Archive for March 14th, 2013

Welcome to the medieval transparency wasteland that is the Irish judicial system.

We learn today that in the High Court in Dublin yesterday, NAMA launched a legal action against an individual named “Fergus Appelbe”. As is usual with recently-filed applications, there is no solicitor on record for the respondent. The applicant is National Asset Loan Management Limited represented by top-tier solicitors, Lavelle Coleman. The case reference is 2013/785 S.

We have no way of identifying the “Fergus Appelbe” because the High Court won’t confirm the address or other details of the respondent who doesn’t have a solicitor on record, and NAMA won’t even help just to confirm the identity of the respondent. We don’t even know if the “Fergus Appelbe” is an Irish national.

So far this year, NAMA has taken legal action on nine occasions in Dublin’s High Court and has been on the receiving end of 14 applications, though 12 of these relate to deposits on a Portugese golf resort.


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No further news on the curious events last month, when Ulster Bank obtained approval from the High Court in Dublin to serve Sean Dunne with bankruptcy proceedings over a €164m judgment, but at the time, there was speculation that the move might have been related to an ongoing legal battle between Gayle Dunne and Ulster Bank over an unpaid bill for hotel repairs. Gayle’s company, Mavior is suing a company established by Ulster Bank called Zerko Limited for €1m in respect of repairs and refurbishment of her husband’s Ballsbridge hotels after the severe flooding in late 2011. Zerko Limited is refusing to pay.

A preliminary issue has been before the courts for some time, and that is whether Mavior which is an unlimited company which doesn’t file public accounts, is capable of funding its legal case and Zerko demanded security for costs, in other words, for a sum of money to be paid into court to cover Zerko’s costs in the event that it won. Gayle’s Mavior was resisting the demand. Last year, the High Court held that poverty should not be a barrier to a company taking legal action and dismissed Zerko’s demand. Zerko appealed to the Supreme Court and this week, the Supreme Court supported the High Court judgment when it, too, ruled that Mavior does not have to provide security of costs in this case.

The judgment was delivered on 13th March 2013 and is available here. Judges Denham, Clarke  and MacMenamin focused on whether Gayle’s Mavior was what is called a “nominal plaintiff”, which if established, may have led the judges to overturn the High Court decision and impose an order for costs in advance of the full hearing.  A “nominal plaintiff” is a plaintiff who is really acting on behalf of another party, but in this case the judges didn’t accept that Mavior was such a plaintiff.

So, now Zerko faces a full hearing at the High Court over the matter at the root of the case, the unpaid €1m bill. And should Zerko win, it faces an uncertain prospect of getting its costs. So, a small victory for Gayle Dunne but she still has to pursue the €1m unpaid bill.

And what is going on with those Ulster Bank bankruptcy proceedings?

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This morning, Ireland’s Central Statistics Office (CSO) has released its inflation figures for February 2013. The monthly headline Consumer Price Index (CPI) increased by 0.8% compared to January 2013, but is still only up a modest 1.1% year-on-year. February’s results mirror those of December, November, October and  September, and continue a subdued annual inflation trend seen in recent months compared with the 2%+ that pertained before January 2011.

Housing has stopped being the biggest driver of annual inflation, mostly because mortgage costs have been declining – by 7.0% in the past year, as ECB rate cuts and greater scrutiny of variable mortgage interest rates take effect. Just a few months ago, mortgage interest was rising by 20% per annum, and as mortgage interest costs account for over 5% of the basket which measures inflation, the impact on inflation was substantial.

Energy costs in homes on the other hand, which account for over  5% of the total basket examined by the CSO, have risen by 6.9% in the past 12 months, mostly driven by the 9% price hikes at the ESB, and in October 2012 at Bord Gais.


Elsewhere, private rents rose by 0.2% in the month of February 2013  – this after a 0.1% increase in January 2013 but bigger increases in previous months: 0.7% in December, 0.6% in November, 0.7% in October  and  0.9%  in September 2012. Over the past year, such rents are up by 2.2% according to the CSO – there is some small rounding in the figures above which show 2.4%.

It seems that in our financial crisis, the big correction in rent took place in 2009 with a 19% maximum decline, compared to a decline of just 1.4% for all of 2010. Since the start of 2011 there has been a 6.9% increase (mostly recorded in February and October 2011 and February and September/October/November  2012).

Rent assistance levels have not been affected by the recent Budget 2013, neither the rates nor contribution have changed.

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Three weeks ago, NAMA said that it had sold €21m of Irish residential property offered with its so-called “negative equity” mortgage – that’s the mortgage which protects you against future declines in the value of your property, up to 20% over five years. NAMA had offered a cumulative total of 285 homes with the product, and this morning it has announced it is widening the scheme with an additional 100 homes offered for sale with the product.

The new offerings are in counties Dublin, Cork, Limerick and Wicklow. They range in size from two-bedroom apartments to five-bedroom houses, with prices ranging from €95,000 to €370,000. But remember, NAMA has in the past slashed the asking prices for some of these schemes, so don’t take these as fixed prices even if there is a negative equity promotion. NAMA has even produced a little brochure available here.

NAMA says today that its sales total under the scheme have gone up to €22m representing 120 homes or an average of €183,000 each.

NAMA reiterates today what the 80:20 initiative is, as follows

NAMA does not own the properties and is not itself issuing the mortgages.
This is a targeted initiative aimed solely at potential home buyers who may have a
concern that house prices may fall further and are consequently postponing their
The product will protect buyers from decreases of up to 20% in the value of their
property over the next five years.
Three banks – Bank of Ireland, AIB [through its subsidiary EBS] and permanent tsb bank
– are participating in the initiative. Buyers should approach these banks to obtain a
mortgage, which will be subject to typical lending criteria.
80% of the agreed sale price of the property is paid upfront. The remaining 20% will only
be due in five years’ time. How much, if any, of that 20% is then due will be calculated
on the basis of an independent assessment of the property’s value at that point (see
note 2).
As normal, each of the three lenders will require buyers to part-fund their purchase with
a deposit of at least 10% of the value of the house.
A key benefit for buyers is that, for the first five years, their repayments can be
calculated based on a mortgage that includes the deferred payment element. If the price
of their house falls over the five years and they may not be liable for the deferred
payment element, they will have, in effect, been accelerating their mortgage repayment
and achieving considerable savings on the interest accruing on their mortgage.
This is a targeted, limited initiative supported by NAMA.
The initiative is not aimed at buyers who cannot get a mortgage or at investors.

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On 6th February 2013, Minister for Finance Michael Noonan executed one of the most financially significant acts of his two year term in office, the liquidation of Irish Bank Resolution Corporation. It was over two weeks later when we found out in passing that as part of the liquidation, NAMA had been directed by the Minister to provide a €1bn credit facility to IBRC at 1.52% per annum. It was almost a month after, that Minister Noonan finally published the text of the directions he gave to NAMA.

But the directions published are pretty meaningless without the supporting schedules, deeds, transfers and perhaps most importantly, the facility agreement which makes €1bn of our money available to an insolvent bank at 1.52% per annum.

This week in the Dail, the Sinn Fein finance spokesperson Pearse Doherty asked for the supporting documents, and surprise, surprise, they are “commercially sensitive” and Minister Noonan refuses to publish them.

So, the Minister has finally found a means to politically direct NAMA without revealing such directions to the public. Next time, the Direction might just say “Dear NAMA, I command you to carry out the actions listed in the attached Schedule, Sincerely, Michael”

The Directions issued to NAMA as part of the IBRC liquidation represent a departure for this administration. Not only were the Directions published a month later after at least one request from the Opposition, but the Directions omit the meat of what is being directed. This all represents a serious deterioration in transparency, even compared with the previous administration and if allowed to stand, give unfettered direct political control over NAMA. And it’s not exactly reassuring to know that the NAMA Board including the so-called independent member, Steven Seelig, promptly approved the Directions given by the Minister.

The full parliamentary question and response are here:

Deputy Pearse Doherty: To ask the Minister for Finance further to the eventual publication on or after 4 March 2013, of the Directions given by him to the National Asset Management Agency in respect of the liquidation of Irish Bank Resolution Corporation, if he will now publish the documents referred to in the directions, namely the facility agreement, deeds, transfers and schedules.

Minister for Finance, Michael Noonan: I do not intend to publish the documents referred to in the directions, at this time, as they contain commercially sensitive information which if released could have a detrimental effect on the outcome for the taxpayer.


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The countdown continues to 31st March 2013 when the Property Services Regulatory Authority will make available online the details of some 20,000 Irish commercial leases.

This week in the Dail, we learned a little more about what we will get, when justice minister Alan Shatter responded to a parliamentary question from the Sinn Fein finance spokesperson Pearse Doherty.

The leases that will be available on the new database will only be those dated on or after January 2010. We also found out that whilst some (unspecified) basic information will be available free of charge, an (unspecified) fee will be charged for other (unspecified) information.

The cut-off of January 2010 means that the vast majority of the leases on the new database will be those entered into after the banning of upward only rent review clauses in new leases that came into effect in March 2010. So, we won’t get the chance to be blown over by some of the peak rents that still apply in some pre March 2010 UORR leases, though we do know that on average, commercial rents have declined by just over 50% since the peak in 2006/7.

This is the full parliamentary question and response.

Deputy Pearse Doherty: To ask the Minister for Justice and Equality further to Parliamentary Question No. 489 of 26 February 2013, if he will provide an estimate of the total number of commercial leases here and the total number that will be captured on the new commercial leases database; and if he will outline the principal reasons for omissions of extant leases from the commercial leases database..

Minister for Justice and Equality, Alan Shatter: As indicated in my reply to Question No. 489 of 26 February 2013, Section 87 of the Property Services (Regulation) Act 2011 provides that the Property Services Regulatory Authority (PSRA) shall maintain and establish a database relating to commercial property leases.

I am not in a position to advise the Deputy as to the total number of commercial leases here. However, I am advised by the Authority that it estimates that approximately 18,000 to 20,000 commercial leases will initially be detailed on the new commercial leases database, which is expected to be published in the near future. It is anticipated that the database will contain information in relation to all commercial leases entered into on or after 1 January 2010.

Section 87 provides that in respect of each relevant commercial lease, the Database shall contain: the address and description of the commercial property the subject of the lease; the date of the lease of the property; the term of years of the lease; and the rent payable in respect of the property. It is further provided in Section 87(3) that such information may, at the Authority’s discretion, be included in the Database, notwithstanding the fact that such a lease was entered into before the commencement of Section 87. Section 87(4) provides that Section 87(3) shall not apply to a commercial property lease entered into more than 5 years before the commencement of Section 87. I am advised by the Authority that it is satisfied that the information available on commercial leases entered into on or after 1 January 2010 is accurate and reliable and that it proposes, on the initial publication of the database, to include all leases entered into with effect from that date.

Section 88 of the Act also provides that the Authority make the information available on the Commercial Leases Database publicly available “on the payment of the appropriate fee”. While the Authority will make certain limited information available free of charge, all of the information, which tenants are required to furnish to the Authority under Section 88 of the Act, will only be made available on the payment of a fee.

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