14.25.3
Mandatory Grounds
A
landlord must prove that:
a) at, or before, the grant of the tenancy
the landlord gave notice in writing that possession might
be recovered on this ground. The notice need not be in
any particular form and may be included as a recital in
any tenancy agreement provided that the agreement does
not operate retrospectively. The court has power to dispense
with such a notice if it considers it just and equitable.
See:
· Boyle v Verrall [1997] 04 EG 145, 29 HLR 436, CA.
(In determining whether it is just and equitable to dispense
with notice, the court should look at all the circumstances
of the case. If oral notice was given when a tenancy was
granted, it may be an important factor favouring dispensation.
However it does not follow that oral notice is a prerequisite
for such a decision. On the other hand absence of oral
notice is not a reason for restricting dispensation to
circumstances where there is an ‘exceptional case’. A tenant’s
persistent late payment of rent is a relevant circumstance.)
· Mustafa v Ruddock (1998) 30 HLR 495, CA. Matters relevant
to the exercise of discretion included:
(1) the original letting purported to
be an assured shorthold;
(2) the proceedings were undefended.
There was no evidence of hardship to the tenant;
(3) there was genuine hardship to the
landlord;
(4) the error arose through the mistake
of the landlord’s agent who was now bankrupt.
The
failure to notify the tenant that possession might be required
was an important factor but in no way conclusive.
· Hegab v Shamash June 1998 Legal Action 13, CA. The
Court of Appeal stated that it was ‘inherent in...deciding
what was just and equitable [to take] into account all
the circumstances’. The Court allowed the tenant’s appeal
because the judge had failed to take into account two matters,
namely the fact that the tenant had paid a deposit of £4,000
in relation to a proposed purchase of the premises which
had not been refunded and that the landlord had not paid
the costs of earlier proceedings concerning an illegal
eviction by the landlord.
and either
b) at some time before the grant of
the tenancy the landlord, or if there are joint landlords,
at least one of them, occupied the dwelling-house as his
or her only or principal residence. A landlord’s previous
occupation may be temporary and intermittent in order to
suffice - see Naish
v Curzon (1984) 17 HLR 220, CA and Mistry
v Isidore (1990) 22 HLR 281, CA cf Ibie
v Trubshaw (1990) 22 HLR 191, CA.
or
c) the landlord (or at least one of
them) ‘requires the dwelling-house as his or his spouse’s
only or principal home’. The landlord need not show that
the premises are reasonably required, merely that the landlord ‘bona
fide wants’ or ‘genuinely has the immediate intention’ of
occupying the premises (Kennealy
v Dunne [1977] QB 837, CA). Premises need not be required
as a permanent residence and fairly intermittent residence
will be sufficient (Naish v Curzon (1984) 17 HLR 220, CA).
This
ground for possession is not available to a new landlord
who has acquired the premises ‘for money or money’s worth’ from
an original landlord who gave a notice that possession
might be recovered under this ground. (Epps v Rothnie [1945] KB 562, CA).
This
ground applies if :
a) a mortgagee is entitled to exercise
a power of sale (e.g. if the mortgagor has defaulted on
instalments of the mortgage); and
b) the mortgagee requires vacant possession
to exercise that power; and
c) a Ground 1 notice was given before
the commencement of the tenancy or the court considers
it just and equitable to dispense with the notice.
Note
the comments of Lord Denning MR in Quennell v Maltby [1979] 1 WLR 318.
A
landlord must prove that:
a) not later than the grant of the tenancy,
notice was given that possession might be recovered under
this ground and;
b) at some time during the twelve months
prior to the grant of the tenancy, the dwelling-house was
occupied for a holiday.
The
court has no power to dispense with service of the notice
required prior to the grant of the tenancy. See Fowler
v Minchin (1987) 19 HLR 224, CA, but cf Springfield
Investments v Bell (1990) 22 HLR 440, CA.
This
ground applies where, during the twelve months preceding
the tenancy, premises were let by a specified educational
institution. As with Ground 3, notice stating that this
ground may be relied upon has to be served before the commencement
of the tenancy. See the Assured and Protected Tenancies
(Lettings to Students) Regulations 1998 SI No 1967.
This
ground applies to premises which are ‘held for the purpose
of being available for occupation by a minister of religion
as a residence from which to perform duties of his office’.
Notice that possession might be required must be served
before the grant of the tenancy and the landlord must satisfy
the court that the property is required for occupation
by a minister of religion as a residence.
This
ground is available for a landlord who ‘intends to demolish
or reconstruct the whole or a substantial part of the dwelling-house
or to carry out substantial works’. This ground is very
similar to Landlord & Tenant Act 1954 s30(l)(f).
a) It has been held that ‘reconstruction’ means ‘a
substantial interference with the structure of the premises
and then a rebuilding, in probably a different form, of
such part of the premises as has been demolished by reason
of the interference with the structure’. See Joel
v Swaddle [1957] 3 All ER 325 at 329; and Barth
v Pritchard [1990] 20 EG 65.
b) The landlord must show that the intention
will be fulfilled shortly after the date of the hearing
(Betty’s Cafe v Phillips [1958] 1 All ER
607, HL). There are two elements to the concept of intention:
· a
genuine desire that the result will come about and
· a
reasonable prospect of bringing about that result.
In Edwards
v Thompson [1990] 29 EG 41, the landlord failed to
prevent the grant of a new tenancy because she had not
found a developer at the time of the hearing and ‘there
was a real possibility that [she] would not be in a position
to carry out the entire development on the termination
of the current tenancy....She had failed to show that she
had the means and ability; she had not established the
necessary intention.’ It is not essential that a landlord
obtain planning permission in advance if it can be shown
that there is a reasonable prospect of getting consent
(see Gregson v Cyril
Lord [1962] 3 All ER 907).
c) The landlord must show that because
of one of four specified reasons, the intended work cannot
reasonably be carried out without the tenant giving up
possession of the premises. ‘Possession’ means ‘putting
an end to legal rights of possession’ and not merely access
(see Heath v Drown [1972]
2 All ER 561 and HA 1988 s16).
d) This ground is not available to a
landlord who has acquired his or her interest in the property
by purchasing it after the grant of the tenancy.
e) possession order is made under this
ground the landlord must pay a sum equal to the tenant’s
reasonable removal expenses (section 11(l)).
Although
an assured tenancy may pass by will or on intestacy after
the death of a tenant, the landlord may obtain possession
if proceedings are brought within twelve months of the
death of the tenant or the date upon which the landlord
became aware of the death. ‘Proceedings for possession’ means
court proceedings, not the service of a s8 notice (Shepping v Osada [2000] 30 EG 125, [2001] L&TR 489, (2000) The
Times March 23, CA).
This
ground does not apply if a spouse succeeds to the tenancy
under section 17. The Act specifies that acceptance of
rent after the death of the former tenant should not be
regarded as creating a new tenancy unless the landlord
has agreed in writing to a change in the terms of the tenancy,
such as an increase in rent.
As
amended by Housing Act 1996 s101.
This
is the first of three distinct grounds for possession based
on rent arrears, although in practice most landlords plead
all three in the alternative. Under Ground 8, two months’ rent
arrears (or eight weeks’ arrears in the case of a weekly
tenancy) give a landlord an automatic right to a possession
order. However the landlord must prove that there are two
months’ arrears, both at the time when the notice of the
landlord’s intention to bring proceedings is served and
at the date of the hearing.
Judges
are entitled to find that Ground 8 is satisfied despite
the fact that housing benefit is owed by the local authority
(Marath v MacGillivray (1996)
28 HLR 484, CA where the local authority paid benefit after
the hearing with the result that the arrears were reduced
below the Ground 8 threshold).
If
possession proceedings are brought during the fixed term
of a tenancy, there is no power to grant relief from forfeiture
- County Courts Act 1984 s138 does not apply - Artesian
Residential Investments v Beck [2000] 2 WLR 357, [1999]
3 All ER 113, CA, but does the court have power to adjourn
for a short period so that those problems can be sorted
out? Probably, by analogy with Birmingham
Citizen Permanent BS v Caunt [1962] ChD 883, ChD, R v Circuit Judge ex p Wathen (1976) 33 P&CR 423, DC and the
House of Lords decision in Bristol
CC v Lovell [1998] 1 All ER 775, HL, if the decision
to adjourn is made before evidence is given. See too Hoffman
v Cueto-Corondo and Filipe April 2000 Legal Action
32, Edmonton County Court and s9(1) and (6).
With
all ‘rent arrears’ grounds, there may be:
a) the possibility of a defence of set
off, based on a counterclaim for breach of repairing obligations
(express terms, Landlord and Tenant Act 1985 section 11,
Defective Premises Act 1972, quiet enjoyment etc). See British
Anzani (Felixstowe) v International Marine Management [1980]
1 QB 137; Chiodi v De Marney [1988] 41 EG 80, CA;
and Davies v Peterson (1989)
21 HLR 63, CA
or
b) a defence relying upon Landlord and
Tenant Act 1987 s48; see:
· Dallhold Estate v Lindsey [1992] 23 EG 112, CA
· Hussain v Singh [1993] 31 EG 75, CA
· Rogan v Woodfield Building Services [1995] 20 EG 132, CA
· Drew-Morgan v Hamid-Zadeh [1999] EGCS 72, (2000) 32 HLR 316,CA
14.25.4
Discretionary Grounds
The
availability of suitable alternative accommodation, either
at the time of the hearing or when the order is to take
effect, is a ground for possession. Part III of Schedule
2 gives further clarification as to the matters to be taken
into account when determining whether or not accommodation
is suitable. When a possession order is made under this
ground, the landlord must pay a sum equal to the tenant’s
reasonable removal expenses (section 11(1)).
A
landlord must prove that there were rent arrears both at
the date when proceedings were begun and, unless the court
considers it ‘just and equitable’ to dispense with the
need for service of a notice prior to issue, that there
were arrears when the notice was served. In theory a possession
order may be made even if the arrears are paid off before
the hearing, although in most circumstances there would
be strong grounds for arguing that it would not be reasonable
to make an order. See Dellenty
v Pellow [1951] 2 All ER 716, CA and Lee-Steere
v Jennings (1987) 20 HLR 1, CA.
Even
if there are no arrears on the date when possession proceedings
are issued, persistent delay in paying rent which is due
is a ground for possession. The phrase ‘persistent delay’ is
not defined, but is likely to have the same meaning as
in Landlord and Tenant Act 1954 s30(1)(b) -- i.e. one instalment
of rent has been in arrear for a significant period of
time or instalments have persistently been paid late, or
both. See Hopcutt
v Carver (1969) 209 EG 1069 and Horowitz
v Ferand [1956] CLY 4843 (cc).
This
ground applies if ‘any obligation of the tenancy (other
than one related to the payment of rent) has been broken
or not performed.’
This
ground applies not only to premises let, but also to common
parts.
As
inserted by Housing Act 1996 s148.
The
tenant or a person residing in or visiting the dwelling-house:
a) has been guilty of conduct causing
or likely to cause a nuisance or annoyance to a person residing, visiting or otherwise engaging in lawful activity in
the locality; or
b) has been convicted of:
· using
the dwelling house or allowing it to be used for immoral
or illegal purposes, or
· an arrestable offence committed in,
or in the locality of, the dwelling house. (The italics denote the main changes between the old and the new
grounds.) There is no requirement that any person visiting
the premises and causing a nuisance should be there lawfully.
The ground is wide enough, for example, to encompass
behaviour by a former partner of a tenant who has been
excluded, but returns contrary to the tenant’s wishes.
(In
relation to the former Ground 14, see Northampton
BC v Lovatt [1998] 07 EG 142, CA.)
Arrestable
offences are defined by Police and Criminal Evidence Act
1984 s24 and include all offences for which the sentence
is fixed by law (eg life imprisonment), offences for which
adults may be sentenced with terms of imprisonment of five
years or more, taking motor vehicles without authority
and offences under Sexual Offences Act 1956 ss22 and 23
(causing prostitution of women and procuring girls under
21)
See
too Northern British
Housing Association v Sheridan, (2000) 32 HLR 346,
CA.
As
inserted by Housing Act 1996 s149.
This
ground applies where one of both partners is a tenant and:
a) one partner has left because of violence
or threats of violence by the other towards that partner
or a member of that partner’s family; and
b) the court is satisfied that the partner
who has left is unlikely to return.
Landlords
seeking to rely upon this ground must satisfy the court
that notice of proceedings for possession has been served
on the partner who has left the home or that they have
taken reasonable steps to effect service (Housing Act 1996
s150).
Where
possession is sought under Ground 14A, it is not sufficient
that the alleged violence or threats of violence were merely
one of a range of causes of equal efficacy in the victim’s
departure from the property. For the ground to be made
out it has to be established that the alleged violence
or threat of violence was the dominant, principal and real
cause of the departure (Camden LBC v Mallett (2001) 33 HLR 204,
CA).
An
employer who has let accommodation to an employee ‘in consequence’ of
employment may claim possession if the tenant has ‘ceased
to be in that employment’. It
applies whether or not the employer requires the premises
for another employee.
The
tenant is the person, or one of the persons, to whom the
tenancy was granted and the landlord was induced to grant
the tenancy by a false statement made knowingly or recklessly
by:
a) the tenant; or
b) a person acting at the tenant’s instigation.
This
ground was introduced by Housing Act 1996 s102 and is identical
to Housing Act 1985 Sched 2 Ground 5 as amended.
14.25.5
Reasonableness
The
criteria for establishing whether or not it is reasonable
to make an order for possession against an assured tenant
are the same as those used in proceedings against secure
tenants. See e.g. West
Kent Housing Association v Davies (1998) 31 HLR 415,
[1998] EGCS 103, CA.
As
to suspension of possession orders, see s9 and the notes
on Housing Act 1985 s85 above. Section 9 ‘gives a wide
power to stay or suspend an order for possession which
is applicable to all cases except those where it is expressly
excluded by statute.’ The power may be exercised where
circumstances have changed since the original hearing,
even where an outright order was made by a different judge
(Ujima HA v Smith April 2001 Legal Action
22, (2000) October 16, ChD, where the defendant was by
the time of the application to suspend accepting her legal
responsibility for serious damage to a shared kitchen and
offering to pay £150 in compensation).
14.25.6
Assured shorthold tenancies
a) Tenancies granted before 28 February
1997
Housing
Act 1988 s20 stipulated four requirements for the creation
of an assured shorthold tenancy:
· It
must be for a fixed term of not less than six months;
· It
must not contain any provision enabling the landlord to
terminate the tenancy within six months of the beginning
of the tenancy;
· Notice
in the prescribed form must be served before the commencement
of the tenancy stating that the tenancy will be an assured
shorthold tenancy. The court has no power to dispense with
service of this notice. The form of the notice is prescribed
by the Assured Tenancies and Agricultural Occupancies (Forms)
Regulations 1988. See York
and Ross v Casey [1998] 2 EGLR 25, (1999) 31 HLR 209,
CA and Clickex Ltd v McCann [1999] 30 EG 96, CA
· It
would be an assured tenancy but for these three requirements
being satisfied.
b) Tenancies granted on or after 28
February 1997
Housing
Act 1996 section 96 and Sched 7 take effect as a new Housing
Act 1988 s19A and Sched 2A. They provide that all tenancies
entered into on or after 28 February 1997 which would otherwise
have been assured tenancies are automatically assured shorthold
tenancies lacking long term security of tenure unless certain
exceptions apply (See Schedule 2A). This applies whether
the tenancy is granted orally or by a written agreement.
In other words, the requirement of a s20 notice informing
the tenant that the tenancy would be an assured shorthold
tenancy has been abolished.
Housing
Act 1988 s21 provides:
‘21(1)
Without prejudice to any right of the landlord under an
assured shorthold tenancy to recover possession of the
dwelling-house let on the tenancy in accordance with Chapter
I above, on or after the coming to an end of an assured
shorthold tenancy which was a fixed term tenancy, a court
shall make an order for possession of the dwelling-house
if it is satisfied:
a) that the assured shorthold tenancy has
come to an end and no further assured tenancy (whether
shorthold or not) is for the time being in existence, other
than a statutory periodic tenancy; and
b) the landlord or, in the case of joint
landlords, at least one of them has given to the tenant
not less than two months’ notice in writing stating that
he requires possession of the dwelling-house.’
All
that a landlord need do to recover possession is to:
a) prove that the tenancy has come to
an end and that no new tenancy has been granted; and
b) give at least two months’ notice
to the tenant that the landlord requires possession; and
c) take court proceedings.
If
landlords comply with these requirements, they are automatically
entitled to possession. The court has no power to suspend
possession orders, apart from Housing Act 1980 s89(1) which
provides that orders for possession must take effect no
later than 14 days after the court order unless exceptional
hardship would be caused, in which case the maximum period
that may be allowed is six weeks.
The
section 21 notice:
a) may be given before any fixed term
expires or even at the beginning of the tenancy (s21(2));
b) need not be in any particular form,
although it must be in writing (Housing Act 1996 s98);
c) may be given by only one of several
joint landlords (s21(4)(a)).
There
is no power to dispense with service of the notice.
It
is important to check that:
a) the notice gives at least two months
notice although no actual date need be specified provided
that ‘the tenant knows or can easily ascertain the date
referred to.’ Lower Street Properties Ltd v Jones [1996]
48 EG 154, CA
b) if the tenancy is a periodic tenancy,
the date specified in the notice is (or the period of notice
given in the notice expires on) ‘the last day of a period
of the tenancy’ (s21(4)(a)).
Uncertainty
has been caused by the dichotomy between Housing Act 1988
s21(1)(b) and s21(4)(a). Section 21(1)(b) merely provides
that the landlord must give ‘the tenant not less than two
months’ notice stating that he requires possession of the
dwelling-house’. However s21(4)(a) provides that the date specified in a notice
where there is ‘a periodic tenancy’ shall be ‘the last day
of a period of the tenancy’. Both Arden and Partington (Housing
Law 1-223/4) and Walter and Harris Claims to the Possession
of Land pp324-5) take the view that there is no need for
the two months notice to expire on ‘the last day of a period
of the tenancy’ if the notice is served during a fixed term
assured shorthold but that this requirement has to be satisfied
if the notice is served after the expiry of a fixed term
(i.e. during a statutory periodic assured shorthold tenancy).
In Gracechurch International
v Tribhovan and Abdul (2001) 33 HLR 263, CA, CA Simon
Brown LJ, while hearing an appeal on another issue, described
the dismissal of possession proceedings, because a notice
requiring possession from a periodic tenant did not expire
on the last day of a period of the tenancy, as ‘clearly correct’.
This was also the approach taken in Lomas
v Atkinson September 1993 Legal Action 16, where Assistant
Recorder Hamilton sitting at Shrewsbury County Court dismissed
a claim for possession (inter alia) because the s21 notice
served after the expiration of the fixed term failed to expire
on ‘the last day of a period of the tenancy’ as required
by s21(4). See too Transeuropean Carriage Co v Abou-Hamdan July
1998 Legal Action 12, (1998) May 21, West
London County Court and Chignell Investments Ltd v Deghdak June
1999 Legal Action 23, Central London County Court. However
in Ujima HA v Richardson [1995] CLW 46/95 HHJ Graham sitting at Shoreditch
County Court held that a landlord may either serve a notice
which complies with s21(1)(b) or one which complies with
s21(4).
The
former approach is more likely to be correct. The use of
the words ‘without prejudice...to...subsection (1)’ in s21(4)
clearly show that the two subsections are alternatives and
that s21(4) is not an additional requirement for all s21(1)
notices. The words in s21(2) (‘A notice under paragraph (b)
of subsection (1) above may be given before or on the day
on which the tenancy comes to an end’) indicate that a s21(1)
notice is one which can be served during a fixed term. In
contrast the use of the words ‘let on an assured shorthold
tenancy which is a periodic tenancy’ in s21(4) indicate that
the s21(4)(b) requirement applies whenever a notice is served
during a periodic tenancy - and that includes a statutory
periodic tenancy (cf s13(1)(a) and (b) and s15(3)). This
approach is also supported by Housing Act 1996 s98 which
refers to s21(1) notices as being given ‘under a fixed term’ and
s21(4) as the ‘corresponding provision for periodic tenancies’.
Accordingly
a notice served during a periodic assured shorthold tenancy
which does not expire ‘on the last day of a period of the
tenancy’ is unlikely to be valid.
c) the date specified ‘is not earlier
than the earliest day on which...the tenancy could be brought
to an end by a notice to quit given by the landlord on
the same date as the notice…s21(4)(b)). Accordingly more
than two months’ notice is required where there is an express
provision requiring a longer period of notice or the rental
period is longer than two months, eg, where there is a
quarterly tenancy, in which case three months’ notice has
to be given; and
d) proceedings have not been commenced
before the date specified in the notice. The claim for
possession in Lower Street Properties Ltd v Jones was
dismissed because proceedings were started the day before
the s21 notice expired. Schiemann LJ stated it ‘is implicit
that the landlord cannot bring proceedings until after
[the date specified in the notice]’ although Kennedy LJ
reached his decision on the grounds that the notice served
stated ‘The landlord cannot apply for such an order before
the notice has run out’, and left open whether, with a
different wording, proceedings could have been begun before
expiry;
e) if the tenancy is one to which Housing
Act 1988 s19A applies, that any possession order will not
take effect earlier than six months after the grant of
the original tenancy (Housing Act 1988 s21(5) as inserted
by Housing Act 1996 s99).
Part
4: Mortgages
14.26
Introduction
Although
some mortgages are regulated by the Consumer Credit Act
1974, most mortgage possession proceedings are governed
by the provisions of the Administration of Justice Acts
1970 and 1973. These Acts, although considered daily in
the county courts, received very little attention from
the Court of Appeal for the first twenty years of their
existence. The last few years have however seen a significant
increase in appeals and this has resulted in a dozen or
so reported decisions. This body of case law has had a
marked effect upon practice in the county courts.
14.27
Power to suspend or to delay date for possession
Administration
of Justice Act 1970 s36(1) provides:
‘Where
the mortgagee under a mortgage of land which consists of
or includes a dwelling-house brings an action in which
he claims possession...(not being an action for foreclosure
in which a claim for possession...is also made) the court
may exercise any of [its] powers...if it appears to the
court that in the event of its exercising the power the
mortgagor is likely to be able within a reasonable period
to pay any sums due under the mortgage or to remedy a default
consisting of a breach of any other obligation arising
under or by virtue of the mortgage.’
Section
36(2) provides that the court:
a) may adjourn the proceedings, or
b) on giving judgment, or making an
order, for delivery of possession...or at any time before
execution of such judgment or order may:
· stay
or suspend execution of the judgment or order; or
· postpone
the date for delivery of possession
for such period or periods as the
court thinks reasonable.
The
court’s powers under s36 apply equally to repayment mortgages
and endowment mortgages (Bank
of Scotland v Grimes [1985] 2 All ER 254, CA). However,
borrowers cannot rely upon s36 where a charge securing
a bank overdraft provides that the sum owed shall only
become payable on demand, (an ‘all moneys charge’) since,
in those circumstances, there is no agreement to defer
payment (see AJA 1973 s8 and Habib Bank Ltd v Taylor [1982] 3 All ER
561, CA and Rees
Investments Ltd v Groves [2001] June 27, ChD) In those
circumstances ‘the court has no jurisdiction to decline
the order or to adjourn the hearing, whether on terms of
keeping up payments or paying arrears, if the mortgagee
cannot be persuaded to agree to this course’ (Birmingham
Citizens Permanent Building Society v Caunt [1962]
Ch 883, ChD.) In Caunt Russell J stated that the sole exception
to this rule is that possession proceedings:
‘may
be adjourned for a short time to afford the mortgagor a
chance of paying off the mortgagee in full or otherwise
satisfying him; but this should not be done if there is
no reasonable prospect of this occurring. When I say the
sole exception, I do not, of course, intend to exclude
adjournments which in the ordinary course of procedure
may be desirable in circumstances such as temporary inability
of a party to attend, and so forth.’ (p912)
In Royal Bank of Scotland v Miller [2001]
EWCA CIV 344, (2001) February 27, CA it was held that (1)
the relevant time for determining whether land consists
of or includes a dwelling-house within the meaning of s36
is the time when the mortgagee claims possession, not the
date when the legal charge is entered into; and (2) breach
of a term of the mortgage (e.g. occupation by a third party
without consent) does not prevent s36 from applying.
The
court’s power under s36 to adjourn mortgage possession
proceedings, stay or suspend execution or postpone the
date for delivery of possession ceases after a warrant
has been executed. (Cheltenham
and Gloucester Building Society v Obi (1996) 28 HLR
22, CA.)
A
bankrupt has locus standi to make an application to the
court for relief under Administration of Justice Acts 1970
and 1973 (Nationwide BS v Purvis [1998] BPIR 625, CA).
14.28
Criteria and evidence
The
borrower must, on the balance of probabilities satisfy
the court that it is likely that the arrears will be cleared
within a reasonable period. The court cannot suspend an
order for possession under s36, however hard the circumstances,
if there is no prospect of the borrower reducing the arrears.
(Abbey National Mortgages v Bernard (1995)
71 P&CR 257, CA)
The
defendant need not always produce evidence in the normal
formal sense (eg witness statement, affidavit or on oath).
In Cheltenham and Gloucester Building Society v Grant (1994) 26 HLR
703, CA where the building society unsuccessfully challenged
the common practice of district judges exercising their
discretion under AJA 1970 without hearing sworn evidence
from borrowers, Nourse LJ stated that:
‘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 reception of informal material is made by the mortgagee.
Clearly, it will sometimes be prudent for the mortgagor
to put in an affidavit before the hearing.’ (p707)
The
Court of Appeal declined to lay down rigid rules as to
how ‘busy district judges’ should satisfy themselves as
to the requirements in s36 and upheld the original order
made by the district judge that a possession order should
not be enforced without leave of the court while regular
payments were made.
14.29
Reasonable period
One
crucial question which has to be answered in every case
is ‘What is a reasonable period?’ The phrase is not defined
by the Administration of Justice Act.
In Centrax Trustees v Ross [1979] 2 All ER
952, ChD, Goulding J stated that in assessing how long
a reasonable period might be, the court must ‘bear in mind
the rights and obligations of both parties, including [the
lender’s] right to recover their money by selling the property,
if necessary, and the full past history of the security.’
In First Middlesbrough Trading and Mortgage Co
Ltd v Cunningham (1974) 28 P&CR 69, CA, Scarman
LJ, when considering what is a ‘reasonable period’ within
s36, stated:
‘since
the object of the instalment mortgage was, with the consent
of the mortgagee, to give the mortgagor the period of the
mortgage to repay the capital sum and interest, one begins
with a powerful presumption of fact in favour of the period
of the mortgage being the ‘reasonable period’’. (p75)
In Western Bank v Schindler [1977] Ch 1;
[1976] 2 All ER 393, CA Buckley LJ stated:
‘What
must be reasonable must depend on the circumstances of
the case....In a suitable case the specified period might
even be the whole remaining prospective life of the mortgage’.
([1976] 2 All ER at p400)
These
passages were obiter but were followed by the Court of
Appeal in Cheltenham and Gloucester Building Society
v Norgan [1996] 1 All ER 449, (1995) 28 HLR 443, (1996)
72 P&CR 46, CA. Waite LJ stated that in determining ‘a
reasonable period’:
‘the
court should take as its starting point the full term of
the mortgage and pose at the outset the question: would
it be possible for the mortgagor to maintain payment-off
of the arrears by instalments over that period?’ (p458)
In
Norgan there had been a history of arrears. In May 1990,
when arrears stood at £7,216, the building society obtained
a possession order suspended for 28 days. In December 1990
the terms of the suspension were varied, but not complied
with, and the building society obtained a warrant. The
warrant was twice suspended on terms, but when the borrower
failed to comply, the building society applied to reissue
the warrant and the borrower cross-applied for a further
suspension. The district judge gave leave to reissue the
warrant and refused any further suspension. By the time
the appeal came on before the circuit judge the arrears
were in the region of £20,000. He dismissed the borrower’s
appeal and she appealed to the Court of Appeal. The Court
of Appeal allowed her appeal.
Evans
LJ set out a number of considerations which are likely
to be relevant when establishing what is a reasonable period.
They
include:
‘a) How much can the borrower reasonably afford
to pay, both now and in the future?
b) If the borrower has a temporary difficulty
in meeting his obligations, how long is the difficulty
likely to last?
(c)
What was the reason for the arrears which have accumulated?
(d)
How much remains of the original term?
(e)
What are the relevant contractual terms, and what type
of mortgage is it, ie when is the principal due to be repaid?’
Other
matters which may be relevant include family circumstances
and the income of other members of the family. If arrears
have accrued as a result of matrimonial breakdown, are
any proceedings for ancillary relief likely to result in
an order which will enable arrears to be paid off? Is the
Benefits Agency (or should it be) paying anything towards
the interest due on the mortgage?
14.30
Security at risk
Norgan
was a case where the lender’s security was not at risk.
Courts are likely to be far more cautious about exercising
s36 powers where there is already negative equity or where
there is a risk of negative equity. In Norgan Waite LJ
recognised that there would be cases where evidence might ‘be
required to see if and when the lender’s security will
become liable to be put at risk as a result of imposing
postponement of payments in arrear’. (p459) Evans LJ indicated
that courts should ask ‘Are there any reasons affecting
the security which should influence the period for payment?’ (p463)
Similarly in First Middlesbrough Trading and Mortgage Co
Ltd v Cunningham the Court of Appeal stated that when
exercising its AJA discretion, one of the ‘relevant surrounding
circumstances’ which the court is entitled to take into
account is the fact that the debt might be inadequately
secured. Sometimes borrowers produce letters from estate
agents in order to satisfy the court about the value of
the property in comparison with the amount of the loan
outstanding, but in Bristol
and West BS v Ellis (1997) 29 HLR 282, CA the Court
of Appeal stated that judges should approach such estimates
with ‘reserve’. If a borrower’s valuation is disputed,
it may be necessary for there to be an adjournment for
an independent valuation so that the court can determine
whether the lender’s security is at risk.
14.31
Sale of the property
In
most cases borrowers try to satisfy the court that it is
likely that the arrears will cleared within a reasonable
period by giving evidence about their income and expenditure.
However, where borrowers’ income is not sufficient to repay
arrears, they may seek time in which to sell the property
so that the outstanding balance (including arrears) can
be paid from the proceeds of sale.
In National and Provincial Building Society v
Lloyd [1996] 1 All ER 630, (1995) 28 HLR 459, CA,
the Court of Appeal considered an appeal against a decision
to suspend a possession order to give the borrower time
to sell premises and so clear mortgage arrears. The building
society argued that any such suspension should only be
for a short period. Neill LJ rejected this submission.
If there is clear evidence that completion of the sale
of a property ‘could take place in six or nine months
or even a year’, there was no reason why the court could
not come to the conclusion that it was likely that the
arrears would be repaid within a reasonable period. What
is ‘a reasonable period’ is a question for the court
in each individual case. However, in Lloyd there was
insufficient evidence before the judge to show that the
arrears would be paid within a reasonable period. Much
of it was ‘a mere expression of hope’ and accordingly
the building society’s appeal against the suspension
was allowed.
In Bristol and West BS v Ellis (1997) 29
HLR 282; (1996) 73 P&CR 158, CA, the Court of Appeal
confirmed that what is a reasonable period for sale depends
on the individual circumstances of each case, particularly
the extent to which the mortgage and arrears are secured
by the value of the property. In Ellis the Court of Appeal
allowed a lender’s appeal against an order which would
have allowed the borrower three to five years (when her
children would have finished university education) to sell
because there was insufficient evidence that Mrs Ellis
could or would sell the property within that period or
that the proceeds of sale would be sufficient to discharge
the mortgage debt and arrears. The Court stated that the
comments by Neill LJ in National
and Provincial BS v Lloyd [1996] 1 All ER 630 that
sale ‘could take place in six 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’. (See
too Cheltenham and Gloucester BS v Johnson (1996) 28 HLR 885, CA where
Lloyd was followed.)
In
most cases where the security is not at risk, the court
will adjourn or make a suspended order to allow the borrowers
to arrange a sale. It is generally accepted that borrowers
occupying premises achieve a better price on sale than
lenders through ‘forced sales’. For example in Target Home Loans v Clothier [1994] 1 All ER 439; (1993) 25 HLR 56,
CA borrowers paid no mortgage instalments for over 15 months
and when possession proceedings came to court there were
arrears of £46,000. The lenders sought an immediate possession
order, but the district judge adjourned for 56 days under
s36. When the Court of Appeal heard the appeal, there was
a letter from estate agents indicating that an offer of £450,000
for the house had been received. Nolan LJ, after asking
whether there was a prospect of an early sale, stated:
‘If
so, is it better in the interests of all concerned for
that to be effected by [the borrower] and his wife or by
the mortgage company? If the view is that the prospects
of an early sale for the mortgagees as well as for [the
borrower] are best served by deferring an order for possession,
then it seems to me that that is a solid reason for making
such an order...’([1994] 1 All ER at p447)
The
Court of Appeal made a possession order to take effect
in three months.
Even
if the power to suspend execution under Administration
of Justice Act 1970 s36 cannot be exercised because it
is unlikely that the borrower can repay arrears within
a reasonable period, the county court still has a residual
inherent jurisdiction to defer the giving up of possession
in order to enable the lender to sell the property (Cheltenham
and Gloucester plc v Booker (1997) 29 HLR 634; (1997)
73 P&CR 412; [1997] 1 EGLR 142 (1996) Times, November
20, CA.) In such circumstances the court may give conduct
of the sale of premises to the lender while postponing
execution of a warrant for possession until completion
of the sale, thus allowing the borrower to remain in occupation.
There is no reason in principle for the court to accede
to a lender’s insistence upon immediate possession if:
a) possession will only be required
on completion;
b) the presence of the borrowers pending
completion will enhance, or at least not depress, the sale
price;
c) the borrowers will cooperate in the
sale; and
d) they will give possession to the
purchasers on completion.
However
in Booker Millett LJ stated these conditions are seldom
likely to be satisfied and the circumstances in which such
a course would be appropriate are hard to imagine. Such
an order would ‘certainly be a rarity’.
If
a lender does not agree to a borrower selling premises,
the borrower may apply for an order for sale under Law
of Property Act 1925 s91(2). Such an application may be
made in a county court if ‘the amount owing in respect
of the mortgage or charge at the commencement of the proceedings
does not exceed £30,000’ (The High Court and County Courts
Jurisdiction Order 1991, para 2(4)). If the amount owing
is more than £30,000 a section 91 application has to be
made in the High Court. In Cheltenham
and Gloucester BS v Krausz [1997] 1 All ER 21, CA.
the Court of Appeal held that a district judge in the county
court has no jurisdiction to suspend a warrant in these
circumstances. Phillips LJ did not consider ‘that the County
Court, as part of its inherent jurisdiction, can properly
suspend an order or warrant for possession in order to
enable a mortgagor to apply to the High Court for an order
under section 91. It [is] incumbent on the mortgagor to
seek from the High Court any relief which the court is
empowered to give before the warrant takes effect.’ He
noted that s36 makes it clear that parliament did not intend
that the court should have power to curtail mortgagees’ rights
to possession unless the proceeds of sale were likely to
discharge the mortgage debt.
PART
5: Civil Procedure Rules Part 55
New
CPR Part 55 - due to be implemented on 15 October 2001.
14.32
Materials
Civil
Procedure (Amendment) Rules 2001 SI No. 256, Schedule 1.
Practice
direction.
Forms
N206 A Notice of Issue
N206 B Notice of Issue
N5 Claim form for possession of property
N5A Claim form for relief against
forfeiture
N119 Particulars of claim for possession
(rented residential premises)
N7 Notes
for defendant
N7A Notes for defendant
N11R Defence form (rented residential
premises)
N120 Particulars of claim - mortgaged
residential premises
N11M Defence form - mortgaged residential
premises
N5B Claim form - accelerated possession
procedure
N11B Defence to possession claim
- accelerated procedure
N7B Notes for defendant - forfeiture
claim
N121 Particulars of claim - trespassers
