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Annual Review 2010

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Annual Review 2010
ANNUAL REVIEW 2010
Introduction 2010 has seen a continuing decline in the number of mortgage possession claims issued, orders made and properties taken into possession. The most recent figures, published by the Ministry of Justice on 11th November 2010, provide statistics for the third quarter of 2010: 18,391 mortgage possession claims were issued in Q3 (19% lower than in Q3 of 2009); 14,138 orders were made (28% lower than in Q3 of 2009) of which 47% were suspended. However, the Council of Mortgage Lenders has expressed caution: “ a combination of low interest rates and the commitment of borrowers, lenders, the government and debt advisers has helped to keep mortgage payment problems in check so far. But we cannot take falling arrears and possessions for granted and the recent welcome trend may reverse.” For statistics see: • Ministry of Justice • Financial Services Authority • Council of Mortgage Lenders
Legislation On 8th April 2010 the Mortgage Repossessions (Protection of Tenants Etc.) Act 2010 received the Royal Assent. The Act provides limited protection to unauthorised tenants of borrowers who suffer repossession and enables them to apply to postpone the date for delivery of possession for up to two months. The Act was brought fully into force on 1st October 2010 and is to be read with The Dwelling-Houses (Execution of Possession Orders by Mortgagees) Regulations 2010 which sets out a prescribed procedure. For commentary on the Act see the April update, and for the Regulations, the September update. The first case on the application of the new Act and Regulations – Bank of Scotland v Ashraf (Romford County Court, 5th October 10) was reported in the November (1) Update (with transcript).
Civil Procedure There has been a number of relevant amendments to the Civil Procedure Rules. Under the Mortgage Arrears Pre-Action Protocol, lenders are obliged to consider postponing possession proceedings should the borrower be entitled to financial support under the various support schemes listed in the protocol. The 51st Update, effective from 6th April 2010 added a further scheme to the list – Mortgage Rescue Schemes run by participating local authorities – and Form N123(Protocol Checklist) was amended accordingly. The 52nd Update, effective from 1st April 2010 amended the notice requirements in CPR 55.10 by requiring lenders to serve a copy of the notice to occupiers on the proprietor of any other registered charge. Following the introduction of the Mortgage Repossessions (Protection of Tenants Etc.) Act 2010 and The Dwelling-Houses (Execution of Possession Orders by Mortgagees) Regulations 2010,the 53rd Update, effective from 1st October 2010, further amended CPR 55.10 by enabling an unauthorised tenant to apply to court for an order for possession to be suspended. In addition, CCR Ord 26 r 17 was amended to require that an order for possession could only be executed after 14 days of the lender giving notice that it is applying to court for a warrant of possession, and Form N325 (Request for Warrant) was amended to require a lender to certify that notice had been given.
Legal Practice In the February Update we noted the introduction (on 1st January 2010) of the Building Societies Association Mortgage Instructions, providing a full set of conveyancing instructions to conveyancers acting on behalf of BSA members and their subsidiaries in residential conveyancing transactions- similar in form to the Council of Mortgage Lenders Handbook. We also noted the case of Webb v MacDonald [2010] EWHC 93 (Ch) which contained a useful review of some of the principles involved in assessing Barristers’ and Solicitors’ negligence in the conduc t of mortgage possession proceedings. English v Hodge Jones Allen and Swift Advances Plc [2010] EWHC 2058 (Ch), reported in the August Update concerned the duty of care owed by a solicitor when giving independent legal advice to a potential victim of fraud. Anfield (UK) Limited v Bank of Scotland Plc [2010] EWHC 2374 (Ch) reported in the October Update concerned the relevance of lenders/solicitors negligence in failing to register a charge upon a claim based in subrogation. Mortgage Express v Sawali [2010] EWHC 3054 (Ch) reported in the November (2) Update concerned the extent of a solicitor’s duty to give disclosure of the borrower’s file.
Undue Influence It has been a busy year for claim s involving undue influence. For a review of the principles, see the Undue Influence page . Royal Bank of Scotland Plc v Chandra [2010] EWHC 105 (Ch) reported in the February Update raised some interesting questions about the timing of the application of the Etridge principles (speeches given by the House of Lords only 19 days before the Guarantee and Legal Mortgage were signed) – suggesting that a reasonable period had to be allowed after 11th October 2001 for the new guidelines to be absorbed by lenders. In the March Update we reported on the case of Hewett v First Plus FinancialGroup [2010] EWCA Civ 312 and the novel proposition whether a husband’s failure to disclose an extra-marital affair could amount to undue influence. The June Update dealt with the case of Annulment Funding Co Ltd v Cowey [2010] EWCA Civ 711 which emphasised that a plea of undue influence involves an issue of fact upon which it is open to the trial judge to make findings or actual or presumed undue influence. The July Update saw two cases – Smith v Cooper [2010] EWCA Civ 722 involving the principles to be applied in a Class 2(b) case (presumption arising on the particular facts rather than out of an established relationship) and Kapoor v National Westminster Bank (unrep 13th July 10) concerning the adequacy of an Etridge compliant certificate signed by the husband’s solicitor when acting for the wife.
Overriding Interests It has also been a busy year for cases involving overriding interests – the interests of personal in actual occupation. For the principles, see the Third Parties page. Link Lending Ltd v Bustard [2010] EWCA Civ 424, reported in the April Update is a Court of Appeal decision giving fresh guidance on the requirement of ‘actual occupation’ in Para 2, Sched 3, Land Registration Act 2002. This decision was subsequently applied by the High Court in Bank of Scotland v Hussain [2010] EWHC 2812 (Ch), a case which involved similar factual issues about the nature and extent of the occupation required and which also contains a useful review of the principles of res judicata in the context of possession claims. Overriding interests were also in issue in Re North East Property Buyers Litigation [2010] EWHC 2991 (Ch) in which the court held that interests arising under sale and leaseback arrangements were not capable of amounting to overriding interests with priority over the mortgages used to fund the properties. The case is not reported, but for related litigation see [2010] EWCA Civ 277. Both decisions are noted in the November (1) Update. Incidentally, the January Update contained details of the FSA’s Consultation Paper on the Sale and Leaseback Market- see the Full Regime paper.
Shortfall debt Limitation and other issues arising in the context of shortfall debt claims are featured on the Limitation page. In March we reported on the case of Ashcroft v Bradford & Bingley Plc [2010] EWCA Civ 223, on the relationship between acknowledgments and part payments under the Limitation Act 1980 and in October on Chelsea Building Society v Nash [2010] EWCA Civ 1247 concerning the principles of accord and satisfaction and the practical steps to be followed by a lender in separately pursuing co-debtors
Various • Forgery – equitable interests – orders for sale under s 14 TLATA 1996 – Edwards v Bank of Scotland Plc [2010] EWHC 652 (Ch) • Forgery – Ratification – Solicitor’s duty of care - English v Hodge Jones Allen and Swift Advances Plc [2010] EWHC 2058 (Ch) • Consumer Credit – ‘total charge for credit’ – Southern Pacific Securities 05-2 Plc v Walker [2010] UKSC 32 • Subrogation - Anfield (UK) Limited v Bank of Scotland Plc [2010] EWHC 2374 (Ch) • Charging Orders – discretion to set aside - Monte Developments Ltd v Court Management Consultants Ltd [2010] EWHC 3071 (Ch) • Marshalling - Serious Organised Crime Agency v Szeptiewski [2010] EWHC 2570 (Ch)
What to look out for in 2011 Expect legislation to ensure that residential owner-occupied mortgaged property cannot be sold without a court order. This follows in the wake of Horsham Properties Group Ltd v Clark and the abortive draft legislation which led to the publication of the Ministry of Justice Consultation Paper on Mortgages-Power of Sale and Residential Property, reviewed in the January Update. See generally the Orders for Sale after Horsham page. The closing date for responses was 28th March 2010 – see the MoJ website. An inevitable product of restricted lending is unlawful borrowing, and we expect the number of fraud-related claims to continue to increase, including cases involving forgeries and undue influence. Overall, we anticipate that the number of mortgage claims and the consequential number of orders and properties taken into possession will stabilise, with residential mortgage lending probably remaining at its current, limited level until well into 2011. Finally, bear in mind the significant cut-backs in the Legal Aid budget which will inevitably mean that fewer borrowers will qualify for Civil Legal Aid to run defended mortgage-related cases. The Government has recently re-emphasised its commitment to promoting Alternative Dispute Resolution. In response LegalMortgage will soon be launching its new Early Neutral Evaluation Service.