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Right of residence and remortgaging house (hypothetical question)

  • 11-07-2020 11:31pm
    #1
    Hairy Japanese BASTARDS!
    Closed Accounts Posts: 443 ✭✭


    My auntie (mam's sister) was left the family house. Her brother (my uncle) who has a disability and unable to work was given the right to live there until he dies even though the house was left in my auntie's name.

    Hypothetically, if my auntie remortgaged the house and failed to pay it, if the house was possessed by the bank what rights would my uncle have?

    This is entirely hypothetical. I'm not seeking legal advice.


Comments

  • #2
    Marcusm
    Registered Users, Registered Users 2 Posts: 10,441 ✭✭✭✭Marcusm


    Your aunt might find her a specialist lender willing to advance a small amount if the house’s value. As your aunt only has a reversionary interest, no lender will be able to displace the life tenant (assuming it has properly been granted) meaning that the lender would only be able to enforce any claim on the death of your uncle.


  • #3
    Peregrinus
    Registered Users, Registered Users 2 Posts: 26,690 ✭✭✭✭Peregrinus


    Assuming your uncle is mentally competent, any lender is likely to want him to join with your aunt in granting a mortgage over the property to to the bank.


  • #4
    Marcusm
    Registered Users, Registered Users 2 Posts: 10,441 ✭✭✭✭Marcusm


    Peregrinus wrote: »
    Assuming your uncle is mentally competent, any lender is likely to want him to join with your aunt in granting a mortgage over the property to to the bank.

    And presumably any halfway competent solicitor would advise him not to do so unless he benefits substantially from the monies raised given that he is surrendering some right to continued occupation of the property without an ability to control it.


  • #5
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    A house was recently sold in Drumcondra in a vaguely similar circumstance.

    The house was sold subject to a life tenancy where the existing occupant could remain rent free for the rest of their life.

    OP my guess is no mainstream bank would grant a mortgage if they knew of your uncle's right to occupy as it would severely limit their security. Much depends on how your unrles rights were granted and if/where those rights have been registered. Something your hypothetical solicitor could confirm.


  • #6
    Peregrinus
    Registered Users, Registered Users 2 Posts: 26,690 ✭✭✭✭Peregrinus


    Marcusm wrote: »
    And presumably any halfway competent solicitor would advise him not to do so unless he benefits substantially from the monies raised given that he is surrendering some right to continued occupation of the property without an ability to control it.
    Well, much is going to depend on why the money is being borrowed. If the aunt wants to borrow money to maintain or improve the house, the uncle will benefit from having a well-maintained or improved house to live in. He might not want to deny himself (and his sister) the benefit of that by refusing to consent to the grant of the mortgage.

    To my mind, the big risk for the uncle is not so much the fact that he might lose his right of residence if the house is repossessed - repossession is an extremely rare event, and he might be confident that, given the size of the loan and the aunt's financial position, it's very unlikely in this instance. (Or, of course, he might not be confident. But let's assume he is.)

    The more immediate issue, I think, is that as well as requiring him to join in the grant of the mortgage, the bank will require him to join in the loan agreement. This will make him jointly liable, with the aunt, for the full amount of the loan, regardless of how much, if any, of the proceeds of the loan actually come to him. Which is another reason he will want to look carefully at what the loan is for and how it is going to be spent.

    You might think he would be made to participate in this at all. But such things are commonly done in families - e.g. parents joing in guaranteeing loans for their children, and grant mortgages over their own homes in support of the guarantee. It all depends on how much trust and confidence family members have in one another.


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  • #7
    Marcusm
    Registered Users, Registered Users 2 Posts: 10,441 ✭✭✭✭Marcusm


    Peregrinus wrote: »
    Well, much is going to depend on why the money is being borrowed. If the aunt wants to borrow money to maintain or improve the house, the uncle will benefit from having a well-maintained or improved house to live in. He might not want to deny himself (and his sister) the benefit of that by refusing to consent to the grant of the mortgage.

    To my mind, the big risk for the uncle is not so much the fact that he might lose his right of residence if the house is repossessed - repossession is an extremely rare event, and he might be confident that, given the size of the loan and the aunt's financial position, it's very unlikely in this instance. (Or, of course, he might not be confident. But let's assume he is.)

    The more immediate issue, I think, is that as well as requiring him to join in the grant of the mortgage, the bank will require him to join in the loan agreement. This will make him jointly liable, with the aunt, for the full amount of the loan, regardless of how much, if any, of the proceeds of the loan actually come to him. Which is another reason he will want to look carefully at what the loan is for and how it is going to be spent.

    You might think he would be made to participate in this at all. But such things are commonly done in families - e.g. parents joing in guaranteeing loans for their children, and grant mortgages over their own homes in support of the guarantee. It all depends on how much trust and confidence family members have in one another.

    In theory at least, any guarantee of her obligations under the loan could be limited to the surrendering of his interest in the property. Again, this would not be a standard loan arrangement. Realistically, I doubt that any significant finance would be available with the property as principal security for repayment.

    To be clear, he should not, under any likely circumstances, be a co-oblige or under the loan. Such structures are not uncommon in complex financing, ie unsuited to a common family home. I recall one structure involving a life tenant borrowing on the basis of security of his interest in the property without proper due diligence. He was 85-90, all funds (millions) reinvested in the property but no ability to recover on his death (in part because of embarrassment on the bank’s part).


  • #8
    coylemj
    Registered Users, Registered Users 2 Posts: 25,492 ✭✭✭✭coylemj


    Graham wrote: »
    A house was recently sold in Drumcondra in a vaguely similar circumstance.

    The house was sold subject to a life tenancy where the existing occupant could remain rent free for the rest of their life.

    Almost certainly a cash purchase. By a much younger person who sees the (future) rent from the property as part of their pension. And I've no doubt that the sale agreement contained a provision for the occasional inspection, plus guaranteed access for essential maintenence.


  • #9
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    coylemj wrote: »
    Almost certainly a cash purchase. By a much younger person who sees the (future) rent from the property as part of their pension. And I've no doubt that the sale agreement contained a provision for the occasional inspection, plus guaranteed access for essential maintenence.

    If I remember correctly there wasn't even provision for a viewing before the auction but can't say I investigated closely either.

    Would be a brave investor that bought on the basis of a walk past the front door! :pac:


  • #10
    coylemj
    Registered Users, Registered Users 2 Posts: 25,492 ✭✭✭✭coylemj


    Graham wrote: »
    If I remember correctly there wasn't even provision for a viewing before the auction but can't say I investigated closely either.

    Would be a brave investor that bought on the basis of a walk past the front door! :pac:

    The value for the buyer may lie in the development potential. In which case he or she might be happy for the place to fall down around the occupant for the want of maintenance.

    A certain well known businessman bought a house on Shrewsbury Road several years ago. When the city council refused him PP to knock the place and develop multiple units, he just left the place to rot.


  • #11
    Peregrinus
    Registered Users, Registered Users 2 Posts: 26,690 ✭✭✭✭Peregrinus


    coylemj wrote: »
    The value for the buyer may lie in the development potential. In which case he or she might be happy for the place to fall down around the occupant for the want of maintenance.

    A certain well known businessman bought a house on Shrewsbury Road several years ago. When the city council refused him PP to knock the place and develop multiple units, he just left the place to rot.
    From memory, the property in question is a mid-terrac C19 house in central Dublin. I think redevelopment potential, as least as far as the structure goes, is pretty limited. When the property falls vacant it's quite likely to be converted to commercial use and if so will be completely redecorated and possibly remodelled anyway, but, at a mimimum, it does need to be kept structurally sound and weatherproof in the meantime.


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