NAMA Powers

Table of Contents

Deemed Rights and Mortgagor Restrictions

The NAMA legislation includes novel legal provisions which are designed to reduce the risk of mortgagors and other transferors unreasonably frustrating the development potential of the mortgaged property. The provisions are aimed at limiting claims of “ransom” strips and equivalent rights over adjoining land. or otherwise asserting rights which

There is deemed to be included in transfers of lands, for the benefit of the mortgagee any easements or rights over adjoining land retained by the transferor that it is reasonable to assume, would have been contemplated to be included. This is for the purpose of access for rights of way, service etc.

Where a mortgagor holds an interest in or option to purchase other lands, he must not deal with those other lands without giving notice to NAMA, if it is not possible to realise the full value of the secured lands for development, sale or leasing unless those other lands were owned by NAMA. Any failure to give notice to NAMA makes the transaction voidable.

Where a mortgagor holds an interest in or option to purchase other lands it must not deal with those other lands without giving notice to NAMA. If it is not possible to realise the full value of the secured lands for development, sale or leasing without acquisition unless those other lands were owned by NAMA. Any failure to give notice to NAMA makes the transaction voidable.

Compulsory Acquisition

NAMA has power to compulsorily acquire lands, easements and rights. It may exercise these powers if it is of the opinion that it is necessary to do so:

so as to ensure that the secured property can be used or enjoyed effectively ;or
because the acquisition of the land or right is necessary to enable a building to be used for the purpose for which it was developed; or
because there is a material impediment to vesting good title in the land for the intended use and the relevant right would resolve the impediment; or
because it was excluded in error; or
because it may used as a ransom strip by the borrower.

NAMA may apply to Court for an acquisition order to acquire the property or easement concerned. It must publish an initial notice in a newspaper and serve notice on every person whom it believes has any rights to the lands concerned. The maps, plans and books of reference for the lands concerned are deposited at a suitable place open for inspection during normal business hours. Persons who claim to have an interest in the land are obliged to file details of their interests within 21 days.

Any person objecting to the application must be heard by the Court. The objection must be lodged within the period of 21 days. If no objection is made or the Court rejects any objection, the Court must make an order authorising NAMA to compulsorily acquire the property in accordance with the terms of the application or the application as modified by the Court if it is satisfied that the above grounds apply.

At any time after making the order, NAMA may take possession of the land. It must give 14 days’ notice to the occupier. Compensation need not be paid immediately, but it will be back dated with interest. The amount of compensation to be paid is determined in accordance with the existing methods of assessment under general compulsory purchase legislation. Sums due to a person entitled to compensation can be set off against debts due by that person to NAMA.

After making a compulsory acquisition order, NAMA is obliged to publish a copy of the order in a newspaper circulating the area and serve a notice of the making of the order on persons who have an interest in the land. Where the necessary persons have not transferred or agreed to transfer land to NAMA and NAMA has made an offer in writing to such persons, the Court may vest the title to land in NAMA.

Development Powers and Rights

NAMA has wide powers in relation to developing land. It may enter agreements with the borrower. The objective of the agreements must be for the orderly development of the land in order to secure the best price reasonably possible.

NAMA is deemed to have the same rights as the credit institution or the borrower or any associated persons have or had in relation to the defects in design or workmanship in relation to a building constructed or to be constructed.

Where there is an agreement for the development of land which provides for the engagement of design service providers or contractors, NAMA is entitled to copies of all the relevant documentation. It is entitled to continue or terminate the agreement with the service provider or contractor as it sees fit. A lien (e.g. by an architect etc) for unpaid fees over any designs, plans or drawings is void as against NAMA, but the underlying claim remains.

NAMA is entitled to a licence from the development professionals, design building and engineering team in relation to the use of drawings, intellectual property of the development professional, the drawings, designs and plans. It may grant sub-licences. The design professionals or building engineering contractors are to be entitled to fair and reasonable remuneration for work already done and a fair and reasonable licence fee in relation to use of the drawings.

Attempt to Frustrate NAMA

Where a debtor or guarantor or somebody associated with him has taken action to dispose of assets directly or indirectly in order to defeat, delay or hinder the acquisition of the assets by NAMA or impair their value, the Court is entitled to make an order deeming the transfer to be void.

NAMA Statutory Receivers

NAMA will have the power to appoint a so called “statutory receiver”. This receiver will have special extended powers in relation to a security, where the power of sale arises or becomes exercisable or where a power to appoint a receiver arises. See our separate chapter in relation to when a power of sale or a power to appoint a receiver arises. The receiver may be an officer of NAMA.

The statutory receiver is deemed an irrevocably appointed attorney of the mortgagor and can accordingly do anything that the mortgagor could do in his name or on his behalf. He is deemed to be agent of the mortgagor. The mortgagor is deemed solely responsible for this engagements, acts, omissions, remuneration, defaults and losses and for his liabilities. NAMA does not incur any liability by reason of the appointment of a statutory receiver or for his actions or for anything he does or does not do.

A statutory receiver selling property which subject to a mortgage in favour of NAMA, must exercise reasonable care to obtain the best price reasonably obtainable at the time of sale. A statutory receiver is not obliged to sell property at any time or at all.

The appointment of a liquidator or examiner does not displace the powers of a statutory receiver. The maximum rate of commission payable by law to a receiver does not apply a statutory receiver.

Powers

The receiver has the powers in a mortgage and also those additional statutory powers set out in the NAMA legislation. The powers in the legislation are much broader and more far reaching than is the case with traditional receivers or mortgagees in possession. These statutory powers include the following:

powers to take possession of and collect any secured asset or its income;
power to make demands and take such legal proceedings as are required to take possession;
power to sell;
power to carry on, manage, develop, reconstruct any business;
power to appoint advisers and agents on such terms as it sees fit;
power to raise and borrow money either unsecured or on the security of the secured assets on such terms as NAMA determines (in priority to NAMA’s security or otherwise);
power to grant easements and rights;
power to sell any land or any rights to land by auction or private contract or in such manner as it sees fit. The sale may be for cash or on such other terms, including shares or other price;
power to let, lease or license any property for any term or at any rent as it sees fit;
power to enforce calls on shares;
power to sell book debts;
power to exercise voting rights;
power to acquire land;
power to exercise the rights of the mortgagor as landlord or tenant under any legislation;
power to settle, compromise or agree any claim or dispute with any creditor of the mortgagor or relating to the secured property;
power to bring, defend or cease any legal proceedings in its own name or in the name of the mortgagor in relation to the property;
power to form a subsidiary of the mortgagor and arrange for such subsidiary to trade or cease to trade and power to transfer any asset to that subsidiary;
power to delegate its powers;
power to appoint managers, officers and employees;
power to enter into contract with or to lend money to any customer of the mortgagor;
power to substitute or improve plant and machinery;
power to elect for VAT purposes;
power to run the tax affairs of the mortgagor in such manner as it sees fit;
power to insure;
power to conduct all investigations, studies, samplings, testings or otherwise to comply with environmental law;
power to register, maintain and protect intellectual property;
power to redeem any prior mortgage and settle accounts in relation to it;
power to effect any repair or insurance or otherwise which the mortgagor might do in the course of its business;
power to commence and complete any building operation or complete any existing building operation;
power to provide or arrange for any service for the efficient use and management of the assets;
power to do all things desirable and necessary for realising the asset or incidental or conducive to such rights, powers and discretion;
power to exercise all powers in relation to the asset as if it was owner;
power to use the name of the mortgagor when exercising any of the rights;
power to do all things and to execute in the name of and on behalf of the mortgagor any deed, receipt or other documents and to make any payment necessary or incidental to its functions;
power to claim in the bankruptcy of any debtor of the mortgagor;

Vesting of Secured Asset

A mortgagee is not generally entitled to keep a secured property in whole or part satisfaction of a debt. This is possible in some countries by a court order for foreclosure. Foreclosure was never granted in Ireland and has now been abolished under the 2009 law reforms. However, NAMA will have new special power to take ownership of lands comprised in a security, under certain circumstances. This will not extinguish the debt.

NAMA may apply to Court for a vesting order to take ownership of the asset, if it is entitled to sell the asset but forms the view that it is unlikely that the sum secured can be recovered by sale within a reasonable time. Where there is a prior charge, that prior charge must be discharged by NAMA. NAMA then ceases to manage the property as a security and takes ownership.

The application to Court for vesting of ownership must show evidence of the price likely to be achieved in the immediate future and of any other interest in the land. NAMA is obliged to serve notices on the mortgagor, other mortgagees and any guarantor. It must publish notice in a newspaper. Where there are multiple mortgages, the Court may direct taking of accounts. A subsequent mortgagee may redeem the mortgage in full, in which event the vesting proceedings may be terminated.

If the Court is satisfied that it is unlikely that the sum secured can be recovered by sale within a reasonable period and there is no reasonable prospect of a sale at a price sufficient to redeem the mortgage, the Court may make an order vesting the property in NAMA. Any prior mortgage may be made the subject of an undertaking to discharge.

If on a vesting order, the value of the land exceeds the sum secured against the asset, the Court must order compensation to be paid to the other mortgagees or if there is an excess it is paid to the mortgagor. The amount of compensation is not to exceed the excess.

The vesting order vests ownership of the land in NAMA, extinguishes the equity of the mortgagor i.e. right to redeem and extinguishes the interests of other mortgagees. The debt remains outstanding. An vesting order may not affect a principal private residence.

If NAMA later sells the land, its title is deemed unimpeachable.

Where NAMA has acquired an asset where the land or building has been abandoned, overgrown, infested, in disrepair or at risk from trespasses or vandalism, it may apply to the District Court for an order to do any of the following:-

fence and secure the boundary
clear and treat the land or any building or structure on it in a manner designed to remove vermin
repair and secure any building or structure

The order allows the steps to be taken within six months. NAMA must give occupier 24 hours of intention to enter. The order does not permit forceable entry, unless it specifies. NAMA is not a mortgagee in possession when it enters land using this power. The cost and expense of the works concerned is a debt due and recoverable from the debtor, guarantor or surety and is secured against the land.

NAMA Power of Sale

NAMA has powers to sell assets and give good title to purchasers notwithstanding any restrictions, existing contractual terms or even other legislation prohibiting it. Where an asset is subject to a prior charge, NAMA may redeem and discharge it.

A deed by NAMA is to have the effect of a transfer deed. It is deemed to have the effect of transferring the property clear of all other mortgages, charges and interests other than those which have priority to NAMA. The rights of the holders of any such mortgages, charges or interests are extinguished on transfer. Any such rights attach to the proceeds of sale only in the same order of priority as prior to extinguishment.

If there was sufficient equity in the property on sale, a second mortgagee may be entitled to some or all of the proceeds of sale but cannot challenge the sale itself. The effect of the above provision will be to extinguish the rights of lower ranking mortgagees, because there are no remaining proceeds after NAMA has been paid what it is owed.

A sale by NAMA gives a purchaser full ownership and title, free from all third party claims and interests other than those:-

to which it is expressly made subject;
which arise by an equitable mortgage (see below);
which were already registered in the Registry of Deeds or Land Registry;
certain rights of occupiers of land which always affect registered land without registration (e.g. squatters, certain leases less than 21 years).

This overrules the unusual conveyancing rules. The rights overridden include the beneficial interest in a dwellinghouse, unless one of the above exceptions apply. An “equitable mortgage” in the above context, is a mortgage by deposit or created solicitor’s undertaking, which in the case of a company has been duly registered in the Companies Registration Office.

Where third party rights are overridden on a NAMA sale, they attach to the proceeds of sale and NAMA must discharge them as soon as possible.

Existing Proceedings

Legal proceedings in respect of bank assets, including enforcement proceedings, continue notwithstanding that NAMA acquires the secured asset. NAMA may choose to be substituted in the proceedings and assume some or all of the rights and obligations of the participating institution in relation to it. NAMA is not to be liable for any counterclaim or set off by the other party to the proceedings.

Where NAMA chooses to be substituted in the legal proceedings, the institution continues to be liable for the following:-

damages on any counterclaim or cross claim by the other party;
its own costs in the proceedings before substitution;
potential costs incurred to others as a result of the institution being a party before substitution;
any subsequent costs it may incur in a capacity in which it remains in the proceedings.

Where NAMA takes over any legal proceedings, the institution is obliged to assist in full.

Where a “lis pendens” (notice of pending litigation which binds third parties) is registered in respect of pending litigation after 30th July 2009 it is to have no affect against NAMA or any person who acquires land from NAMA. Where an institution has obtained a judgment before acquisition of the asset, NAMA may enforce it.

Where the institution is defendant in legal proceedings it remains liable in the same capacity. NAMA may elect to become a party to the proceedings.

Legal Action against NAMA

There are limitations and restrictions on taking legal action against NAMA. No legal action may be taken against NAMA by reason of its acquisition of a bank asset. No legal action is maintainable against NAMA for damages for any injury caused to person or property or other loss alleged to have been caused or contributed by failure to perform any functions by NAMA.

No legal proceedings may be taken against NAMA in relation to breach of contract, misrepresentation or wrong committed by a participating institution. The claimant concerned may be able to enforce such right against the institution itself.

In any proceedings for recovery of money by NAMA the principal interest or otherwise a certificate in writing by NAMA specifying the sum due is deemed sufficient evidence for a period of one month.

There are restrictions in taking injunctive action i.e. Court order against NAMA ordering it (to do or desist from doing an act). The Court is to have regard to the public interest in particular the purpose of the act, the desirability of certainty and the desirability of moving assets back into the private economy in a timely and efficient manner. The Court may not grant an injunction where damages would be an adequate remedy unless refusal to grant an injunction would give rise to injustice.

Judicial Review

Judicial review is an application to Court to challenge the legality of the act of a public body. The right to take a judicial review against NAMA actions under the act is severely limited. An application for consent to take judicial review is required within one month of the decision unless there are very good reasons for the delay. Consent to take judicial review will not be given unless a substantial issue is raised.

The application may only be made with the initial consent of the Court. The Court may grant consent only if it is satisfied that the public interest is outweighed by the applicant’s interest and the applicant has given an undertaking. In applying for consent the applicant must undertake to pay any damages suffered by NAMA as a result of being prevented from dealing with the asset, and must produce adequate security in respect of that undertaking.

In considering an application, the Court must have regard to the purposes of the act, the desirability of certainty in relation to acquisition by NAMA, the desirability of having bank assets that NAMA managed move back into the private economy in a timely and efficient manner.

Obligations to Enforcement Authorities

NAMA has obligations to pass information to the authorities including Garda Siochana, Revenue Commissioners, Director of Corporate Enforcement or other regulatory bodies, where it believes an institution may have committed a criminal offence or may have contravened the law in relation to taxation, companies or financial services legislation.

Where NAMA is obliged to pay monies to any guarantor, debtor or connected person, payment is not to be made until a tax clearance certificate or a direction from Revenue Commissioners issues to the effect that it is in order to make the payment. Where this is not available, the Revenue Commissioners may issue a notice to NAMA directing NAMA to pay, where the amount of money is greater than the outstanding tax, the amount of money equal to the outstanding tax or where it is less, than the outstanding tax.