• periodic payments: if the lender wants to discharge all the arrears by periodic payments (instalments), then the court will want to be satisfied that all the arrears will be repaid within a ‘reasonable time’. The starting point for a ‘reasonable period’ will be the remainder of the term of the mortgage – but that is only a starting point, and not an assumption. There are likely to be numerous other factors that are relevant (eg how much can the borrower afford; if there is a temporary problem, then how long is that likely to last; how much remains of the original term; should an accelerated repayment clause be ignored; should arrears be paid off more quickly?). In essence, the court has to consider all these factors – in particular, the borrower’s current and future income. But, the key point to appreciate is that a ‘reasonable period’ can, in this situation, be a relatively long time;
• remortgage or sale: if the borrower cannot pay off the arrears by instalments, the only real prospect of avoiding repossession is to repay the whole loan (with all interest) by selling the property or remortgaging it. In that case, the ‘reasonable period’ will not be the term of the mortgage and the above logic does not apply. In Target Homes [1994] a reasonable period was said to be three months, but in National & Provincial [1996] it was said that ‘if there were… clear evidence that the completion of the sale of the property… could take place in six or nine months, or even in a year’, then that could be a ‘reasonable period’. However, that one-year period is very much seen as a long stop and in Ellis [1996] it was held to be the maximum possible. Instead, the court regards a few months as being more appropriate in most cases (with immediate possession being granted if there is likely to be considerable delay, or alternatively if there would be negative equity). To make matters worse, in Steele [1996] it was said that an order would not be granted ‘unless there is firm evidence that a particular sale is about to be completed’. Needless to say, mortgagee representatives will often cite Steele for the proposition that ‘about to be completed’ means contracts must have already been exchanged, with completion to take place within a few weeks. However, that is not what the case actually decided, and it merely requires that there be a particular purchaser on foot, without there necessarily having to be a sale on the horizon.

What will be a ‘reasonable period’ will depend on the facts of the individual case. The real point to appreciate, however, is that different principles are applied when dealing with ongoing instalments than when dealing with a remortgage (or sale). For a recommended article on this topic, see [2006] SJ 650.  © Practical Lawyer