Introduction
This essay critically examines the extent to which the common law and equity provide viable protections for mortgagors facing possession claims or the exercise of a mortgagee’s power of sale. It also evaluates the utility of section 36 of the Administration of Justice Act 1970 (AJA 1970) in offering relief to mortgagors in default. The statement under discussion suggests that these legal mechanisms are largely redundant, leaving mortgagors with little option but to surrender. Through a detailed analysis of relevant legal principles, case law, and statutory provisions, this essay argues that while the protections offered by common law, equity, and section 36 AJA 1970 are indeed limited in certain contexts, they are not entirely without value. However, their practical effectiveness is often constrained, particularly for mortgagors in severe financial distress. The discussion will be structured into three main sections: the role of common law and equity in defending mortgagors, the limitations of equitable principles in the context of a mortgagee’s power of sale, and the scope and restrictions of section 36 AJA 1970.
The Role of Common Law and Equity in Defending Mortgagors
At common law, the relationship between a mortgagor and mortgagee is fundamentally contractual. Upon default, the mortgagee has a legal right to seek possession of the mortgaged property or to exercise a power of sale as stipulated in the mortgage agreement. Historically, common law offered little in the way of defence for the mortgagor once a breach of repayment terms occurred. As noted by Gray and Gray (2011), the strict application of contractual obligations at common law often left mortgagors vulnerable to immediate possession claims, with courts prioritising the legal rights of the lender over the personal circumstances of the borrower.
Equity, however, emerged as a mitigating force to temper the harshness of common law. The equitable right of redemption, for instance, allows a mortgagor to redeem the property even after default by repaying the outstanding debt, interest, and costs. This principle, established in cases such as Thornborough v Baker (1675), reflects equity’s concern with fairness (Cousins, 2010). Nevertheless, the practical utility of this right is often limited. If a mortgagor lacks the financial means to redeem the mortgage, as is frequently the case in possession proceedings, this equitable remedy becomes theoretical rather than actionable. Furthermore, equity will not typically intervene to prevent possession if the mortgagee’s legal rights are clear and the default is undisputed, as confirmed in Ropaigealach v Barclays Bank Plc [2000] QB 263, where the court upheld the mortgagee’s right to possession absent exceptional circumstances.
Thus, while equity provides some theoretical protection, its application as a defence to possession claims is arguably of limited effect for many mortgagors. The reliance on financial capacity to invoke such remedies often renders these mechanisms inaccessible to those most in need.
Equitable Limitations in the Context of Mortgagee’s Power of Sale
When a mortgagee exercises its power of sale under section 101 of the Law of Property Act 1925 (LPA 1925), equity imposes certain duties to ensure fairness. Notably, the mortgagee must act in good faith and take reasonable steps to obtain a proper price for the property, as established in *Cuckmere Brick Co Ltd v Mutual Finance Ltd* [1971] Ch 949. This duty aims to protect the mortgagor from undue loss if the property is sold at an undervalue. However, the scope of this obligation is narrow. The mortgagee is not required to delay the sale to achieve a higher price or to consider the mortgagor’s personal circumstances, as reiterated in *Silven Properties Ltd v Royal Bank of Scotland Plc* [2003] EWCA Civ 1409. Consequently, the equitable oversight of the power of sale offers limited practical assistance to a mortgagor facing financial hardship.
Moreover, once the power of sale is exercised, the mortgagor’s equity of redemption is extinguished, leaving no further recourse to reclaim the property. This was affirmed in Horsham Properties Group Ltd v Clark [2008] EWHC 2327 (Ch), where the court clarified that the sale transfers legal title, effectively terminating the mortgagor’s interest. Therefore, while equity imposes some constraints on the mortgagee, these are often insufficient to prevent significant loss to the mortgagor, supporting the view that equitable remedies in this context are largely redundant.
The Scope and Limitations of Section 36 of the AJA 1970
Section 36 of the Administration of Justice Act 1970 provides courts with discretion to adjourn possession proceedings or postpone an order for possession if it appears that the mortgagor is likely to remedy the default within a reasonable period. This statutory protection, extended to include certain leasehold properties by section 8 of the Administration of Justice Act 1973, offers a potential lifeline to mortgagors facing repossession. For instance, in *Cheltenham & Gloucester Building Society v Norgan* [1996] 1 WLR 343, the court held that a “reasonable period” could extend over the remaining term of the mortgage if the mortgagor could demonstrate a viable repayment plan.
However, the utility of section 36 is constrained by several factors. Firstly, the court’s discretion is contingent on the mortgagor’s ability to pay current instalments alongside arrears, a condition that many in financial distress cannot meet. Secondly, the provision applies only to possession proceedings and not to out-of-court sales under the mortgagee’s power of sale, as clarified in Ropaigealach v Barclays Bank Plc [2000] QB 263. This limitation significantly undermines the statute’s protective reach, particularly in cases where mortgagees bypass court proceedings altogether. Therefore, while section 36 offers some relief, its scope is indeed limited, often leaving mortgagors with little practical assistance in the face of possession or sale.
Conclusion
In conclusion, the protections afforded by common law, equity, and section 36 of the AJA 1970 to mortgagors facing possession claims or the exercise of a mortgagee’s power of sale are generally limited in their practical effect. Common law prioritises the contractual rights of the mortgagee, offering scant defence to the mortgagor in default. Equity, while providing theoretical remedies such as the right of redemption and oversight of the power of sale, often fails to assist those without the financial means to leverage these protections. Similarly, section 36 AJA 1970, though a valuable statutory tool in some cases, is restricted by stringent conditions and its inapplicability to out-of-court sales. Consequently, the assertion that mortgagors in such positions might as well surrender holds some weight, given the significant barriers to accessing meaningful relief. Nevertheless, these mechanisms are not entirely redundant; they retain relevance in specific circumstances where financial recovery is feasible. The implications of this analysis underscore the need for broader legislative reform to enhance protections for vulnerable mortgagors, ensuring that legal remedies are not merely theoretical but practically accessible to those in need.
References
- Cousins, E. (2010) Modern Land Law. 5th edn. Oxford University Press.
- Gray, K. and Gray, S. F. (2011) Elements of Land Law. 5th edn. Oxford University Press.
