For how long can a lender rely on a possession order?
For further information please contact Max Houghton, Head of Secured Collections or Jeremy Bouchier, Solicitor and Chief Legal Officer.
The situation is familiar. The Possession Order was made some years ago, the arrears have been repaid but subsequently the borrower has fallen behind again with the payments. All lenders have had to grapple with this problem – do new possession proceedings have to be issued or can the lender proceed straight to enforcement relying on the earlier order? Last year the Court of Appeal in the case of Zinda v Bank of Scotland Plc gave a decisive ruling and helpful confirmation as to the meaning and effect of the standard possession order issued by County Courts. In October 2005 a possession order was made against Mr Zinda suspended (in the usual way) upon a monthly contribution towards the then arrears “in addition to the current instalments under the mortgage”. In 2008 and as a concession the bank agreed to consolidate the remaining arrears which were added to the balance resulting in an adjustment to the contractual monthly payments. Mr Zinda fell behind again with his payments and issued an application to suspend the enforcement of the possession order obtained in 2005. As is often the case previous good will concessions granted by lenders are not reciprocated.
Mr Zinda’s ambitious argument that the 2005 possession order was both ambiguous and discharged by the consolidation exercise was given short shrift by the Court of Appeal. Reminding us that the relevant sections of the Administration of Justice Act protected borrowers against the old established common law principle that “the mortgagee may go into possession before the ink is dry on the mortgage”, the Court made it clear that these sections covered “any” sum secured by the mortgage. Accordingly the possession order made by the District Judge was legally correct, was not affected by a subsequent consolidation (which clearly favoured the borrower) and could be enforced.
This is an important ruling. It expressly approved of previous decisions (Bradford and Bingley v Harris and Halifax Plc v Taffs) and gave clarity on a common issue. In our experience reliance by mortgagees on fairly aged possession orders can on occasion raise judicial eyebrows but issues regarding fairness still have to be considered under the AJA upon any application for a suspension. Further, as the Court of Appeal noted, judicial permission still needs to be required to enforce a possession which is over 6 years old.
The decision by a lender whether or not to issue a fresh set of proceedings or rely on an aged possession order will be heavily influenced by its approach/strategy to TCF principles. On the one hand commencement of proceedings requires protocol compliance (which sets out a mandatory structure for discussions with a borrower) but on the other, the same procedures incur costs which increase the borrowers overall liability. In the current climate lenders are naturally expected to show both sympathy and latitude towards borrowers who are experiencing financial difficulties. This case confirms that lenders will not be penalised for doing so.
As a specialist recovery firm, Restons has over 30 years’ experience in mortgage possession work (both bulk possession actions and complicated defended cases). For further information please contact Max Houghton, Head of Secured Collections or Jeremy Bouchier, Solicitor and Chief Legal Officer.