January 10 - www.legalmortgage.co.uk
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January 2010
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| Item | MORTGAGE REPOSSESSIONS (PROTECTION OF TENANTS Etc.) BILL 2009 |
| Details | We mentioned the introduction of this Private Members Bill in the December 2009 Update. The Bill has now been printed: 1 Power of court to postpone giving of possession (1) This section applies if— (a) the mortgagee under a mortgage of land which consists of or includes a dwelling-house brings an action (other than an action for foreclosure) in which the mortgagee claims possession of the mortgaged property, and (b) there is an unauthorised tenancy of all or part of the property. (2) When making an order for delivery of possession of the property, the court may, on the application of the tenant, postpone the date for delivery of possession for a period not exceeding two months. (3) Subsection (4) applies where an order for delivery of possession of the property has been made but not executed. (4) The court may, on the application of the tenant (“the applicant”), stay or suspend execution of the order for a period not exceeding two months if— (a) the court did not exercise its powers under subsection (2) when making the order or, if it did, the applicant was not the tenant when it exercised those powers, (b) the applicant has asked the mortgagee to give an undertaking in writing not to enforce the order for two months beginning with the date the undertaking is given, and (c) the mortgagee has not given such an undertaking. (5) When considering whether to exercise its powers under this section, the court must have regard to— (a) the circumstances of the tenant, and (b) if there is an outstanding breach by the tenant of a term of the unauthorised tenancy— (i) the nature of that breach, and (ii) whether the tenant might reasonably be expected to have avoided breaching that term or to have remedied the breach. (6) The court may make any postponement, stay or suspension under this section conditional on the making of payments to the mortgagee in respect of the occupation of the property (or part of the property) during the period of the postponement, stay or suspension. (7) The making of any payment pursuant to— (a) a condition of an undertaking of a kind mentioned in subsection (4)(c), or (b) a condition imposed by virtue of subsection (6), is not to be regarded as creating (or as evidence of the creation of) any tenancy or other right to occupy the property. (8) For the purposes of this section there is an “unauthorised tenancy” if— (a) an agreement has been made which, as between the parties to it (or their successors in title), is or gives rise to— (i) an assured tenancy (within the meaning of the Housing Act 1988), or (ii) a protected or statutory tenancy (within the meaning of the Rent Act 1977), and (b) the mortgagee’s interest in the property is not subject to the tenancy. (9) In this section “the tenant”, in relation to an unauthorised tenancy, means the person who is, as between the parties to the agreement in question (or their successors in title), the tenant under the unauthorised tenancy (or, if there is more than one tenant, any of them). 2 Notice of execution of possession order (1) This section applies where the mortgagee under a mortgage of land which consists of or includes a dwelling-house has obtained an order for possession of the mortgaged property. (2) The order may be executed— (a) only if the mortgagee gives notice at the property of any prescribed step taken for the purpose of executing the order, and (b) only after the end of a prescribed period beginning with the day on which such notice is given. (3) “Prescribed” means prescribed by regulations made by the Secretary of State. (4) Regulations made by the Secretary of State may prescribe the form of notices and the way in which they must be given. (5) The regulations may make supplementary, incidental, transitional or saving provision. (6) Regulations under this section may be made only with the consent of the Lord Chancellor. (7) Regulations under this section are to be made by statutory instrument. (8) A statutory instrument containing regulations made under this section is subject to annulment in pursuance of a resolution of either House of Parliament. 3 Interpretation (1) This section applies for the purposes of this Act. (2) “Dwelling-house” includes any building, or part of a building, that is used as a dwelling. (3) The fact that part of the premises comprised in a dwelling-house is used as a shop or office, or for other business, trade or professional purposes, does not prevent the dwelling-house from being a dwelling-house for the purposes of this Act. (4) “Mortgage” includes a charge, and “mortgagee” is to be read accordingly. (5) “Mortgagee” includes any person deriving title under the original mortgagee. (6) “Order” includes a judgment, and references to the making of an order are to be read accordingly. 4 Commencement, extent and short title (1) This Act (except this section) comes into force on such day as the Secretary of State may by order made by statutory instrument appoint (and different days may be appointed for different purposes). (2) An order under subsection (1) may make transitional or saving provision. 20 (3) This Act extends to England and Wales only. (4) This Act may be cited as the Mortgage Repossessions (Protection of Tenants etc) Act 2010. |
| Summary | The Act will apply in standard residential mortgage possession actions in which the mortgaged property is tenanted but the lender is not bound by the tenancy. When the lender applies for an order for possession, the court can postpone the date for delivery of possession for up to two months. In addition, even if the court has made an order for possession which has not yet been executed, the tenant can still apply to stay or suspend execution of the order for up to two months (although the tenant is first required to ask the lender for an undertaking not to enforce the order). For this purpose, the lender may only execute the order after it has given notice at the property and after the expiry of a prescribed period (Regulations will prescribe the form of notice and the prescribed period). In deciding whether to exercise its powers, the court must have regard to the circumstances of the tenant; the nature of any breach of the tenancy agreement and whether the tenant might reasonably have avoided or remedied the breach. Any postponement, stay or suspension can be made conditional upon payments being made to the lender in respect of the continued occupation of the property. |
| Progress | To follow the progress of the Bill, go to the UK Parliament website, or click on the link: |
| Item | MINISTRY OF JUSTICE CONSULTATION: MORTGAGES – POWER OF SALE AND RESIDENTIAL PROPERTY |
| Details | On 29 December 2009 the Ministry of Justice published a Consultation Paper: The Consultation is to “seek views on proposals to amend the law in relation to residential owner-occupier mortgages to ensure that such properties cannot be sold without either a court order or the homeowner’s consent. This would mean that the borrower would always have the opportunity to access the protections offered by the court”. The Consultation comes in the wake of Horsham Properties Group Ltd v Clark [2009] 1 WLR 1255, a first instance decision of Briggs J on 8 December 2008, and the subsequent draft amendments to s 101 Law of Property Act 1925 and s 36 Administration of Justice Act 1970 in the Banking Bill 2008 and the Home Repossession (Protection) Bill 2009 – both of which were withdrawn, and the Government’s own Consumer White Papers published in July 2009. The Consultation document contains a very useful review of mortgagees’ rights and remedies; the powers of the court under the Administration of Justice Acts; and the practice and procedure adopted by most lenders, including the remedy of taking possession of abandoned property (Ropaigealach v Barclays Bank Plc [2000] QB 263), but it specifically focuses on the exercise of the contractual or statutory power of sale without the involvement of the courts. The provisional proposal is that in the absence of agreement, the exercise of the power of sale should only be considered to be authorised by the court either where an order for possession exists , or where the court makes an order for sale using the same criteria as it does for granting an order for possession. A suspended possession order would therefore not authorise the exercise of the power of sale. An unconditional order would. Orders for sale could be suspended in the same manner as orders for possession are at present. The provisional proposal would apply to mortgages entered into after the new restriction comes into force, although the Ministry welcomes views as to any possible retrospective application. The Consultation is not proposing any special treatment for abandoned properties. Where the property is abandoned and the borrower cannot be contacted, the lender will need a court order to sell the property. Nor does the Consultation propose any different treatment for unilateral handing in the keys. As the power of sale may be exercised by agreement, where the borrower hands over the keys because he has reached an agreement with the lender, this would mean that there is no requirement for a court order. Interestingly, since the Consultation applies to residential owner-occupier mortgages, it distinguishes between what it calls classic home loan cases, and loans secured on the family home to secure financing for a business or investment venture. Once a mortgage falls within the latter category it will avoid the special restrictions on the power of sale. It will not therefore apply to buy-to-let mortgages or other commercial lending. Where there is more than one mortgage over a property, each mortgage should be assessed according to its own purpose. The Consultation, which is open to all interested parties, will close on 28 March 2010. |
| Item | HM LAND REGISTRY NEW PRACTICE GUIDE 31: DISCHARGE OF CHARGES |
| Details | On 1 January 2010 HM Land Registry published a new Practice Guide 31: Discharge of Charges, replacing the previous edition published in September 2009: It deals with: • Discharges of registered charges • The release of part of a registered estate in a registered title from a registered charge • The discharge of charges noted under the LRA 1925 and LRA 2002 • The withdrawal of notices of deposit of land and charge certificates • Early completion of applications where no evidence of discharge is lodged |
| Item | FSA PUBLISHES DETAILED RULES AND GUIDANCE ON THE SALE AND RENTBACK MARKET |
| Details | On 29 January 2010 the Financial Services Authority published a Consultation Paper (CP 10/4) setting out details of the full regulatory regime which will apply in the sale and rent back market from 30 June 2010: The FSA has: •banned exploitative advertising and high-pressure sales techniques and prohibited the use of emotive terms like ‘fast sale’, ‘mortgage rescue’ and ‘cash quickly’ in promotional literature; •introduced a 14 day cooling-off period to give consumers more time to make decisions on sale and rent back; •banned cold calling and prohibited firms from dropping promotional leaflets through letter boxes; •confirmed rules to ensure consumers have a security of tenure for a minimum of five years; •introduced an affordability and appropriateness check across all sales to check that the sale and rent back deal is right for the consumer; and •put in place measures to ensure all risks are clearly signposted to the customer, via FSA literature and during the sales process. The Council of Mortgage Lenders issued a supporting press release. CML Director-General Michael Coogan said: "We are pleased to see FSA pressing ahead with its plans to reinforce protection in an area where there has clearly been potential detriment for borrowers in arrears. Rules guaranteeing security of tenure for five years and banning cold-calling by sale-and-rent-back firms are particularly welcome. "Borrowers in arrears should always continue discussing their problems with their lender, who will work to devise a solution depending on their individual circumstances. There are likely to be a number of options for them other than sale-and-rent-back, but it is re-assuring that borrowers who may still wish to consider this option will be better protected". |
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