An issue troubling several members of the Oireachtas Joint Committee on Finance and the Public Service when quizzing the NAMA CEO was NAMA borrowers transferring assets to family members, spouses or related companies in order to avoid repayment to NAMA. The issue was particularly raised by Joan Burton who further asked about the definition of a family home (in particular whether a number or portfolio of homes, eg one in Dublin, one on the Continent and one in the Irish countryside could be considered as one home) and whether a so-called trophy home (eg one on Ailesbury Road in Dublin where asking prices in 2010 continue to be pitched at the €2000/psf plus mark) could be considered a family home worthy of special protection from creditors.
The NAMA CEO made reference to the Family Home Protection Act 1976 and opined that a change in the law might be helpful to NAMA in its efforts to recover loans. However he pointed to the fact that NAMA had powers to apply to the Court to have transactions set aside and that certain transactions which disposed of property which was of interest to NAMA might be considered fraud. Changing the law may at this stage be closing the stable doors two years after the horse has bolted and retroactive application of any law poses problems but that has never stopped determined governments who simply introduce defined and targeted taxes.
The Family Home Protection Act 1976 was designed to support married couples and their families by preventing the sale or mortgage of a property without both spouse’s consent. Same-sex and unmarried couples enjoy no protection under the Act. The concern is that borrowers who default on loans will continue to own, control or access fantastic wealth, whilst the State (either through NAMA or a recapitalisation) picks up the debt – Joe Soap struggling to make ends meet living in modest accommodation pays for the debts run up by Joe Elite who continues to enjoy fantastic wealth.
As pointed out before on this blog (for example here), wealthy individuals frequently make use of lawful devices including trusts, offshore facilities and limited liability corporations to protect wealth and it may be an ugly and unpopular truth but at some point NAMA and government may need to abandon the “chasing them to the ends of the earth” rhetoric and write the debt off. That doesn’t mean NAMA should not make full use of all lawful means to recover the debt including, where appropriate, seeking to have transactions set aside. The government might consider balancing these ugly truths with a reform of the insolvency laws for average citizens eg simplifying bankruptcy arrangements and reducing the duration, burden and effect of bankruptcy – with negative equity affecting close to 200,000 households and a slow housing recovery and further wage reductions, unemployment and taxes in prospect this might be how a NAMA for the little people would work.