. The judgment mortgage in issue relates solely to the first defendant’s interest in the family home. The second defendant retains her property rights intact. There is no dispute as to the debt for which only the first defendant is liable. The only dispute is as to the order for sale in lieu of partition. Partition itself is not a possibility as the premises is a family home  The second defendant is an entirely innocent party; there is no judgment registered against her; the disruption to her and her family would be immense

The court refused sale and decided there was a good reason for refusal under the pre-2009 Partition Act 1868. The fact that the property was a family home was a relevant factor.

In Drillfix Limited v Savage the fact that the property had been a family home for 30 years, the owners were approaching retirement and had limited means were relevant and potentially good reasons to refuse to exercise the discretion to order sale. In contrast, in  Trinity College Dublin v Kenny there was evidence that the co-owners could buy alternative accommodation, notwithstanding that they were older and had been living in the property for 15 years.

References and Sources

Primary Texts

Wylie on Irish Land Law Wylie 6th Edition 2020

Land Law In Ireland -Lyall 4th Edition 2018

Principles Of Irish Property Law de Londras 2nd Edition 2011

Equity and the Law of Trusts in Ireland- Keane 3rd Edition

Land Law Kenna & Murphy 2019

Land Law Pearce & Mee 3rd Edition 2011

Other Irish Sources

The Land and Conveyancing Law Reform Act 2009: Annotations and Commentary -Wylie 2nd Edition 2017

Property Legislation 2009 2011 Cannon, Clancy, Kenna 2012

Irish Land Law – A Casebook: Adanan Maddox 2020

A Casebook on Equity and Trusts in Ireland – Wylie

 

Shorter Guides

Land Law Nutshell Cannon 2020

UK Textbooks

Land law C. Bevan 2nd ed.2020

Land Law: Text, Cases and Materials B McFarlane, N Hopkins and S Nield, (4th ed. OUP 2018)

Property Law R Smith(10th ed., Pearson, 2020)

Cheshire and Burn’s Modern Law of Real Property by Burn, E. H. 2011

Modern Land Law Dixon 2018

Elements of Land Law Gray, 2009

Property law: cases and materials Smith 2015

Land law Cooke 2015

Co-Ownership of Land: Partition Actions and Remedies – Conway

Compulsory Purchase and Compensation in Ireland: Law and Practice – Galligan and McGrath