Inhibitions

An inhibition is a form of diligence (debt enforcement) that prevents a borrower selling her/his home without paying off the creditor who has taken out the inhibition against him/her.

If a borrower has an inhibition recorded against her/him in the Register of Inhibitions and Adjudications (sometimes called the ROI or Personal Register), s/he will not have the right to sell her/his home, or to take out a secured loan (such as a second mortgage) against it. [1]

If the borrower is in the process of selling her/his home when the inhibition is registered and the missives (the formal letters laying out the details of the sale exchanged by the seller's and buyer's solicitors) have already been concluded, the inhibition will not affect the sale. [2] However, the inhibition can be extended to cover other properties owned by the borrower, to ensure s/he cannot sell them without paying off the debt. [3]

Duration of an inhibition

An inhibition will no longer apply if: [4]

• the borrower pays off the debt, including the expenses, in full and the creditor discharges the inhibition

• the creditor discharges the inhibition on the condition that the borrower repays the debt using the proceeds of the sale of her/his home

• the borrower successfully applies to the court to have the inhibition dismissed

• the creditor takes the borrower to court over the debt, but the case is dismissed

• the borrower dies

• five years have passed [5] – however, the creditor can re-register the inhibition if s/he chooses.

Once the inhibition has been discharged, this will be registered in the ROI.

It may be that the only way the borrower can repay the debt is by selling her/his home. In this case, it may be possible for the borrower's solicitor to negotiate with the creditor to discharge the inhibition so that the borrower can sell the home, on the condition that money is held back from the proceeds to repay the debt.

If the borrower owns her/his home jointly with another person who does not owe money to the creditor, the creditor can only be repaid from the borrower's share of the proceeds.

If the creditor is also taking the borrower to court to enforce the debt, the borrower may be able to defend her/his case, or apply for a time to pay direction to give her/him a chance to pay back the money. However, if a time to pay order is granted, the inhibition order will remain in force until the debt is cleared.

The National Debtline website has practical information about the various different kinds of diligence and how borrowers can defend themselves in court.

In some circumstances, the borrower may be able to apply to the court to have the inhibition lifted, but will need to get legal advice before doing so.

When a property is repossessed and sold by a lender, that lender then holds the proceeds of the sale in trust for any other creditors who have loaned the borrower money secured on the property. [6] However, the courts have yet to decide definitively whether a creditor who has registered an inhibition has a security over the property, and even if s/he does not, whether an inhibition gives the creditor any preference over the free proceeds. [7]