Sales of Property where NAMA is the chargeholder

Conveyancing 06/09/2013

Practitioners have sought guidance as to the practices to be adopted where a property in sale is the subject of a charge or mortgage that has been transferred to NAMA (NAMA-charged property) pursuant to the National Asset Management Agency Act 2009 or where a property is subject to a charge or mortgage granted directly in favour of NAMA. In that respect, it should be noted that all such transfers were made to National Asset Loan Management Limited (a ‘NAMA group entity’ for the purposes of the NAMA Act) and not to NAMA itself. As such, all discharges and releases will be executed by National Asset Loan Management Limited (NALM).

Approval of proposed sale by NAMA

A vendor of NAMA-charged property will require the prior approval of NAMA before proceeding with any proposed sale. Applications for such approval should be made by the vendor to their usual contact in NAMA or the relevant participating institution dealing with their NAMA loans.

Such applications should, among other things, set out the net proceeds of sale that NAMA can expect to receive on completion of the sale after deduction of taxes and professional and other costs (the net sale proceeds), with a breakdown of those proposed deductions. These must all be approved of by NAMA. NAMA may also set out other conditions that must be adhered to on a case-by-case basis (the commercial conditions). This will include confirmation that NAMA’s policy in relation to sales being on an arm’s-length basis to non-connected parties has been adhered to (section 172 condition). Compliance with the section 172 condition will be a matter for either the vendor’s selling agent or, if appointed, a receiver. Vendors of NAMA-charged property are made aware of terms of this policy directly by NAMA.

Sale approved – next steps by vendor’s solicitor

A practitioner acting for a vendor should obtain a copy of the conditions imposed by NAMA or a participating institution in relation to the sale from the vendor. They should then contact the relevant solicitor in NAMA or the participating institution dealing with the matter (if not known, the vendor should confirm this with their NAMA contact) who will issue confirmation of the terms on which a release will be provided (this will be done by way of a standard terms of release letter).

Contract terms

In view of the foregoing, practitioners should discuss with the vendor the advisability of entering into a contract for sale prior to obtaining NAMA approval or to the inserting of a provision making the contract conditional upon the obtaining of such approval.

NAMA has advised that it will require that proceeds are to be split separately to allow net sale proceeds be paid directly to the participating institution or NALM. A practitioner advising a vendor should include a special condition in the contract allowing for any necessary split of the sale proceeds to facilitate the foregoing, if a requirement.

Approval of release

The deed of discharge or release of the relevant charge or mortgage should be prepared in advance of completion of the sale by the vendor’s solicitor. In that respect, NAMA has developed a suite of template discharges and releases (which have been approved by the Property Registration Authority) that must be used in all cases. The vendor’s solicitor should contact the relevant solicitor in NAMA or the participating institution dealing with the matter to obtain a copy of the relevant template, when contracts are in place and in advance of completion.

In approving a release prepared by a vendor’s solicitor, NAMA’s solicitor will require confirmation from the vendor’s solicitor that: (i) a NAMA standard release or discharge format has been used; (ii) in the case of a partial release, that only the relevant property in sale is included; (iii) that the vendor’s solicitor has been instructed by the vendor or the vendor’s selling agent/surveyor/engineer (who should be named) that any maps appended to the release properly identify the property in sale; (iv) that the vendor’s solicitor has been instructed by the vendor or the vendor’s selling agent/surveyor/engineer (who should be named) that any relevant rights or easements that are necessary for the remainder of the property (insofar as it is secured in favour of NAMA) have been reserved over the property in sale.

As practitioners will be aware, the transfer of ownership of charges to NAMA occurs pursuant to the operation of the NAMA Act without the need for a formal instrument in writing to be registered in either the Land Registry or the Registry of Deeds, although NAMA are working with the Land Registry office of the Property Registration Authority with a view to entering the ownership of charges (which are registered as burdens and have been transferred to NALM) on a subsidiary register maintained under section 8(b) of the Registration of Title Act 1964, as amended.

Where a release relates to security that NALM has acquired (rather than security it has taken in its own name), it is the practice of NAMA to insert a recital in the release dealing with the transfer of ownership of the relevant security (being released) to NALM, pursuant to the NAMA Act. Of specific import to practitioners is that NALM certifies pursuant to section108 of the NAMA Act that the relevant security (being released) is an ‘acquired bank asset’ for the purposes of the NAMA Act. Practitioners should note that, once so certified by NALM, they do not need to investigate NALM’s rights to the relevant security or their being the appropriate party to release same any further.

Confirmation of compliance with commercial conditions

In advance of completion, the vendor’s solicitor should obtain a copy of the confirmation given to the vendor by NAMA or the participating institution that the commercial conditions (other than the payment of the net sale proceeds) have been complied with.

Practitioners are advised to deal with any legal conditions (other than those that can only be dealt with at completion) in advance of completion so that, ideally, the only outstanding condition by completion should be the furnishing of the net sale proceeds to NAMA or the participating institution.

Letter of confirmation from NAMA (or a participating institution) for completion purposes

On satisfaction of the above, NAMA or the participating institution will issue a letter addressed to the vendor’s solicitor and, if known, the purchaser’s solicitor (the letter of confirmation) confirming that, on receipt by NAMA or the participating institution of the net sale proceeds, they will furnish a release in the agreed format, executed by NALM.

Where a participating institution is the primary contact for a vendor, NAMA have confirmed that the participating institution is authorised to act on its behalf in relation to the matters set out in this practice note. However, as all releases will only be executed by NALM, they must ultimately all be presented to and executed within NAMA itself.

As NAMA is a State body and a participating institution is acting for and on behalf of NAMA (in accordance with the NAMA Act) in relation to these matters, the committee is of the view that practitioners acting for both vendors and purchasers should accept a letter of confirmation from NAMA or a participating institution for completion purposes. NAMA expects that this will apply in the vast majority of sales in which it involved and, in particular, residential sales. Other than in exceptional circumstances, as set out below, practitioners should not require that NAMA or a participating institution furnish an executed release (regardless of whether it is to be held on trust or subject to the vendor’s solicitor’s undertaking or otherwise) in advance of compliance with the conditions set out in the letter of confirmation.

In line with the above, NAMA have advised that they will no longer issue executed releases to be held on trust or subject to an undertaking by a vendor’s solicitor in advance of completion and receipt by it of the net sale proceeds

In exceptional cases, NAMA have advised they will facilitate ‘three-way’ closings by arranging that a solicitor acting for NAMA or a participating institution be available at completion to exchange an executed release on receipt of the net sale proceeds by way of bank draft or e-transfer only. This will apply for high value sales and, while NAMA has not specified any de minimis, it is expected that this will only arise in significant commercial transactions or sales of particularly valuable properties. NAMA has confirmed it will also facilitate a ‘three-way’ closing where it is joining in as mortgagee in the deed of assurance, which accordingly must be furnished to the purchaser’s solicitor on completion. NAMA will confirm its position in this regard on a case-by-case basis. All of the requirements set out above will apply in these cases too.

Releases will be executed under seal by NALM in the usual format for a limited company.

NAMA’s interest in unregistered lands

Practitioners should be aware that there is currently no ‘searchable’ means of establishing whether a mortgage or charge granted to a participating institution over unregistered lands has been transferred to NAMA. The committee has made enquiries of NAMA as to whether it would be possible to provide some notification of the fact of a transfer against the relevant entry on the Register of Deeds for that mortgage or charge. However, given the significant exercise that this would entail, involving resources on both NAMA’s and the Property Registration Authority’s part, the committee has been advised that this is simply not practicable. NAMA have also advised that, arising from both their general banker’s and statutory obligations of confidentiality, they cannot confirm their ownership (or otherwise) in relation to any particular security (or property provided as security) directly to any person, without the written consent of the relevant debtor.

Releases by participating institutions of non-NAMA charged property

The committee is aware that some practitioners are seeking confirmation from participating institutions that the relevant security being released has not transferred to NAMA. Notwithstanding the foregoing but having regard to the separation of the participating institutions’ NAMA loan management functions from their non-NAMA functions, the committee considers, at this juncture, that it is unlikely that a participating institution could incorrectly continue to act as the party beneficially entitled to a mortgage or charge that has been transferred to NAMA. Therefore, unless the practitioner is specifically on notice otherwise (for example, their client has instructed them that the relevant security has transferred to NAMA), it is not necessary to seek any additional verification in that respect in accepting a release or discharge from a participating institution.

If or when matters change, the committee will issue further recommendations as may be necessary. 

View the Terms of Release letter here.
View the Agreement to Furnish Release here.