Mortgage: Possession Flashcards
When is mortgagee entitled to exercise its power of sale(entitlement to possession)?
If some interest under the mortgagee is in arrears and unpaid for two months after becoming due
Statutory provisions: Court’s discretion to interfere with the Mortgagee’s entitlement to possession
S.36 Administration of Justice Act 1970
S.8 Administration of Justice Act 1973
When may a Mortgagee be restrained from bringing a claim?
If third party has a right superior to the mortagees or where mortgagee is compelled to respect the rights of a third party acquired form the mortgagor (authorised tenant)
What documents required to prove right to possession?
- official copy of CHARGES REGISTER,
- official copy of MORTGAGE DEED; and
- HRR SEARCH
What does the court have the power to do under s.36 AJA 1970?
ADJOURN proceedings (on terms it may deem necessary); or
On giving judgment or making a possession order, SUSPEND or STAY EXECUTION or POSTPONE DELIVERY of possession, for such period as the court thinks reasonable
(Has inherent power to adjourn if procedurally required)
When can court exercise power under s.36 AJA 1970?
If:
… it appears to the Court that in the event of its exercising the power the Mortgagor is LIKELY to be able within a REASONABLE PERIOD to pay ANY SUMS DUE under the mortgage…
What does the wording of ‘likely to’ relate to?
Civil burden of proof: ‘on the balance of probabilities’ / more likely than not
What did s.8(1) AJA 1973 clarify?
That ‘any sums due’ under s.36 = instalments that should have been paid by the possession hearing (not entire redemption monies)
A Court order in a mortgage possession hearing where s.36 AJA 1970 and s.8 AJA 1973 have been considered is only making a ruling on the _______. It is accepted that the Court has no power to interfere with the __________ _________
- Arrears
2. Mortgage contract
What requirement is placed on the Borrower under s.8(2) AJA 1973?
Extra evidential burden — must appear likely to the court that Borrower can not only pay sums due in a reasonable period but ALSO that he is likely to be able to pay the further amounts he will be required to pay
I.e:
Borrower must demonstrate an ability to maintain the current monthly instalment together with an additional amount towards the arrears.
Court may only exercise its discretion (under s.36 +s.8) if the Mortgagor is likely to be able to maintain the monthly instalments and pay off the arrears within a reasonable period of time.
What is key case on the reasonable period?
Cheltenham and Gloucester Building Society v NORGAN
What was held in Norgan?
What Q should court ask?
Starting point = the full term of the mortgagee
Would it be possible for the Mortgagor to maintain payment off of the arrears by instalments over that period?
What are the relevant considerations when fixing a reasonable period?
(A) How much can the Borrower reasonably expect to pay towards the arrears, apart from
the agreed instalments of interest, both now and in the future?
(b) If the Borrower has a temporary difficulty in meeting his obligations, how long is the
difficulty likely to last?
(c) What was the reason for the arrears that have accumulated?
(d) How much remains of the original term?
(e) What are the relevant contractual terms, and what type of mortgage is it, i.e. when is
the principal due to be repaid?
(f) Is it a case where the Court should exercise its power to disregard accelerated payment
provisions (s.8)?
(g) Are there any reasons affecting the security which should influence the length of the
period for payment?
What powers are available to the court when the mortgage is repayable on demand?
- No power under s.8
- Only power under s.36
So if a formal demand has been made, the Judge MUST give possession unless the Mortgagor can pay the “ENTIRE redemption monies”.
What was established in Habib Bank v Tailor ?
Separated repayment on demand mortgages from other mortgages to which s.8 does not apply.
S.8 applies if:
- Although monies are repayable immediately on a mortgage, there are provisions for
deferment. (means that the mortgage can be repaid by instalments.)
- There is provision for ‘early repayment’ if mortgagors defaults or mortgagee demand repayment
In repayable on demand mortgages there is no provision for deferment (bank can demand monies at any time) and there is no provision for early repayment because the written demand is the only prepayment provision. Monies are not repayable at all until a written demand is made.
Difference because relationship is bank-customer not mortgage company-borrower
Examples of Non-financial breaches of mortgages:
Non-payment of service charge Death of the mortgagor Bankruptcy of the mortgagor Abandonment Other breaches of terms and conditions
Does s.36 apply to non-financial breaches?
Yes in theory because wording is:
if it appears to the Court that in the event of its exercising the power the Mortgagor is likely to be able within a reasonable period… to REMEDY A DEFAULT consisting of a breach of any other obligation arising under or by virtue of the mortgage.
Does Pre-Action protocol apply to non-financial breaches?
No
Expired Term Mortgage
What power does the court have to deal with End of Term mortgages?
Little/no discretion under s.36. Reasonable period cannot be longer that remaining term (Norgan) and this has already passed.
Judge may suspend upon imminent payment of the entire balance (perhaps via re-mortgage) but argue better for PO in 28 days to be made. In this time D can attempt to secure funds and negotiate with C.
Expired Term Mortgage
What is LBI HF v Stanford and Anr used as authority for?
How to oppose?
Authority to interpret or extend a RP beyond the expert of the mortgage term
Robust submission against this:
- Case distinguishable on facts, order made was conditional upon payment of a substantial payment into court and in that case court was not referred to any authority beyond s.36 itself, including Norgan
Expired Term Mortgage:
Submissions in relation to discussion of ‘unusual circumstances’ to justify departing from remaining term or mortgage being prima facie the reasonable period
Mere ending of a term cannot in itself be seen as an unusual circumstance given that all mortgages have such an end date.
Expired Term Mortgage:
If judge suggests they retain discretion as to what the period of the possession order ought to be and seek to make an extended possession order (i.e 3 months)
Resist on basis that such an order would be postponing the date for delivery of possession (s.36(2)(b)(ii))
And s.36 discretion not engaged
State Bank of New South Wales v Carey Harrison III
outside of the s.36 discretion there is no inherent power to delay the Claimant’s right to possession
Equitable Mortgage:
Mortgagor right to possession when mortgage is equitable:
No right to possession until court gives it to the mortagee
Barclays Bank Ltd v Bird
This does not seem unduly troublesome given that even a legal Mortgagee will generally seek a court order for possession.
What are the requirements under CPR 55.10?
Within 5 days of receiving notification fo the date of the hearing the Lender must send
Notice to ‘tenant/occupier’ of property
Notice to housing department of the LA within which property is located
Notice to any registered properitor
What must notices state?
Extra for proprietor notice?
- That possession claim started
- Name and address of lender, borrower and court which issued CF
- Give details of hearing
Full address of property
55.10
What is required at the hearing
Evidence of service of the relevant notices and copies of letters
What provision allows advocates to update figures orally at the hearing
PD 55A 5.2
What are the requirements when the Claimant has provided D with a schedule of payments before commencing proceedings
PD 55B 6.3A
Schedule must be for prior 2 years prior to issue or from date of first default if les than 2 years ago
6.3B
C only need provide summary of arrears with PofC
6.3C
C must serve on D no later that 7 days after date of issue full arrears history as required under 6.3 AND make a W/S confirming compliance AND EXHIBIT full history
If C has complied with 6.3(A) & provided schedule pre commencement what does the summary in the PofC need to cover under 6.3(b)
- Amount of arrears @ date of letter before action
- Date and amount of the last 3 payments received
- Arrears total at date of issue
