Real Property

Powers and Functions of Official Assignee I

The functions of the Official Assignee are to get in and realise the property, to ascertain the debts and liabilities and to distribute the assets in accordance with the Bankruptcy Act. The Official Assignee may in case of doubt or difficulty seek the directions of the Court in connection with the affairs of any bankrupt or arranging debtor.

The exercise by the Official Assignee of the below powers are subject to the control of the Court. Any creditor or other person who in the opinion of the Court has an interest may apply to the Court in relation to the exercise or proposed exercise of those powers.


Powers and Functions of Official Assignee II

In the performance of his functions the Official Assignee has, in particular, the following powers

  • to sell the property by public auction or private contract, with power to transfer the whole thereof to any person or to sell the same in lots and for the purpose of selling land to carry out such sale by lease, sub-lease or otherwise and to sell any reversion expectant upon the determination of any such lease,
  • to make any compromise or arrangement with creditors or persons claiming to be creditors or having or alleging themselves to have any claim present or future, certain or contingent, ascertained or sounding only in damages whereby the bankrupt or arranging debtor may be rendered liable,
  • to compromise all debts and liabilities capable of resulting in debts and all claims, present or future, certain or contingent, ascertained or sounding only in damages, subsisting or supposed to subsist between the bankrupt or arranging debtor and any debtor and all questions in any way relating to or affecting the assets or the proceedings on such terms as may be agreed and take any security for the discharge of any debt, liability or claim, and give a complete discharge in respect thereof,
  • to institute, continue or defend any proceedings relating to the property,
  • to refer any dispute concerning the property to arbitration under the terms of the Arbitration Act,
  • to mortgage or pledge any property to raise any money requisite,
  • to take out in his official name without being required to give security, letters of administration to any estate on the administration of which the bankrupt or arranging debtor would benefit,
  • to agree a sum for costs where the Court so directs or where he considers that the amount which would be allowed on taxation would not exceed €12,000,
  • to agree the charges of accountants, auctioneers, brokers and other persons,
  • to ascertain and certify to the Court the amount due in respect of a mortgage debt and the due priority thereof with power to the Court to vary such certificate,
  • to draw out of the account referred to in section 84 (1) any sum not exceeding F49[€130] by way of indemnity in respect of costs incurred by him.

Power of Sale

The Official Assignee has the power to sell and realise the bankrupt’s assets.  This may be done by auction or private contract.  Lands may be sold as a whole or in lots.  There is a duty to obtain the best price, reasonably obtainable in the circumstances. The mode of sale is determined by the assignee or trustee.

In common with other major powers, the Official Assignee or a creditor may apply to the court for directions. A creditor or other interested party may apply for directions in relation to the exercise of the powers.

There are protective provisions applicable to the sale of the bankrupt’s family home. Court consent is required to a sale. There is discretion to postpone the sale. Following 2015 reforms, the property revests in the bankrupt unless a court order is made or a sale is agreed within three years of bankruptcy.

An application may be made to Court to sell mortgaged property.  All mortgagees and persons having rights to the property are entitled to be heard in the application.  The court may make an order confirming a third party’s interest in the property. An order for accounts and enquiries may be made.  The court may direct the manner of sale.


Sale Issues

The court may make an order directing that a buyer be granted possession of the property in order to give full effect to the sale.  A buyer is protected notwithstanding certain failures to follow procedure.

In realising assets, the assignee must account for tax in the normal way.  As the role of their insolvency officers, they are assessible for the tax of the underlying bankrupt in respect of post-bankruptcy income and gains. Pre-bankruptcy tax liabilities must be proved in the normal way.

In common with other cases where fiduciary obligations apply, the trustee and assignee may not purchase themselves. The court may give directions in relation to the sale, which may override the assignee’s discretion.


Family Home Consent Issues

The bankrupt’s interest in the family home vests in the Official Assignee automatically, by operation of law.  A vesting certificate may issue to the Land Registry or Registry of Deeds which confirms the transfer of the interest of the bankrupt person on the title.

The bankrupt debtor’s share of the family home (or civil partner shared home) is not immune from enforcement in Ireland. There are a number of conditions and restrictions, which may have the effect in many cases, that it does not become part of the bankruptcy assets.

Spouse’s consent is not required to the vesting of the bankrupt;’s interest in the family home in the Official Assignee or trustee in bankruptcy.  The spouse’s interest in the family home is not transferred.

The Family Home Protection Act requirement for spousal consent to sale does not apply to a sale or transfer of the property by the Official Assignee. A court order is required for the sale. An order may be required for possession, which may be given in the same proceedings. The bankrupt’s spouse’s share will also be sold compulsorily, albeit that he or she will receive his or her share of the net proceeds

In theory, the Official Assignee may seek to partition the property and sell the bankrupt’s former interest in it separately.  However, this is unlikely to be allowed by the court. In practice, the interest may be bought by the other spouse or a relative.


Spouse’s Interest I

It is commonly the case that the family home is held by spouses or civil partners as joint legal and beneficial owners. The bankrupt’s share of jointly acquired assets passes to the Official Assignee. Where the property is held jointly (with a spouse or another), bankruptcy severs the joint tenancy and converts it into a tenancy in common.

The bankrupt’s spouse who is not a legal owner on the title may have a beneficial interest in the family home (or any property) by reason of direct or indirect contributions to the purchase price or mortgage redemption, thereby creating a resulting trust.  The Official Assignee takes the bankrupt’s interest in the property subject to this interest.

It may be that notwithstanding that the bankrupt and his spouse are legal joint owners or owners in common, that they hold the beneficial interest in the property in different shares. It is presumed, that where spouses or civil partners hold the family or shared home as co-owners (most commonly jointly) that they equal legal and beneficial owners.


Spouse’s Interest II

It may be that the bankrupt is not an owner on the title but has a beneficial ownership. This interest will pass to the Official Assignee. Its existence may be difficult to prove.

There is a summary procedure whereby a spouse may establish a beneficial interest in family property, even if he or she is not named on the title.  Even if he or she is on the title, then the relevant percentage may be different to the (usually 50-50 legal title) that may appear to exist.

There is a principle that where a spouse has mortgaged an interest in property in order to raise monies for the other spouse’s debts, he or she is presumed to be entitled to an indemnity from the bankruptcy estate of the other spouse.  It must be shown that the intent was that the spouse should be a surety and did not intend to make a gift to the other spouse.   This may augment the beneficial interest of the spouse.


Sale of Family Home

No transfer of property of a bankrupt, (arranging debtor or person dying insolvent), which comprises a family home of the bankrupt or the bankrupt’s spouse, or a shared home of the bankrupt or the bankrupt’s civil partner, may be made without the prior sanction of the Court. Any disposition made without such sanction is shall be void.

On an application by the Official Assignee for an order for the disposition of a family home or shared home, the Court has the power to order the postponement of the disposition of the family home or shared home. It must have regard to the interests of the creditors, spouse or civil partner and any dependents, of the bankrupt, arranging debtor or person dying insolvent, as the case may be, as well as to all the circumstances of the case.

The court has the discretion to order a postponement of the sale of the family home.  It appears that the court may not refuse the sale indefinitely.  The court has jurisdiction to order the postponement of the sale, having regard to the interests of the creditors, the spouse, and the dependent as well as the circumstances of the case. The interest of the creditors must be balanced with the interests of the spouse and dependents.  The court may make such orders as it thinks fit and reasonable.


Approach of Courts

The cases show that the court’s approach depends on the particular facts. It appears that although postponement may be allowed, ultimately the Official Assignee / trustee on behalf of the creditors is entitled to realise the bankrupt’s interest in the house.

The cases appear to take the approach that there is a presumption that the property should be sold in the near to short-term other than in exceptional circumstances.  The postponement will usually be for a limited time only. In a number of cases, relatively short postponements only have been allowed.

In circumstances of hardship, the sale may be postponed for a longer time. In some cases, the courts have allowed postponements for several years to allow continued occupation and extensive opportunities for the family to relocate.

The courts have sometimes postponed the sale until the children of the family are over a certain age. Where the spouse had lived in the property for a long number of years, was elderly, and in ill health, there were sufficiently exceptional circumstances, to allow postponement of the sale for the lifetime of the spouse.

The 2015 Act contemplates the possibility of the dismissal of the application for consent to sell and the consequent revesting of the family home in the bankrupt. This might be argued to imply that there is a court discretion to refuse a sale entirely.


Residence Revests in Three Years

After 29th January 2016, provisions similar to those which have applied in the UK for many years came into effect. Generally, if the Official Assignee does not act within three years, the family home, shared home or principal residence revests in the former bankrupt.

Where on the third anniversary of the making of the adjudication order, the unrealised property of the bankrupt includes any estate or interest in the family home or shared home of the bankrupt, and the Official Assignee has not applied to court for the sale of that home, then the estate or interest shall on the third anniversary be revested in the bankrupt without need to reconveyance or assignment or transfer.

Where on the third anniversary of the making of the adjudication order, the unrealised property of the bankrupt includes any estate or interest in the principal private residence of the bankrupt, then the estate or interest shall on the third anniversary be revested in the bankrupt without the need to reconveyance or assignment or transfer.

Where prior to the third anniversary of the making of the adjudication order, the Official Assignee has applied to court for the sale of the family home or shared home of the bankrupt, and the application is dismissed, the court shall, unless it does not consider just to do in all the circumstances, make an order that the estate or interest of the bankrupt in the family home or shared home shall be revested in the bankrupt from such day as is specified in the order, without any conveyance, assignment or transfer.

Where an interest in the family home, shared home or principal private residence has revested in the bankrupt, in accordance with the above provisions, the Official Assignee shall on the application of the bankrupt, issue a certificate in such form as may be prescribed confirming the revesting of the interest in the bankrupt.


Revesting Not Applicable; Agreement or Court Extends

The provisions regarding the revesting of the family home shared home or principal residence do not apply

  • where at any time within three years after the adjudication order, the Official Assignee and the bankrupt have entered into an agreement in writing, that an estate or interest in the family home or what was at the date of adjudication, the family home, shared home or the principal private residence of the bankrupt, shall not revest in the bankrupt;
  • if on application by the bankrupt or the Official Assignee, the court, where it considers it just to do so, makes an order that any estate or interest of the bankrupt in what was the family home, shared home or principal private residence at the date of the adjudication shall not revest in the bankrupt;
  • where on the application by the Official Assignee at any time after the making of the adjudication but within three years, the court substitutes the third anniversary for another date that it considers just in all the circumstances.

Where the court makes an order in the last case, the earlier cases apply subject to the modification that the reference to the third date shall apply to the substituted date.

Where an order of adjudication was made more than two years and six months prior to the coming into effect of the 2015 Act, the above provision shall apply, so that references to the third anniversary shall be taken as references to the day following six months after the date of coming into operation of the provision (29th July 2016).


Policy of Insolvency Service

The Official Assignee (OA) points out on the Insolvency Service website that following the 2015 legislation, it has a three-year period from the date of adjudication to monitor the valuation of the family home to decide whether it is negative or positive equity.  The Official Assignee having valued your family home indicates that it will write out to you six months before the three-year period elapses and inform you whether he believes your property is in positive or negative equity.

The policy of the OA as published in the Insolvency Service website is to sell the bankruptcy’s interest in a family home in positive equity to the bankrupt, once the purchase funds are proven not to be the bankrupt’s/discharged bankrupt’s.  They may be provided by a third party. Alternatively, he will sell his interest to the bankrupt’s spouse/civil partner. The OA will accept staged payments for up to a maximum of 12 months and on final payment will transfer his interest to the bankrupt or their spouse/civil partner.

If the bankrupt or spouse/civil partner is unwilling or unable to purchase the Official Assignee’s share, he will apply to the Court for permission to sell the home on the open market.


References and Sources

Irish Books

Burke & Comyn Personal Insolvency Law               2014

Bracken Practioner’s Personal Insolvency Handbook 2013

Law Society (Wright)       Insolvency Law                  2009

Sanfey & Holohan            Bankruptcy Law & Practice2nd Ed             2010

Farry, Holohan  Consolidated Bankruptcy & Personal Insolvency Legislation2013

Forde, Kennedy & Simms              Company Insolvency                      2015

Forde & Simms Bankruptcy Law 2nd Ed 2009

UK Books

Insolvency Law and Practice (Report of the review committee chaired by Sir Kenneth Cork CBE, 1982, Cmnd 8558) (the Cork report)

V Finch, Corporate Insolvency Law: Perspectives and Principles 3rd Ed 2017

RM Goode, Principles of Corporate Insolvency Law (4th Ed, 2011)

A Keay and P Walton, Insolvency law: corporate and personal (4rd Ed, 2017)

Marsh Bankruptcy Insolvency and the Law 2016

WW McBryde, Bankruptcy 2nd Ed, 1995

Butterworths Insolvency Law Handbook 14th Ed 2012

Core Statutes on Insolvency Law and Corporate Rescue (annual editions)

Legislation

Bankruptcy Act 1988

Bankruptcy (Amendment) Act 2015

Personal Insolvency Act 2012

Personal Insolvency (Amendment) Act 2015

Bankruptcy Act 1988 (Commencement) Order 1988, S.I. No. 348 of 1988

Bankruptcy Act, 1988 (Alteration of Monetary Limits) Order 2001, S.I. No. 595 of 2001

Bankruptcy Act 1988 (Official Assignee Accounts and Related Matters) Regulations 2013, S.I. No. 464 of 2013

Bankruptcy (Amendment) Act 2015 (Commencement) Order2016, S.I. No. 34 of 2016

Rules of the Superior Courts (Bankruptcy) 2013, S.I. No. 461 of 2013

Rules of the Superior Courts (Bankruptcy) 2016, S.I. No. 232 of 2016

Rules of the Superior Courts (Bankruptcy) 2012, S.I. No. 120 of 2012

Bankruptcy (Amendment) Act 2015 (Commencement) (No. 2) Order 2016, S.I. No. 253 of 2016

Functions of Official Assignee in bankruptcy and vesting arrangements.