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Europe > Ireland > Litigation Finance > Consumer finance > Article > Commercial Property Investors are not Consumers within the CCMA Code but could notice to a Bank change that?

Article: Commercial Property Investors are not Consumers within the CCMA Code but could notice to a Bank change that?


The High Court in ACC Bank plc v Niall Quinn [2014] IEHC 677 decided in favour of the well-established principle that commercial investors are not consumers.


The Plaintiff sought the repossession of two properties pursuant to mortgages with the Plaintiff, one in Morehampton Road, Donnybrook, Dublin 4 and the other in Athlone, Co. Westmeath. The Defendant challenged the repossession and asserted that the Code of Conduct on Mortgage Arrears (the “Code”), issued pursuant to s. 117 of the Central Bank Act, 1989, applied to the Morehampton Road property as he had been using it as his family home and principal private residence since 2005. As a result, he argued that the Plaintiff could not repossess this property without first adhering to the Code.


The facts as established were that the Defendant took out loans in July 2004 and January 2005 for the purchase and subsequent improvement of the residential investment properties at Morehampton Road and Athlone. The July 2004 facility letter had as a condition precedent to the loan offer that confirmation of the proposed rental income be submitted in advance to the Plaintiff. This was complied with and stated to be an annual figure that would increase once renovations to the property were carried out. Of particular note is that the facility letter incorporated the Plaintiff’s General Terms and Conditions for Commercial Credit Facilities and included within these Terms the Defendant warranted and undertook that he was not acting as a Consumer within the meaning of the Consumer Credit Act, 1995.

However, the Defendant claimed that he had in fact used the Morehampton Road property as his family home since January 2005 and that he, at all times, had intended to use the Morehampton Road property as his principal private residence and family home. He stated in evidence that this was agreed to by the Plaintiff in a meeting, in or around, December 2004 but the Plaintiff disputed that this was ever agreed to.

The Court identified four codes which were in place during the lifetime of the loan:

1.Code of Conduct on Mortgage Arrears 27th February 2009 to 16th February 2010;
2.Code of Conduct on Mortgage Arrears 17th February 2010 to 31st December 2010;
3.Code of Conduct on Mortgage Arrears effective from 1st January 2011; and
4.Code of Conduct on Mortgage Arrears effective from 1st July 2013.

The Code as described in the press release issued by the Central Bank with the most recent revision of the Code in 2013 stated as its objective, to provide a “strong consumer protection framework to ensure that borrowers struggling to keep up mortgage repayments are treated in a fair and transparent manner by their lender, and that long term resolution is sought by lenders with each of their borrowers”.

The Court stated that the first two codes applied to consumers only and so were of no relevance as the Defendant was not acting as a consumer. The last two were not restricted to consumers and applied to mortgage loans of a borrower which were secured on their primary residence. Primary residence is defined as, a property which is (i) the residential property which the Borrower occupies as his primary residence in this State or (ii) a residential property in this State which is the only residential property owned by the borrower.

Ultimately, Mr Justice White ruled against the Defendant and stated in relation to the Code that “the Plaintiff considered the projected rent from the property in assessing the viability of the lending. The fact that the Defendant decided to use the property as his primary residence for periods of time, without any written notice to the Plaintiff, does not entitle him to have the Code applied.” The Plaintiff made it clear in their facility letter and mortgage signed by the Defendant that the loan was only for residential investment property and not for any other purpose. The requirement to provide rental income estimates as a pre-condition strengthened this position.

The High Court did accept that “there may be situations where a lender acquiesces in the use of a property as a primary residence, which has been mortgaged for commercial purposes, and which was not intended to be the primary residence of the borrower. In that case the code would apply. For that to arise there would have to be cogent evidence advanced that the lender had notice that the property was being used as the primary residence of the borrower. There is no independent corroborative evidence advanced by the defendant to suggest that the bank had such notice, and the written documentation suggests the exact opposite”.

It would appear that one of the fatal aspects to the Defendant’s case was his failure to notify the Plaintiff, in writing, that he intended to use the Morehampton Road property as his family home. The fact that the Defendant used the property as his family home appears to be irrelevant as he did not first obtain the Plaintiff’s permission to do so. Accordingly, it would seem to be imperative that a Bank is at least put on notice, and their consent or an acquiescence to the change obtained, should a borrower wish to take up occupancy of a residential investment property as their primary or family residence and seek to have the Code applied.

From a lender’s point of view, this decision is to be cautiously welcomed. It demonstrates the Court’s discretion to make orders for possession even where there is debate over the lending institution’s compliance with the relevant codes. However, the Court’s suggestion of notice to the lender to effect a change in the status of a property from commercial investment to primary residence is not set out in any code and so is liable to challenge and further applications in the future. While this case was clear on the facts that the property was an investment property from the very beginning and no steps were taken by the Defendant to alter its status, other cases may not be as straight-forward and so some ambiguity remains.

Conversely, it may instead open a floodgate for borrowers notifying lenders of their intention to make such residential investment properties their family homes, in a bid to avail of some protection of the Code. Any delay by the lender in denying permission may lead to an argument by the borrowers of acquiescence on the part of the lenders. This is something that will have to be carefully watched for and cautiously approached.

Last Update: 2015-May-04 Margaret McCarthy - AMOSS Solicitors
The contents of this page do not constitute legal advice or create an attorney- client relationship with the contributor. Do not apply anything you read here without contacting a professional.
Author: Margaret McCarthy
Law Firm: AMOSS Solicitors
Address: Warrington House
Mount Street Crescent
Dublin 2
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Telephone: 012120400
Website: www.amoss.ie