Brendan Burgess
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Ross Maguire SC of New Beginning has very kindly answered a number of questions I have submitted to him which arise frequently on Askaboutmoney.
Please feel free to post follow up questions. As it's an FAQ, please keep to general questions which have a wide application to other cases rather than case specific questions which have little relevance for others.
1 What are the implications of signing a voluntary sale/voluntary surrender form?
The implications are that you are agreeing, in the case of voluntary sale to sell the property, and in the case of voluntary surrender to surrender the property to the financial institution.
In either event, the property will be sold and the proceeds of sale used to discharge the costs of sale and thereafter to repay the lending institution.
Should there be any excess from the sale, that money is yours (subject to any other registered judgment mortgages on the folio).
If there is a shortfall, you remain liable for that shortfall.
2. If I surrender my home, when does the debt become unsecured debt? In other words, when can I apply for a debt settlement arrangement? Is it when I sign the form or do I have to wait until they sell the home?
The debt becomes an unsecured debt on the sale of the property or on the formal surrender of the property. It is possible to apply for a debt settlement arrangement once the property has been surrendered or when the property in sold.
3. Is the lender obliged to carry over the terms of the mortgage to the mortgage shortfall after surrender or can they charge what they want and set whatever period they like on this unsecured loan?
This will depend on the terms of the mortgage agreement.
In practice, the lender can apply for judgment in the full amount at any stage after a default has occurred. This will usually not happen and the lender will wait until the property is sold. Once the property is sold and the debt is unsecured, a rate of interest will continue to apply based on the terms of the mortgage which may include penalty interest on the basis of the default.
Should you seek to enter into an agreement for payments on the shortfall the bank can dictate the term and the interest rate.
4. How can I force the bank to let me sell a house in negative equity? I am not in arrears but I am in deep negative equity and cannot pay the shortfall. The lender is refusing to give me permission to sell. Can I force them to allow me to sell?
There is a new provision under the new Conveyancing and Law Reform Act, 2009 which permits a mortgagor i.e, the borrower, to apply to the court to direct the sale of a property. This applies to all housing loan mortgages but does not apply to other types of mortgage. It is always possible to surrender the property.
The English case mentioned is now of relevance in Ireland, given the provisions of Section 94 of the Conveyancing and Law Reform Act, 2012 which gives the court a wide discretion to direct a sale of a mortgaged property even if the mortgagee, i.e. the lender, objects to the sale.
It should be noted that this has not yet been tested in Irish law.