# Voluntary Surrender but judgement against property.



## Woodenelf (21 Nov 2021)

Hi,

I have agreed to voluntary surrender of my home with a bank as full and final settlement, after years of fighting to keep it.

There now appears to be a judgement against it for a personal loan amount from about six years back when another bank wouldn’t agree to an instalment plan, even though I still pay a nominal amount to that loan per week to this day. I was not informed of the judgement until now.

Would anyone know what will happen to this judgement when the house is surrendered? I have absolutely no way of paying the amount in full, and the house is in serious negative equity and will be sold for a loss so no equity in sale.

Thank you


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## Johnno75 (21 Nov 2021)

If the judgement is registered against the property as a mortgage (ie a judgement mortgage) and is ranked ahead of the mortgage registered to the bank to whom you surrendered the property, then the judgement must be paid by the bank when it sells the property. 

This scenario is unlikely however, as the mortgagee bank is certain to have the first charge. 

So, if the bank sells the property after its surrender, it will have to distribute any surplus to the judgement holder towards satisfaction of the judgement before distributing any balance to you. 

If after the property is sold there is no surplus for distribution, the judgement remains outstanding and payable by you.


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## Woodenelf (21 Nov 2021)

@Johnno75  thanks, there will be no equity so will the sale be able to go through with the judgement on it as part of a surrender case? 

I have no problem with the fact I owe the money, I just hope it won’t impact the surrender as I have no way to pay it back in a lump sum, and am paying an amount per week for years even though they didn’t agree to it.


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## Johnno75 (21 Nov 2021)

Woodenelf said:


> @Johnno75  thanks, there will be no equity so will the sale be able to go through with the judgement on it as part of a surrender case?
> 
> I have no problem with the fact I owe the money, I just hope it won’t impact the surrender as I have no way to pay it back in a lump sum, and am paying an amount per week for years even though they didn’t agree to it.


That’s an interesting point.

I’m not a conveyancing lawyer, but in the normal course, when a sale closes, searches are done by a purchaser to ensure no judgements are attached to the property in sale. 

When a bank is selling as a mortgagee in possession, I’d say that the same rules apply.

So, I would think that in order for the bank to sell the property, they would probably need to ensure no judgements are attached to it. That means they wait until there is equity until they sell to cover the mortgage and the judgement. Or they take the hit and clear the judgement in order that the sale can proceed.

No purchaser will buy a property with a judgement attached to it, as the purchaser then becomes exposed to the debt.


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## Brendan Burgess (21 Nov 2021)

Hi Jonno

That doesn't sound right. 

Woodenelf

Did you talk to a Personal Insolvency Practitioner?  You should be looking at a Debt Settlement Arrangement or Bankruptcy.

Brendan


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## Johnno75 (21 Nov 2021)

Brendan Burgess said:


> That doesn't sound right.


I’m open to correction, if any conveyancer wants to weigh in, but I’d be surprised if I was way off the mark.

The OP would need to get professional advice on this point.

Here is the risk: where a purchase purchases a property with an undischarged judgement mortgage attached to it, the mortgage remains on the title. Accordingly, there is always the risk that the creditor could seek to have the mortgage well charged and have to property sold to satisfy the debt, notwithstanding that the new property owner is not the debtor.


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## Brendan Burgess (21 Nov 2021)

The problem with that is that a judgement mortgage would weaken the original mortgage.  And I don't think that can happen.  

So the original lender can sell the property free of all charges. 

It would have been happening wholesale that unsecured lenders, get judgement mortgages and hold out for them to be cleared. And this did not happen. 

But I am not a lawyer, so I am open to correction.

Brendan


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## Johnno75 (21 Nov 2021)

The option of registering a judgement as a mortgage is not usually considered attractive from a creditor’s perspective as (1) the bank has first charge and (2) it’s an additional cost for a creditor to have a judgement registered that they’re not guaranteed to recoup, especially given the low levels of repossession in Ireland of late.


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## Woodenelf (21 Nov 2021)

Brendan Burgess said:


> Hi Jonno
> 
> That doesn't sound right.
> 
> ...


Hi,
No I didn’t talk to any personal insolvency practitioner.

 The bank have agreed to a full and final settlement once the house is sold, and I wasn’t aware of the judgement. The unsecured loan is down to about 10k now as I pay a smal amount per week but I’ve no funds to clear it in a lump sum.


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## Baby boomer (21 Nov 2021)

I'm trying to remember my land law lectures - never the most exciting topic - and there's a general principle that you can only dispose of (or have taken from you) that interest in land that you actually hold.  For example, if you hold a long lease, you can't sell the freehold.  Or mortgage it.  Or have a judgment registered against the freehold.  

So, if the bank has a first charge on the property, it is entitled to recover the entirety of the proceeds to satisfy its debt.   The second judgment is only valid, and of value, against any residual value after the first mortgage is redeemed.  If there's no residual, then the bank has good title against the second (judgment) mortgage.  It can go on to give good title to a subsequent purchaser, which will defeat the judgment mortgage - I think!

Disclaimer: it was a long time ago and I might be wrong....


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## Brendan Burgess (21 Nov 2021)

Woodenelf said:


> No I didn’t talk to any personal insolvency practitioner.



We have very borrower-friendly laws in place.  You could even keep your home under a Personal Insolvency Arrangement.

Ring a PIP tomorrow.

Brendan


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## Jim Stafford (22 Nov 2021)

Johnno75 said:


> When a bank is selling as a mortgagee in possession, I’d say that the same rules apply.


 Banks/Funds routinely sell properties as a Mortgagee in Possession when they have JMs registered on them.

Jim Stafford


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## Brendan Burgess (22 Nov 2021)

Hi Jim

Thanks for clarifying. 

And presumably that creates no problem for the buyers of those properties?  

Neither the bank nor the purchaser has any obligation to discharge the judgement mortgage, I assume.

Brendan


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## Jim Stafford (22 Nov 2021)

Brendan Burgess said:


> Neither the bank nor the purchaser has any obligation to discharge the judgement mortgage, I assume.



Correct, neither the bank nor the purchaser has any obligation to discharge the JM provided the property is in negative equity in the "first" mortgage.

The MIP process is "standard" for those Receiverships where the mortgage does not provide "selling powers" to the Receiver. ( It is inexplicable how the lawyers drafted such mortgages years ago!) What happens in these cases is that the Receiver "markets" the property for sale, agrees sales terms, and then, at the last minute, the bank steps in and sells as MIP.

There are two possible drawbacks to the banks/funds selling as MIPs. 1) Whilst the property is under their control as MIP, they are responsible for any "insurance" issues. 2) If there is a CGT liability arising on the sale they have to discharge the CGT.

Jim Stafford


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## Johnno75 (22 Nov 2021)

Jim Stafford said:


> Correct, neither the bank nor the purchaser has any obligation to discharge the JM provided the property is in negative equity in the "first" mortgage.
> 
> The MIP process is "standard" for those Receiverships where the mortgage does not provide "selling powers" to the Receiver. ( It is inexplicable how the lawyers drafted such mortgages years ago!) What happens in these cases is that the Receiver "markets" the property for sale, agrees sales terms, and then, at the last minute, the bank steps in and sells as MIP.
> 
> ...


Thanks Jim for the clarification. 

Quick question. When the bank sells to the Purchaser as MIP with a JM on the title, the JM stays on the title, correct? 

If so, is there not a risk that the owner of the JM could come along down the line and try to enforce their JM?


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## Jim Stafford (23 Nov 2021)

The JM still appears on the title but it is "_crossed out_" by lines.  There is no risk of the JM owner enforcing the JM.

Jim Stafford


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