Ireland: Repossessing Commercial Property Comprising a Private Residence

Outline of facts and outcome

The borrower had charged a plot of land in favour of the bank as security for a loan that was granted for the purposes of the borrower’s farming business. The plot of land included the borrower’s PDH. Although it is not entirely clear from the judgment, it appears the bank was on notice when the loan was entered into, that the plot included the borrower’s PDH.

The borrower defaulted and the bank (in correspondence) demanded repossession of the property – excluding the PDH. The bank accordingly considered that it did not have to comply with the Central Bank of Ireland’s Code of Conduct on Mortgage Arrears (“CCMA“). CCMA, in brief, imposes a moratorium on a lender seeking to repossess a borrower’s PDH to give time for the lender and borrower to explore the possibility of entering into an alternative repayment arrangement.

However, even though it was clear that the bank was not, in fact, seeking to repossess the borrower’s PDH, the bank’s claim for repossession was dismissed. This was because the bank’s formal claim (its special summons) was for possession of the entire plot of land – on the face of it, including the PDH. The fact that the bank had excluded the PDH in its letter demanding possession, and gave evidence that it did not intend to repossess the PDH, did not save its claim from being struck out.

Lessons to be learned

The case underscores that the court’s role in assessing a lender’s compliance with the CCMA is limited to ensuring that the relevant lender has given effect to the moratorium in the CCMA – in brief, repossession proceedings may not normally be issued until certain time periods have elapsed, the borrower has refused to engage with the CCMA process, or in certain instances where there is default by the borrower other than arrears. However, the court will not engage in a qualitative analysis as to the content of alternative proposals made (or not made) during the CCMA process. All of this is consistent with Supreme Court authority.

The case also emphasises the strict approach the court will take when dealing with loan enforcement claims that involve a borrowers’ PDH. It is clear from the decision that it would be anomalous for CCMA automatically to be triggered for a commercial loan simply because the charged property included a PDH. Accordingly, the court may well have been disposed to allow the bank’s claim had it framed its proceedings properly. This is consistent with other recent High Court decisions involving arguments about the scope of CCMA, particularly where the underlying debt is a commercial loan. In this case the court seemed to be of the view that it would be open to a lender to carve a PDH out of its claim, and bring repossession proceedings without first having to comply with CCMA. However, as the bank’s formal claim was for the entire property – including the PDH, the court was compelled to dismiss it as the bank had not complied with CCMA. Therefore, although the borrower’s PDH may not be in jeopardy, the court expects strict procedural compliance where a borrower’s property rights in relation to a PDH are at issue.

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