Govan Law Centre

mortgage possession









 

the experience from England & Wales

Section 2(1) of the Mortgage Rights (Scotland) Act 2001 (in force from 3 December 2001) enables the court to suspend the rights of creditors in mortgage possession proceedings ‘to such extent, for such period, and subject to such conditions, as the court thinks fit’.

Section 2(2) of the Act provides that the court can only make an order of suspension, where ‘it considers it reasonable in all the circumstances to do so, having regard to:

(a)   the nature of and reasons for the default,

(b)  the applicant’s ability to fulfil within a reasonable period the obligations under the standard security in respect of which the debtor is in default,

(c)   any action taken by the creditor to assist the debtor to fulfil those obligations, and

(d)  the ability of the applicant and any other person residing at the security subjects to secure reasonable alternative accommodation’.

The position in English law on this subject is not identical, however, similarities can be made - in particular, both Scotland and England make provision for a ‘reasonableness test’. Section 36 of the Administration of Justice Act 1970 and section 8 of the Administration of Justice Act 1973 enable the English courts to adjourn, stay, suspend or postpone the date for repossession if it is likely that mortgage arrears can be repaid within a reasonable period.

The following is an illustration of how the courts in England and Wales have approached the question of ‘reasonableness’ and other issues. Until case law is established in Scotland,  it may be that practitioners will find assistance from decisions of the English courts; such case law being of persuasive authority in Scotland on comparative statutory provisions. English housing case summaries can be found in Nic Madge’s Housing Law Casebook (published by the Legal Action Group, 2nd edn 1998).

 

Abbey National Building Society –v- Mewton [1995] CLY 3598, CA
Issue – multiple suspensions of possession and reasonableness

Defendant in mortgage possession proceedings successfully applied for possession to be suspended, and then on two occasions for the possession warrant to be suspended.

On each occasion, he failed to make payments which he had promised. On a further application to suspend, the district judge dismissed his application and ordered that he make no further application to suspend in any circumstances. The Court of Appeal dismissed his appeal and held that:

“It seems clear that [the defendant], having failed to comply with the conditions on which the suspension of possession is granted, is not in a position to complain about the orders and warrants for possession made. His record of payment is deplorable  ...  The district judge was fully entitled to order as he did”.

 

Bristol and West Building Society –v- Ellis (1997) 29 HLR 282, CA
Issue – what is ‘reasonable’ depends on individual circumstances of each case

Defendants had borrowed £60,000 under an endowment mortgage. By August 1990 there were arrears of £8,449. A suspended possession order was made but Mr and Mrs Ellis did not comply with it. B January 1995 the arrears were £16,000 and the balance due under the mortgage was £76,000.

In April 1995, Mrs Ellis applied to suspend a warrant for possession. In an affidavit, she stated she was in receipt of income support, the DSS would pay her interest, she could pay off £5,000 arrears immediately, but thereafter could only pay £10 per month to arrears. She offered to sell the property in five years, when her children would had finished university. The warrant was suspend and the lender appealed.

The Court of Appeal allowed the appeal. It held that was is reasonable depends upon the circumstances in each case. The comments by Lord Justice Neill in National and Provincial Building Society –v- Lloyd [1996] 1 All ER 630; (1996) 28 HLR 459, CA, that sale ‘could take place in six months or nine months or even a year’ did not establish a year as the maximum period ‘as a rule of law or as a matter of general guidance’.

However, in the present case there was insufficient evidence that Mr Ellis could or would sell the property within three to five years or that proceeds of sale would be sufficient to discharge the mortgage debt and arrears. Although there were letters from two estate agents, courts should approach such estimates with ‘reserve’.

 
Cheltenham and Gloucester Building Society –v- Grant (1994) 26 HLR 703, CA
Issue – evidence from the mortgagor/debtor

The plaintiffs challenged the practice of district judges who suspended possession orders upon the basis of information given to them by defendants, without necessarily hearing this sworn.

The Court of Appeal declined to lay down rigid rules on how busy district judges should satisfy themselves on evidence, and upheld the original order. Lord Justice Nourse stated:

    “It must be possible for [judges[ to act without evidence, especially where, as here, the mortgagor was present in court and available to be questioned and no objection to the informal material is made by the mortgagee. Clearly, it will sometimes be prudent for the mortgagor to put in affidavit evidence before the hearing”.

Where a lender disputes the truth of what a borrower has said, formal evidence will be necessary.

 
National and Provincial Building  Society –v- Lloyd [1996] 1 All ER 630; (1996) 28 HLR 459, CA 
Issue – reasonable period

The Court of Appeal considered a lender’s appeal against a suspended possession order. The lender argued that any such suspension should only be for a ‘short period’.

Neill LJ rejected this submission and noted that if there were clear evidence that completion of the sale of a property could take place within six or nine months or even a year, then court should come to the conclusion that arrears would be repaid within a ‘reasonable period’.

What is a ‘reasonable period’ is a question for the court in each case. However, in the present case there was insufficient evidence to show arrears would be repaid within a reasonable period. Much of it was ‘a mere expression of hope’ and so the lender’s appeal was allowed.

 

Royal Bank of Scotland –v- Elmes April 1998 Legal Action 11, Clerkenwell County Court
Issue – suspended possession order on payments less than current instalments

A district judge suspended a warrant for possession for three months on terms that the defendant pay £250 one month and thereafter £500 per month for two months, thereafter the case would further considered. The defendant had good prospect of obtaining employment within the period. The lender appealed in the basis the court had no power to suspend on terms of payment less than current instalments.

Assistant Recorder Thomas Q.C dismissed the appeal, and held that s.36 of the Administration of Justice Act 1970 enables the court to impose any terms about payment so long as the borrower would, within a reasonable period, be able to clear the arrears and pay the current instalments.

 

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Mike Dailly
Principal Solicitor

Govan Law Centre
Glasgow
31 August 2001