The banks call all the shots when homeowners default. As the 2008 banking crisis drove many families over a financial cliff, the banks moved to evict the most errant debtors.
Before December 1, 2009, banks relied on a 1964 law giving lenders the right to obtain an order for repossession once a borrower defaulted, usually by issuing a formal demand for repayment.
The Government repealed section 62 (7) of the Registration of Title Act in 2009 when it introduced the Land and Conveyancing Reform Act. But the new law had a controversial element.
The mistake in the 2009 Act was that the law replacing the 1964 one only came into operation on December 1, 2009.
This raised doubt as to whether lenders who issued demands for repayments after the December 1, 2009, deadline could still rely on the old law. It was unclear whether their right to repossess had been "saved", despite the fact that the 1964 law had been revoked.
The subprime banks involved in the Dunne ruling, including Start Mortgages, Secured Property Loans and GE Capital Woodchester Homeloans, argued that under the Interpretation Act 2005, rights that had already been asserted or had accrued at the time the new law was introduced were saved.
Judge Dunne agreed that the "right" of lenders to apply for repossession under the 1964 law was "saved" under the 2005 Interpretation Act – even though the 1964 law was rendered defunct by its 2009 successor.
But she went on to rule that the right only accrued once demand for repayment was made. This meant that if banks issued a demand for repayment before December 1, 2009, they could continue with repossessions under the 1964 law. But if they did not issue demands until after the deadline, the right to apply for repossession was not "saved". Judge Dunne opined that the repeal of the 1964 law by the 2009 one had "unintended consequences".
All hell broke loose as banks saw red at the potential loss of repossession – even though banks, in theory, can recover on foot of mortgages issued/ registered after December 2009.
With the 2009 law in doubt, the Government promised to close the loophole – we are still waiting on the legislation.
But it has come under fresh pressure to act after being drawn into a debt dispute involving bailed-out Bank of Ireland and former rugby player Frankie Sheahan, who is being sued over loans used to snap up a series of buy-to-lets.
BoI has asked the High Court for clarity on Judge Dunne's interpretation of the 2005 Interpretation Act.
It has complained that the "constitutional implications" for secured lenders were never teased out in the Dunne ruling, and say the outcome would have been different if they were.
Alternatively, it wants the 2009 act struck down as an arbitrary and capricious interference with its property rights. What a mess.
Now, more than ever, we need firm clarity on the Government's mortgage arrears strategy.