The High Court has directed the lessee of a Dublin guesthouse to pay rent to a bank-appointed receiver and ordered that rent held in escrow be transferred to him. The order followed an interpleader application brought because both the landlord and receiver claimed the rent.
Mr Justice Ryan held that the landlord, Desmond Killoran, had not established that the receiver lacked entitlement to the rent. The dispute concerned guesthouse premises at Upper Leeson Street, including 1A Upper Leeson Street, where Killoran challenged the bank’s security over a property interest.
Killoran argued that a 2002 lease of 1A was void under the Landlord and Tenant (Ground Rent) (No. 2) Act 1978. He said the bank’s mortgage over that leasehold interest therefore provided no valid security, undermining its appointment of a receiver. The receiver submitted that the building was constructed for commercial guesthouse use, not principally as a dwelling, and that the bank’s security attached to the freehold when Killoran acquired it in 2004.
The judge’s primary view was that the guesthouse extension was not constructed wholly or principally as a dwelling for the purposes of the Act. He also addressed the alternative assumption that the lease was void: in that event, he said, Killoran retained an interest capable of being subsumed into the freehold and subject to the mortgage. The judgment further said Killoran could not retrospectively disown the title he had presented to the bank as security, and that he had failed to prove the lease invalid.
Killoran also relied on alleged interest overcharging. His financial expert calculated overcharging at more than €400,000, while the judgment records that AIB had acknowledged overcharging and estimated €334,245.77 for September 2006 to March 2011, excluding compound interest. Killoran argued that the charges contributed to his loan default.
The receiver submitted that the cause of default did not affect the bank’s contractual power to appoint a receiver while the loans remained unpaid. The judge agreed that the overcharging complaint did not invalidate the appointment or impair the receiver’s powers. He did not decide the merits of the overcharging dispute on this application, observing that its relevance to repayment of the loans was not a question before him.
The court directed the applicant, Derek Byrne, to pay rent under his lease to the receiver, Tom O’Brien, and ordered the escrow funds transferred to O’Brien. The judgment said the order did not affect any interest Mrs Killoran might have; she was not a party to the application.