Lender's Right to possess Flashcards
What is a legal mortgage comprised of
Proprietary interest and a contractual debt
When does the right to poses arise?
As soon as the mortgage is granted on a mortgage deed
Possession is a right of the lender and not a remedy - but this is used as a last resort when borrower defaults
Mortgage deeds almost always contain a term which recognises that the right to possess is postponed for as long as the borrower pays the agreed instalments
Does lender need permission to posess?
No - because it is a right
No need to obtain court consent
BUT series of safeguards have t=developed to protect the borrower
What are the limits on the right to possession?
Criminal Law Act 1977 s 6:
- criminal offence to use or threaten violence for the purpose of gaining entry to property
- exercising the right to repossess by self help is risky and a prudent lender should apply to curt for an order of possession even though it may not be necessary
Pre Action Protocol for Possession Claims 2008:
- sets out steps lender should take before resorting to posession of residential property
- eg lender should discuss the debt with borrower and accept reasonable requests for a new payment plan
- if lenders do not observe the protocol they can suffer delays in obtaining possession and may be ordered to pay borrower the legal costs
What is the statutory jurisdiction to postpone under s36 of the Administration of Justice Act 1970?
The court can postpone the the date for delivery of possession for such period as the court thinks is reasonable to allow borrower to pay any outstanding sums
What does s36 not do?
DOES NOT:
- Enable the court to prevent the lender from exercising the right to possess
2.Enable the court to postpone possession in cases where there has been no application for an order for possession
- Enable the court to prevent a lender from exercising power of sale without first obtaining a court order
What does s36 actually do?
Applies where the property is wholly or partially residential
Enables the court to adjourn possession proceedings or stay or postpone execution of the possession order
To do so the court must be satisfied that the borrower is likely to be able to pay any sums doe within a reasonable period:
- means arrears and accrued interest and not the whole of the debt
- starting point for pinpointing a reasonable period was the remainder of the mortgage term
What are examples when postponement was granted?
Borrower requesting postponement firstly must show to court a detail financial plan for paying off the loan and arrears before term expires
A short delay of 3 months was awarded to allow the borrower to sell the property as there was evidence a genuine offer was made
Court needs to be satisfied that the sale will achieve a sufficient amount to cover the debt - agent’s optimistic estimate of price will not be enough
Court must see evidence of imminent exchange of contracts for sale - simply instructing a solicitor will not be enough
