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Prior to the introduction of Human Rights Act 1998, it was widely accepted that s101 enabled a mortgagee to exercise a power of sale, without first seeking a court order. But, has HRA 1998 changed that position?
The High Court has held that it has not, and that s101 still prevails (ie a mortgagee exercising a power of sale is not required to get a court order permitting him to do so). This was confirmed in a recent case where borrowers admitted they were in arrears, but argued that the statutory right (s101) was incompatible with the rights of a residential mortgager under the European Convention. The court disagreed:
To succeed, the borrowers would have to show that they had been ‘deprived of their possessions’, in breach of the Convention. This had to be as a result of state intervention, rather than purely as the result of the terms of their mortgage. In the view of the court, the borrowers had lost their rights as a result of contractual terms (derived from the mortgage, and not from legislation). Thus, possession was lost without there being any state intervention.
Even if the mortgagee had sold purely in exercise of its statutory (s101) powers, there would have been no ‘deprivation of possessions’. This is because s101 merely serves, rather than overrides, the mortgage agreement between the parties and does not amount to state intervention into private rights.
Even if there had been a ‘deprivation of possession’, this would have been justified in the public interest.
This case attracted much publicity. As a result, the CML has published
a voluntary statement saying that CML members will always obtain a
court order for possession before seeking to sell a mortgaged property where the borrower is in default, or appointing a receiver to sell a residential property. Note that this only applies to owner-occupied residential properties (ie it does not apply to commercial transactions such as buy-to-let, business loans secured against residential property, or bridging loans; nor does it apply to vacant or abandoned properties, or sales that take place with the full informed consent of the borrower). See commentary on Horsham v Clark [2008] EWHC 2327 (Ch). Source: www.practicallaw.com (subscription service) in [2009] NLJ 21. © Practical Lawyer
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