Judgement Mortgages II

Effect of Judgement Mortgage I

The registration of a judgment mortgage operates to transfer and vest in the creditor the unregistered lands referred to in the affidavit for all the estate rights and titles of the debtor in them at the time of registration, whether at law or in equity. It includes interest which he might at such time create by virtue or any disposal power which he might have in them, which without the assent of any other party, may be exercised for his own benefit.

In the case of a registered title, registration creates a charge. It is equivalent in certain respects to a registered charge granted to secure loan monies. Unlike an ordinary charge, it is deemed not to be given for value, from which it follows that it does have priority over prior unregistered transfers and charge for value. See generally the sections on Land Registry charges and the distinction between them and mortgage over unregistered title land.

The creditor is in the same position as a mortgagee by deed.  The judgment mortgage attaches to the judgment debtor’s beneficial interest only.  If the property has been sold and no transfer has been registered, then there was nothing to which to attach.  If a contract for the sale of the property has been entered, then the beneficial interest passes by operation of law, notwithstanding that the purchase price has not yet been paid.

The registration does not bind after-acquired land.  It is limited to the interest of the judgment debtor/judgment mortgagee at the date of registration.A judgment mortgagee may transfer or convey his interest in the property to a third party.  He may grant sub-mortgagor’s interest under the mortgage to a third party.

Effect of Judgement Mortgage II

The registration of a judgment mortgage against a joint tenant of unregistered title land caused the severance of a joint tenancy before the 2009 Act reforms.  Registration of a judgment mortgage in respect of registered land creates a burden on the registered title and did not cause severance. The 2009 reforms provide that registration of a judgment mortgage after 1st December 2009 does not sever the joint tenancy. However the holder may apply to court for an order of sale.

The registration of a judgment mortgage against a family home does not require the consent of the non-owning spouse.  It has been held that the judgment mortgage is a process of execution and not a mortgage granted by the other spouse.  Accordingly, there is no disposition by a spouse, to which to consent.

The registration of a judgment mortgage against the interest of co-owner after the 2009 Act attaches to the interest of the co-owner.  The 2009 Act grants the judgment mortgagee a right to apply to the court for an order for sale. The court has a broad discretion in relation to the grant or refusal of an order for sale. See the sections on co-ownership, partition and sale.

The judgment mortgage affects such interest as the judgment debtor has in the property.  Accordingly, if the debtor’s interest is subject to other interests, such as equitable interests (including unregistered transfer deeds and mortgages for value), the judgment mortgage takes effect, subject to them.  Registration of a judgment mortgage gives the creditor rights and interests which have priority over those of persons whose rights or claims arising subsequent to the registration.

Registration does not give the judgment creditor the same status as a purchaser for value or a mortgagee for value.  Registration of a judgment mortgage against the title of a bare legal owner or trustee is ineffective, as there is no beneficial interest to which to attach.  An improperly registered judgment mortgage is ineffective against subsequent mortgagees and also against intervening registered judgment mortgages.

It has been held that when a purchaser for value has knowledge of an incorrectly registered judgment mortgage but does not know that it remains unsatisfied, then he is not bound by it.  However, it appears from case law that where the later mortgagee or purchase has actual knowledge that the judgment mortgage sum is outstanding, then he may be precluded from objecting to it.

Companies

In the case of a company, the judgment creditor in addition to registering in the appropriate registry was required prior to the 2009 Act, to cause, copies of the affidavit, certified by the appropriate registry, to be delivered to the company within 21 days.  The company was then required within three days to deliver a copy to the Companies Registration Office.

The Land Registry or Registry of Deeds was also to deliver a copy of the affidavit to the CRO.  Default by the judgment creditor is an offence.  Default by the company officer or by the company in making the filing is also an offence.  However, the judgment mortgage is not invalidated.

Under the Companies Act 2014 (from 1^st June 2015), if judgment is recovered against a company and that judgment is subsequently converted into a judgment mortgage affecting any property of the company, the judgment mortgage shall be void against the liquidator and any creditor of the company unless the procedure set out below  is complied with. This provision does not apply to any judgment mortgage created before the commencement of the legislation.

The procedure for registration consists of the taking of steps so that there is received by the Registrar, together with the relevant judgment mortgage document, the prescribed particulars, in the prescribed form, of the judgment mortgage, not later than 21 days after the following date.  That date is the date on which notification by the Property Registration Authority of the judgment mortgage’s creation is received by the judgment creditor.

It is be presumed, until the contrary is proved, that the judgment creditor received notification, of the judgment mortgage’s creation, from the Property Registration Authority on the third day after the date on which that notification is sent by it to the judgment creditor or his or her agent.

Status

It has been held that a judgment mortgagee may the right to marshal against a later judgment mortgagee. Therefore, when a mortgage affects two properties, a later judgment mortgages affect one of them only and a judgment mortgage affects them both, the first judgment mortgagee may marshal to the prejudice of the second mortgagee, once the first mortgagee has been satisfied.

Registration of a judgment mortgage on a registered title creates a burden, which is registered on Part III of the registered title in the usual way.  The registration takes effect subject to existing registered burdens on the folio, section 72 burdens and unregistered rights subject to which a judgment debtor held the interest at the time of registration. The creditor has the rights and remedies for enforcement as may be granted by order of the court.

The unregistered rights did not include the interest of a purchaser under a sale contract who has not yet paid the full purchase monies.  A judgment mortgage attaches to the beneficial interest of the vendor, which remains with him even after he has received a deposit under the contract.  The judgment mortgage might nonetheless be defeated on completion of the sale contract.

Superseding Events

Even under this approach, a judgment mortgage of unregistered title land did not affect land contracted for sale, after the purchase money has been paid, as the seller had no remaining beneficiary interest in the land.

This position has been reversed by the Land and Conveyancing Law Reform Act 2009, by which a beneficial interest in property vests in the purchaser upon the sale contract taking effect. When the owner has contracted to transfer the land, before the judgment mortgage is registered, it will not now attach.  If however, he contracts to transfer for voluntary consideration only, the judgment mortgage has priority.

Unless a judgment mortgage affidavit has been registered for three months prior to the date of adjudication of a judgment debtor as a bankrupt, then the judgment debtor does not obtain the benefit of a judgment mortgage. He has no security rights and ranks as an unsecured creditor only.  Equivalent e provisions apply to judgment mortgages against companies, prior to their winding up.

As a judgment mortgage is not a transfer or mortgage for value, it is subject to a lis pendens with or without notice and irrespective or whether or not it has been registered.  A lis pendens relating to registered land but not registered as a burden affects the interest acquired under the judgment mortgage.

Enforcement by Sale

A judgment mortgage is enforced by way of a declaration that the judgment debt sums are well charged on the debtor’s interest in the property. A well charging order is a court declaration that the judgment mortgage was validly created and affects the lands concerned as a mortgage.

Under the usual practice, an order is made from payment of the money due immediately, with an order for sale in default. Proceedings may be brought in the High Court or Circuit Court.

In the High Court, the order for sales directs the sale of the land through the High Court Examiner’s Office. The sale is be undertaken under the control of the court offices.  See our chapter in relation to court-ordered sales.

In the Circuit Court, a similar procedure applies. The sale may be ordered to be undertaken out of court or under the supervision of the County Registrar.

Sale

A mortgage suit may seek a well charging declaration in relation to a  mortgage (including a judgment mortgage) the sums due, an order for payment, a declaration that the payment may be enforced by sale, an order that an account be taken by the examiner or county registrar of money due, order appointing a receiver (if necessary) and an order for cost.

Where such an order is made, the court may grant carriage of proceedings to the creditor or another. Sale out of court under the auspices of the Examiner or County Registrar is usually ordered. Each significant step in the sale process is subject to the approval or oversight of the Examiner or County Registrar, as the case may be.

Upon completion of a sale, monies are lodged in court and a motion is brought for payment.  An examination will be made of entitlements to the underlying interests.  Advertisements may be ordered to be placed, seeking those who may have an interest in the land/proceeds of a sale.

The sale will be usually by public auction. The court may approve arrangements for sale out of court.  The sale contract must be approved by court-appointed counsel. Where premises are sold, the court will direct appropriate parties to join in and execute a proper conveyance of the premises. If they fail to do so, the court may authorise execution.

Family Home

The Family Home Protection Act 1976 restricts the sale or transfer of a family home without the consent of both spouses,. It does not apply to an involuntary transfers, by  judgment  mortgage proceedings.  However, the courts approach approach the sale of a family home in judgment mortgage proceedings with caution.

The court may  balance the creditor’s legitimate interest in debt recovery with the debtor’s constitutional and statutory rights to family and home life. It may weigh various factors, including the family’s financial circumstances, the availability of alternative housing, and the potential impact on children.

Receiver

It may be possible to have a court receiver to protect the judgment mortgage in certain exceptional circumstances. It would be necessary to show the property or its value is in danger.

A receiver may be appointed in a mortgage suit where it just appears unlikely that the proceeds will be paid at an early date.  The order may be made where

• interest is due on the security there is at least a year’s arrears;
• where the property is in danger or jeopardy; or
• where there is a reason to apprehend that the sum for which the lands will be paid is insufficient to pay off charges and encumbrances.

Release

A judgment mortgagee is entitled to pay off and have the judgment mortgage removed at any time. If the monies due are paid so that the security of the judgment mortgage, is redeemed the judgment creditor must to execute a release of the judgment mortgage.

There is provision for filing of a document in order formally to cancel a judgment mortgage. On the filing in the Registry of Deeds or Land Registry, as the case may be, the judgment mortgage is shown to be discharged on the Register or in the case of the Land Registry is removed entirely.