Sunday 26 January 2020

Top banker demands legal change on seizure of buy-to-lets

Central Bank Governor Patrick Honohan. Photo: Tom Burke
Central Bank Governor Patrick Honohan. Photo: Tom Burke

Laura Noonan

IRISH Banking Federation chief John Reynolds yesterday called on the authorities to "resolve" a "legal flaw" that is preventing banks from repossessing investment properties whose owners have fallen into arrears.

The comments from Mr Reynolds come weeks after Central Bank governor Patrick Honohan publicly called on lending institutions to take a more robust approach to repossessing troubled buy-to-let investments.

Speaking before the Leinster Society of Chartered Accountants yesterday, Mr Reynolds said residential investment properties "do not, logically, have the same protection that is afforded to homeowners".

But he also acknowledged that the banks face major practical difficulties when it comes to actually enforcing on a buy-to-let loan because of an "unintended legal impediment" arising from a recent judgment.

Mortgages

"What this judgment has done is remove a bank's right to repossess registered property taken as security prior to December 1, 2009 unless a letter of demand had also been issued prior to that date," Mr Reynolds said, adding: "The legal flaw which this judgment highlighted must be resolved."

He also criticised the new insolvency regime being brought in by the Government, saying it was "without precedent" to include secured debt, such as mortgages, in an out-of-court settlement.

Mr Reynolds said: "We disagree with this proposal as, in our view, the impacts of including secured debt are unknown, yet could be very substantive and painful for the economy.

"In circumstances where there are financial incentives to categorise oneself as somebody who cannot pay, it will be difficult to determine the difference between someone who can't pay and someone who won't pay." He added that banks "will work and are working with customers who genuinely cannot pay".

Irish Independent

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