There is growing concern that some people are ending up with the loss of their homes when mortgage arrears cannot be settled. Critically evaluate whether the current law provides sufficient protection to borrowers who fall into arrears with their mortgage payments.
The mortgage is one of security by using the land for a loan.[1] Actually, the mortgage has occurred by the borrower loaned money from the lender, besides the borrower transferred their land to the lender as a security of the loan.[2] Consequently, the statuses of parties have been changed, the borrower is changed to the mortgagor, and the lender is changed to the mortgagee.[3] As a system of the mortgage, if the mortgagor can be paid a loan fully, they shall be redeemed their mortgaged property, which is the right to redemption. A mortgage is significantly different from other transactions, and the court was always wise in ensuring that the mortgagee did not take undue advantage of the mortgager and thus interfere with the terms and conditions of the contract to protect the mortgage holder.[4] This interference is shown in two ways. The borrower will then be able to redeem his property regardless of what the contract stipulates if an essence transaction is a mortgaged property.[5] Secondly, the courts make sure, as a mortgage transaction is determined, that the equity of redemption does not cause undue damage to the mortgagor to any clogging or fettering.[6] The interventionist approach is contrary to the traditional principle of contract freedom, which in general allows the parties, and in particular the lender, to determine the terms and conditions for which they have to deal without any court interference.[7] Thus, the banks might find the terms that they have inserted in a mortgage transaction particularly susceptible to attack, examples of terms declared void by court of mortgage agreements are the terms in which a mortgage buyer may purchase the loan property at his option, unreasonably postpone the payment, and a term that gives the loan a collateral benefits especially beyond.[8] Many of the older cases are examples of the crudest consumer protection of the courts of the day when the parliament had not yet conferred consumer intervention powers on the courts.[9] The courts were more reticent, therefore, recently to skewed trade mortgage transactions properly negotiated, although the capacity to override the mortgage terms that disadvantage the mortgager should not be ignored under common law. However, if the mortgagor cannot be paid a loan entirely, the mortgagee as a lender shall foreclosure the mortgaged property. The effected to the mortgagee that if the mortgaged property is the mortgagor’s dwelling house, it means, the mortgagee will be sold the mortgagor’s dwelling house which is lost the mortgagor’s house and becomes to be homelessness. Many laws protect mortgagors. This essay will explore the English laws which protected the dwelling house mortgaged property and the policy that the government or the related organisations protect and support the arrear mortgagor, besides, sharing other perspectives about preventing loss residential house by Thai law.
The power of sale of the mortgagee
In order to implement the security of the loan, the mortgaged property must be purchased, and the mortgagor must prove a default. As it would not be likely whether purchasers would pay any reasonable price on an occupied mortgage, a mortgagor would almost consistently first acquire vacant possession of the property.[10] The primary law that protects the mortgagor who mortgages the resident is the Administration of Justice Act 1970 section 36 and the Administration of Justice Act 1974 Section 8. This section requires the Court only to revoke a possession ordinance or else to suspend possession proceedings and does not prohibit the selling of a mortgaged property under terms and conditions.[11] The mortgagee cannot revoke the mortgagor without an order of the court for a dwelling property. In such cases, the Court could offer the mortgagor time, under the Administration of Justice Act 1970 Section 36 and the Administration of Justice Act 1974 Section 8, to remedy his neglect, to delay the grant of possession meanwhile.[12] Nevertheless, that this right does not impact the status of the mortgagee individual in the absence of a court order in which he is able legitimately to acquire possession or in the absence of possession to impose his power of sale.[13] No mortgager can invoke debt at any time instead of defaulting[14]. Nevertheless, in general, the practical need for possession would ensure that the court could permit the mortgagor time to evade selling their homes by ridiculing the default.[15] The following is addressed the further implications that a mortgage does not have to acquire properties as a legal matter prior to selling the property.[16]
Administration of Justice Act 1970 and Administration of Justice Act 1973
The fundamental laws which protected the mortgagor are the Administration of Justice Act 1970 Section 36 and the Administration of Justice Act 1973 Section 8. These laws are stated the scope the judges can decide to help the mortgagor who falls into the arrear; however, the court can action under section 36 only the case of the mortgaged property is a dwelling-house. In its decision of Birmingham Citizens Permanent Building Society v Caunt[17], which ended a system in which mortgage lists were delayed to offer the mortgage rates, Section 36 was enacted to reinstate the law in the place it was generally believed to be, and enforced by courts since the mid-1930s, before the banner bar of adjournment introduced by courts since 1962.[18] The purpose was to return the status to what had been previously considered.
The sections 36 (1)[19] is stated the power of court for the mortgagee possession where a loan under a mortgage of land that consists of or requires a dwelling entails an action in which it claims ownership of the mortgaged property, it is not an action for foreclosure in which it also claims ownership of the mortgaged estate.[20] For instance, Ropaigealach v Barclays Bank Plc,[21] this case involves mortgage arrears and the scarcity of loans on a family home that had the right, without a court order, to enter a house (temporarily vacant).[22]
Section 36 (2)[23] is showed that the mortgagee is to receive the court’s leave before the court continues to exercise its possession or selling control under the mortgage deed for a house. This section gives many choices to the court that can protect the mortgagor.[24] The main point is that the mortgaged property can be taken possession slowly by the mortgagee. Moreover, In the case, Horsham Properties Group Ltd v Clark[25] shows that the mortgaged contract also can be revoked some conditions by the court under this section.
Additionally, the borrower may apply for a stay, even if the creditor has the right to hold the loan without the borrower showing a default, for example, Western Bank v Schindler.[26] In that case, the Court did, however, refuse to exercise its discretion pursuant to section 36 to postpone or suspend the order because, although the lender had not brooked a provision of the loan, the lender’s interest was prejudiced by the failure to issue a collateral insurance policy.[27] When requests for possession were made and not when a mortgage is removed, the applicable period for deciding whether the property is made up of or included in section 36 (1).[28] However, the court cannot compel the creditor to make a monthly statutory interest payment, unless it is sure that the arrears will be paid out within a reasonable time. The terms of section 36(3) give broad discretion to the court.
The principle is, if repayment is made, the legal right of possession of the lender does not interfere. It is doubtful that the provisions of section 36 will command a view of this principle that give more rights to the mortgagor. Even if it does, the borrower will only be capable of preventing the possession order if it can prove that the counterclaim likely within a reasonable period.[29]
After that, the Parliament was amended section 36 by section 8 of the Administration of Justice Act 1973. It means extending the scope of the protection of the mortgaged dwelling house, which falls into arrear because any initial comments on this clause should be made before the section conclusion.[30]
This led to an amendment of the section by sec. 8 of the Administration of Justice Act 1973 to make it clear that in the case of an instalment mortgage or of a mortgage which permits a deferred payment, the “sums due under the mortgage” are any instalment of payment in arrears and not the whole capital sum. The section remains poorly drafted, but at least now it can receive a sensible interpretation. [31]
The purpose of section 36 is that, in a reasonable period, the borrower may be granted time to resolve the default. This has caused difficulty in Halifax Building Society v Clark[32] since, in this case, the instalment mortgage has immediately payable the entire remaining mortgage money after no instalment has been paid on a timely basis.[33] Since the mortgagor was unable to pay in full in the foreseeable future, the debt could not be remedied in due course, and therefore a judge held that a possession order would have to be issued.[34] The Court of Appeal in First Middlesbrough Trading and Mortgage Co Ltd v Cunningham[35] expressed doubts about this decision.[36]
The section 8, it is also provided with the extension rights to the mortgagee who mortgaged the dwelling-house which stated actions to require the mortgagor is obligated or entitled to pay the balance of the principal by instalments or to postpone the full or partial payment.[37] Otherwise, for the principal amount and interest secured on it only sums that the mortgaging party would have expected to pay as due under the loan could be considered as expected by the court, if there was no such provision of earlier payment. [38]
The following significant effects resulted in Section 8. Firstly, the issue mentioned shown in the Halifax Building Society v Clark[39] was resolved by claiming in Section 8(1)[40] that it is only the arrears and not the current mortgage debt that could be paid within such a decent period.[41] Secondly, it must be evident that if the arrears are cleared, the mortgagor will continually make usual mortgage repayments.[42] Thirdly, in section 8(2)[43], if, within a short period, the mortgage is traditionally repayable and there is also a general interest-related provision, the mortgagor should be granted a reasonably narrow interpretation so that the deference of the payment of capital is allowed within the meaning of subsection (1) above.[44] Fourthly, Section 8(3)[45] shall prevent the mortgagee from evading the application, by foreclosing their mortgage, of the powers of the Court to revoke or postpone.[46] Fifthly, the protection provided by section 36 includes the endowment mortgages.[47] The mortgagor must pay a dividend on the duration of the mortgage and premiums in a separate endowment policy under an endowment mortgage, using the proceeds of the endowment policy once all the premiums have been paid, the mortgagor will have to repay the money notified of the repayment.[48] The Court of Appeal found that the appeal against section 36 was difficult to apply to endowments because the endowment was a separate agreement from the mortgage in the West Bank Ltd v Schindler[49], which was settled the day before Section 8 entered into force. The late payment, which was not to be paid for a while yet, had no default in paying. Bank of Scotland v Grimes[50] recognised, however, that a ‘deferred payment’ under section 8(1) is a duty to pay off the mortgage at the end of the mortgage period.[51]
The circumstances indicate that the mortgagor is incapable of repaying debt.
If requested by a lender to issue a possession order, this provision requires the Court to delay the order or otherwise postpone the action, in which the borrower is satisfied that the arrears are clear, and that payment will return regularly to the loan within a reasonable period.[52] Recently, the majority of the repossession cases are being handled using the provisions of soft law made by the Financial Conduct Authority and the Mortgage Pre-Action Protocol on mortgage conduct of business rules.[53] The Court may continue or postpone execution if it seems that the borrower will pay any amounts overdue under the mortgage within a reasonable period. There was however no reason to believe in that clause at this stage: there were no indications that the borrower was even considering the sale of the property and that the deficit was not repaid after the payments in support of mortgaged interest was recently decreased. Consequently, it did not apply the law referred to in section 36.[54]
However, this act does not apply to mortgages that are secured under regulated agreements under the Consumer Credit Act 1974, but rather the Act stipulates that the County Court has the powers under its rules to extend and delay the time to pay arrears.[55]
The government scheme offers help
Each case will be different in the best way to deal with a person’s debt crisis. Much depends on many factors such as their amount of debt, and how far their cases have gone towards dispossession. Consultative bodies advise any interested person to contact their lender as efficiently as possible for guidance and support. It is also essential to speak to an independent consulting body on the specific case as soon as possible.[56] The exciting scheme that the government provided is ‘Support for Mortgage Interest (SMI)’ which is paid out as a mortgage that has to be repaid when you are dead or when you sell your home, and had to be prior paid as a benefit, so you did not even pay it back.[57] However, SMI cannot help to pay the debt in the case of missed mortgage payments.[58] In addition, there is no other scheme which supports the case of mortgage arrear. Nonetheless, in the case that protected the lessee of the premises which is a mortgaged property, the Mortgage Repossessions (Protection of Tenants etc) Act 2010, which aim to give the tenants whose property owners have left their mortgaged property without the mortgagor’s knowledge or consent, a level of protection if the landlord (the mortgagee) enters into arrears on their mortgage and the lender begins a re-possession procedure.[59]
Mortgage Repossessions (Protection of Tenants etc.) Act 2010
This law supports the mortgagor who mortgaged their own dwelling house in whole or partial. It is undoubtedly given power to the court when the mortgaged property owned by an unauthorised tenancy has been claimed the possession by the mortgagee.[60] Furthermore, the court may postpone the possession day was delivered for a period not exceeding two months at the request of the tenant for the property to be delivered.[61] Any delay or suspension may be subject to the court’s payment to the mortgage during the time of repayment or suspension regarding the occupation of the mortgaged property.
Housing Act 1988
This act stated that the landlord should inform the tenant in writing that the possession will, or the court is of the opinion that the exemption from the application for notice is equitable. A landlord, who is seeking possession or has occupied the house at the very least one of them as his single or principal property, in the event of a joint owner seeking possession sometime before the tenancy commences.[62] In other words, in case of joint proprietor seeking ownership, or at least one, of those proprietors needs a residence as, his own, a private partner’s or his wife’s, and not a proprietor (or, in the case of joint proprietors, one or more), nor any person who, as proprietor, deriving the name under the proprietor’s, has given the above-mentioned notice.
The dwelling-house shall be subject to a mortgage granted prior to the starting of the tenancy, and the mortgagee shall have the right to exercise the selling power conferred to him by the mortgagee under section 101 of the Law of Property Act 1925[63]; and the tenant shall require the possession of a house to be vacantly owned in accordance with that power; and in exercising this power, the mortgagee shall require possession of the residence in order to dispose of the house with vacant possession; and any notice is given as stated above, or the court’s satisfaction that waiving the notice requirement is fair and equitable; and a payment shall be included in the application of this mortgage, and the mortgagee shall be interpreted accordingly.
Comparing with Thai laws
Currently, Thailand has no specific laws or policy to protect the mortgagor, in general, who might lose their dwelling house. However, for agriculturists, there is new legislation, the Protection of Citizens in the Consignment Contract of Land for Agriculture or Residential Purpose Act 2019. It is not a mortgage, but the consignment contract is one of the problems that make agriculturist lose their dwelling house and the arable land. The conceptual of this act is to solve the agriculturists’ problems who could lose their arable land and last residence after signing the sale contract, as well as not allowing obstacles to living. This law will help reduce inequality and create fairness in society. In the past, creditors often set a short sale period with the purpose of undesirable the redemption of assets. Some contracts have a redemption period of 4 months and often come across when it is time to redeem the property for sale, the creditors often flee, in order to be determined not to be found the land will not be redeemed. This act stated that before the expiration of the redemption period, the creditors must prior notify the agriculturists. If not showing that the contract is postponed for another six months. Furthermore, the value of the money to be redeemed must not exceed the sale price of consignment plus interest of not more than 15% and if the owner of the money or creditors died. The owner of the property can be redeemed from the heir or the debtor, or the owner of the property dies. The heirs can also proceed to redeem the property. In addition, in the new law, if the redemption is due to the owner of the property still has another year to find money to redeem the land.
Conclusion
The current UK laws sufficiently protect the mortgagors who fall in arrears with their mortgage payments. Under Section 36 and Section 8 of the Administration of the Law 1970 and the Administration of the Law 1974, the Court may provide mortgagors with time to rectify its negligence and, in the meantime, defer the grant of possession. Nevertheless, the legislation does not impact the status of the mortgagee in the absence of a court order in which he can legitimately gain possession or assert his selling authority without possession. If payment is made, the creditor does not conflict with their legal rights of ownership. The conditions of section 36 are questionable if this rule is circumvented, however, even if so, only if the borrower can prove the counterclaim possibly within a reasonable period can the debtor avoid the possession order. Section 36(1) sets out the jurisdiction of a court of law for mortgage ownership where loans under a mortgage of property that consist of or include a house include an action alleging ownership of the property in the mortgage, are no foreclosure proceedings where the loan is also said to be owned by the property in the contract. Section 36(2) shows that before a Court proceeds to exercise its property or sell authority in the mortgage deed for a building, the mortgagee shall receive leave from a court. The court that can protect the mortgager can choose many tasks in this section. The critical point is the ownership by the mortgagee of the mortgaged property gradually. Moreover, section 8, the extension rights of the mortgager who has mortgaged an apartment that sets out the actions required by the mortgager is also provided, either by instalment or to postpone full or partial payment, to pay off the balance of the principal. In addition, the government’s relevant scheme is ‘ Mortgage Interest Benefit, ‘ which is charged as a loan to be paid back if you have died or if you are selling your home and must have earned a prior fee of advantage if you do not even have to return it. It can help people to manage the debt, but, unfortunately, it does not protect the mortgagor who falls into arrear. In case that the mortgaged property is a rental residential, the Mortgage Repossessions Act 2010, which attempts to provide a level of protection to tenants whose mortgagor have abandoned their mortgaged property without the knowledge or consent of the mortgage holder when the mortgagee is in arrears of their mortgages. Furthermore, the residential shall be subject to the mortgage granted prior to the start of the tenancy and the mortgagee shall be entitled to exercise its selling power. Moreover, the UK mortgagor is more protected in Thailand. Even though Thailand has a law that protects the seller of redemption, but it protected only the dwelling houses and the arable lands of agriculturists. Comparing with the protection of the Administration of Justice Act is more cover than the Consignment Contract of Land for Agriculture or Residential Purpose Act 2019 of Thailand. Current UK legislation provides sufficient protection for mortgagors who fall in arrears of their mortgage payment.
[1] Roger J Smith, Property Law: Cases and Materials (5th ed, Pearson 2012).
[2] ibid.
[3] EP Ellinger, Eva Z Lomnicka and Richard Hooley, Ellinger’s Modern Banking Law (5th ed, Oxford University Press 2011).
[4] ibid; Smith (n 1).
[5] Ellinger, Lomnicka and Hooley (n 3); Smith (n 1).
[6] Ellinger, Lomnicka and Hooley (n 3).
[7] ibid.
[8] ibid.
[9] ibid.
[10] David Capper, ‘Giving the Borrower Time: An Evaluation of the Fitness for Purpose of Section 36 of the Administration of Justice Act 1970’, Comparative perspectives on remedies: views from four continents (Carolina Academic Press 2017).
[11] ibid.
[12] Gary Webber and Daniel Dovar, Residential Possession Proceedings (Tenth edition, Sweet & Maxwell 2017).
[13] See also Ropaigealach v Barclays Bank Plc [2000] Q.B. 263.
[14] See also Habib Bank Ltd v Taylor [1982] 1 W.L.R. 1218.
[15] Patrick McAuslan, Whose Mortgage Is It Anyway?: Producers, Consumers and the Law in the UK Mortgage Market (2016); Capper (n 10).
[16] Capper (n 10).
[17] [1962] Ch 883, 912.
[18] Ian Loveland, ‘Peaceable Entry to Mortgaged Premises: Considering the Doctrine’s Compatibility with the HRA 1998’ 381.
[19] ‘Additional powers of court in action by mortgagee for possession of dwelling-house.
(1) Where the mortgagee under a mortgage of land which consists of or includes a dwelling-house brings an action in which he claims possession of the mortgaged property, not being an action for foreclosure in which a claim for possession of the mortgaged property is also made, the court may exercise any of the powers conferred on it by subsection’
[20] Sarah Nield and Nicholas Hopkins, ‘Human Rights and Mortgage Repossession: Beyond Property Law Using Article 8’ (2013) 33 Legal Studies 431 <https://www.cambridge.org/core/product/identifier/S0261387500003500/type/journal_article> accessed 2 November 2019; David Schmitz, ‘Powers and Duties of Mortgagees, Receivers and Administrators in the Management and Sale of Property’ 28.
[21] [2000] Q.B. 263; and see also Royal Bank of Scotland v Miller [2002] QB 255.
[22] Schmitz (n 19).
[23] ‘Additional powers of court in action by mortgagee for possession of dwelling-house.
(2) The court—
(a)may adjourn the proceedings, or
(b)on giving judgment, or making an order, for delivery of possession of the mortgaged property, or at any time before the execution of such judgment or order, may—
(i)stay or suspend execution of the judgment or order, or
(ii)postpone the date for delivery of possession, for such period or periods as the court thinks reasonable.’
[24] McAuslan (n 15); Capper (n 10).
[25] [2008] EWHC 2327; and see also Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883, 912.
[26] [1977] Ch.1.
[27] Michael Haley, ‘Mortgage Default: Possession, Relief and Judicial Discretion’ (1997) 17 Legal Studies 483 <https://www.cambridge.org/core/product/identifier/S0261387500006486/type/journal_article> accessed 22 November 2019.
[28] Webber and Dovar (n 12).
[29] See also Citibank Trust Ltd v Ayivor [1987] 3 All E.R. 241
[30] ‘The Extent of Court’s Discretion to Stay an Order for Possession in Mortgage Arrears Cases’ (Housing Rights, 21 March 2016) <https://www.housingrights.org.uk/news/legal/courts-discretion-boyd-case> accessed 22 November 2019.
[31] McAuslan (n 15).
[32] [1973] Ch 307; and see also Cheltenham and Gloucester Building Society v Norgan [1996] 1 WLR 343.
[33] Capper (n 10).
[34] ibid.
[35] [1974] 28 P & CR 69.
[36] Capper (n 10).
[37] ibid; McAuslan (n 15).
[38] Capper (n 10).
[39] [1973] Ch 307.
[40] ‘Extension of powers of court in action by mortgagee of dwelling-house.
(1) Where by a mortgage of land which consists of or includes a dwelling-house, or by any agreement between the mortgagee under such a mortgage and the mortgagor, the mortgagor is entitled or is to be permitted to pay the principal sum secured by instalments or otherwise to defer payment of it in whole or in part, but provision is also made for earlier payment in the event of any default by the mortgagor or of a demand by the mortgagee or otherwise, then for purposes of section 36 of the M3 Administration of Justice Act 1970 (under which a court has power to delay giving a mortgagee possession of the mortgaged property so as to allow the mortgagor a reasonable time to pay any sums due under the mortgage) a court may treat as due under the mortgage on account of the principal sum secured and of interest on it only such amounts as the mortgagor would have expected to be required to pay if there had been no such provision for earlier payment.’
[41] Capper (n 10); Haley (n 25).
[42] Haley (n 25); McAuslan (n 15).
[43] ‘Extension of powers of court in action by mortgagee of dwelling-house.
(2) A court shall not exercise by virtue of subsection (1) above the powers conferred by section 36 of the M4 Administration of Justice Act 1970 unless it appears to the court not only that the mortgagor is likely to be able within a reasonable period to pay any amounts regarded (in accordance with subsection (1) above) as due on account of the principal sum secured, together with the interest on those amounts, but also that he is likely to be able by the end of that period to pay any further amounts that he would have expected to be required to pay by then on account of that sum and of interest on it if there had been no such provision as is referred to in subsection (1) above for earlier payment.’
[44] Capper (n 10); McAuslan (n 15).
[45] ‘Extension of powers of court in action by mortgagee of dwelling-house.
(3) Where subsection (1) above would apply to an action in which a mortgagee only claimed possession of the mortgaged property, and the mortgagee brings an action for foreclosure (with or without also claiming possession of the property), then section 36of the Administration of Justice Act 1970 together with subsections (1) and (2) above shall apply as they would apply if it were an action in which the mortgagee only claimed possession of the mortgaged property, except that—
(a)section 36(2)(b) shall apply only in relation to any claim for possession; and
(b)section 36(5) shall not apply.
(4) For purposes of this section the expressions “dwelling-house”, “mortgage”, “mortgagee” and “mortgagor” shall be construed in the same way as for the purposes of Part IV of the Administration of Justice Act 1970.’
[46] Capper (n 10).
[47] ibid; McAuslan (n 15).
[48] Capper (n 10).
[49] [1977] Ch 1.
[50] [1985] Q.B. 1179.
[51] Capper (n 10).
[52] Haley (n 25).
[53] Lisa Whitehouse, ‘The Mortgage Arrears Pre-Action Protocol: An Opportunity Lost’ (2009) 72 The Modern Law Review 793 <http://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-2230.2009.00768.x> accessed 22 November 2019; Capper (n 10).
[54] See also Southern Pacific Mortgage Ltd v Green [2015] 11 WLUK 495.
[55] Webber and Dovar (n 12).
[56] Wendy Wilson, Hannah Cromarty and Cassie Barton, ‘Mortgage Arrears and Repossessions (England)’ [2017] House of Commons Library 35.
[57] ‘Support for Mortgage Interest (SMI)’ <https://www.moneyadviceservice.org.uk/en/articles/support-for-mortgage-interest> accessed 24 November 2019.
[58] ‘Support for Mortgage Interest (SMI)’ (GOV.UK) <https://www.gov.uk/support-for-mortgage-interest> accessed 24 November 2019.
[59] ‘Mortgage Repossessions (Protection of Tenants Etc) Act 2010: Guidance’ (GOV.UK) <https://www.gov.uk/government/publications/mortgage-repossessions-protection-of-tenants-etc-act-2010-guidance> accessed 24 November 2019.
[60] ibid; Wilson, Cromarty and Barton (n 51).
[61] ‘Mortgage Repossessions (Protection of Tenants Etc) Act 2010: Guidance’ (n 54).
[62] Wilson, Cromarty and Barton (n 51); Andrew Gall and Building Societies Association (Great Britain), Understanding Mortgage Arrears. (Building Societies Association 2009).; See also Horsham Properties Group Ltd v Clark [2008] EWHC 2327.
[63] Schmitz (n 19).
