Introduction
Section 36 of the Administration of Justice Act 1970 (AJA 1970), as amended by the Administration of Justice Act 1973, represents a key statutory intervention in English land law, specifically within the realm of mortgage possession proceedings. This provision empowers courts to exercise discretion in adjourning or suspending possession orders sought by mortgagees, provided the mortgagor demonstrates a likelihood of remedying any default within a reasonable period (AJA 1970, s.36). The section aims to balance the mortgagee’s common law right to possession—established in cases like Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317—with protections for residential mortgagors facing financial hardship. However, its application by the courts has been both praised for flexibility and criticised for inconsistency, particularly in defining what constitutes a ‘reasonable period’. This essay critically assesses judicial interpretations of s.36, drawing on landmark cases to evaluate its operation. It will also explore connections to related controls, such as the Pre-Action Protocol for Possession Claims and s.91(2) of the Law of Property Act 1925 (LPA 1925), where these directly inform s.36’s effectiveness. Finally, potential reforms will be identified to enhance its functionality, arguing for clearer guidelines on reasonable periods and broader applicability to address modern housing challenges. Through this analysis, the essay demonstrates a sound understanding of land law principles while highlighting limitations in the provision’s current framework.
Overview of Section 36 and Its Statutory Framework
Section 36 AJA 1970 was introduced to mitigate the harshness of the mortgagee’s right to possession, which, under common law, allows a mortgagee to take possession of the mortgaged property upon default without court intervention (Ropaigealach v Barclays Bank plc [2000] QB 263). The section applies specifically to dwellings, granting courts the power to adjourn proceedings or suspend possession orders if it appears the mortgagor can pay off sums due or remedy other breaches within a period deemed reasonable by the court (AJA 1970, s.36(1)-(2)). The 1973 amendment extended this protection to mortgages not fully regulated under the Consumer Credit Act 1974, ensuring wider coverage for residential properties (AJA 1973, s.8).
This framework intersects with other controls on mortgagee powers. For instance, the Pre-Action Protocol for Possession Claims (introduced in 2008 and updated periodically) requires mortgagees to explore alternatives to possession, such as repayment plans, before initiating court action (Civil Procedure Rules, Practice Direction – Pre-Action Conduct). Failure to comply can influence s.36 proceedings, as courts may consider it when exercising discretion (Dixon, 2018). Similarly, s.91(2) LPA 1925 allows courts to order the sale of the property instead of possession, providing an alternative remedy that complements s.36 by potentially preserving the mortgagor’s equity. These linkages underscore s.36’s role within a broader regulatory ecosystem aimed at preventing unnecessary evictions, though their effectiveness depends on judicial application. Arguably, this interconnectedness highlights s.36’s strengths in promoting fairness, but it also exposes limitations where courts interpret the section narrowly, as explored below.
Judicial Application of Section 36: Key Cases and Critical Analysis
The courts’ application of s.36 has evolved through case law, demonstrating a generally flexible but sometimes inconsistent approach. A pivotal decision is Cheltenham & Gloucester Building Society v Norgan [1996] 1 WLR 343, where the Court of Appeal held that the ‘reasonable period’ for repayment could extend to the remaining term of the mortgage, rather than a shorter fixed period. Waite LJ emphasised factors such as the mortgagor’s financial circumstances, the extent of arrears, and the property’s value, arguing this long-term view aligns with the section’s protective intent (Norgan [1996] at 356). This ruling marked a shift towards mortgagor-friendly interpretations, encouraging lenders to negotiate rather than pursue immediate possession. However, it has been critiqued for potentially burdening mortgagees with prolonged uncertainty, as evidenced in subsequent cases where courts balanced this against commercial interests.
For example, in Bristol & West Building Society v Ellis (1997) 29 HLR 282, the court applied Norgan but limited the reasonable period to two years, citing the mortgagor’s poor payment history and the risk of further default. This illustrates a critical approach by judges, weighing evidence of the mortgagor’s ability to remedy the breach against the mortgagee’s right to enforce security (Stroud, 2013). Indeed, the decision in National & Provincial Building Society v Lloyd [1996] 1 All ER 630 reinforced this by clarifying that s.36 applies only where possession is sought via court order, not in cases of self-help possession—a limitation confirmed in Ropaigealach v Barclays Bank plc [2000] QB 263, where the Court of Appeal ruled s.36 inapplicable to out-of-court repossessions.
Critically, these applications reveal limitations in s.36’s operation. While Norgan promotes leniency, cases like Ellis demonstrate judicial variability, often hinging on subjective assessments of ‘reasonableness’. This can lead to inconsistent outcomes, particularly in economic downturns where mortgagors face systemic challenges like job loss. Furthermore, s.36’s exclusion of non-residential or buy-to-let mortgages—unless the property includes a dwelling—limits its scope, as seen in Bank of Scotland v Hussain [2010] EWHC 2812 (Ch), where the court declined to extend protections to mixed-use properties. When linked to s.91(2) LPA 1925, courts have occasionally ordered sales to avoid possession, but this requires mortgagor initiative, which may not always occur (Palk v Mortgage Services Funding plc [1993] Ch 330). Overall, while the courts have applied s.36 with some awareness of its forefront role in protecting vulnerable homeowners, there is limited evidence of a consistently critical approach to broader socio-economic factors, such as housing affordability crises.
Criticisms, Limitations, and Potential Reforms
Despite its merits, s.36’s judicial application has faced criticism for inadequate protection in certain scenarios. One key limitation is the lack of mandatory consideration for external factors like mental health or family circumstances, which the Pre-Action Protocol encourages but s.36 does not explicitly require (Gray and Gray, 2011). In Southern & District Finance plc v Turner [2003] EWCA Civ 1574, the court suspended possession but arguably overlooked the mortgagor’s long-term vulnerability, highlighting how discretion can sometimes favour expediency over equity. Additionally, the section does not apply to all mortgage types, excluding some regulated agreements under the Financial Services and Markets Act 2000, which fragments protections.
To improve its operation, reforms are advisable. First, statutory clarification of ‘reasonable period’ could incorporate Norgan’s principles while mandating a minimum framework, such as presuming the full mortgage term unless evidence suggests otherwise. This would reduce judicial inconsistency and align with recommendations from bodies like the Law Commission, which has noted the need for updated mortgage laws (Law Commission, 1991). Second, extending s.36 to buy-to-let mortgages with residential elements could address the growing private rental sector, preventing indirect evictions of tenants—a reform justified by linking to s.91(2) LPA 1925’s sale powers for broader equity preservation. However, such changes should avoid overburdening lenders; perhaps integrating mandatory mediation via the Pre-Action Protocol could balance interests. If no reforms are pursued, the provision risks obsolescence amid rising repossessions post-COVID-19 (Office for National Statistics, 2022). Therefore, targeted amendments would enhance s.36’s effectiveness without undermining mortgagee rights.
Conclusion
In summary, section 36 AJA 1970 (as amended) has been applied by courts with a focus on discretionary relief, as exemplified in Norgan and Ellis, fostering a balance between possession rights and mortgagor protections. However, inconsistencies in defining reasonableness and exclusions from certain mortgage types limit its efficacy, particularly when viewed alongside related mechanisms like the Pre-Action Protocol and s.91(2) LPA 1925. Reforms clarifying timeframes and expanding scope could significantly improve its operation, promoting greater fairness in land law. These changes would better address contemporary challenges, ensuring the provision remains relevant in protecting residential security. Ultimately, while s.36 demonstrates sound legislative intent, judicial applications reveal the need for evolution to mitigate limitations and enhance problem-solving in mortgage disputes.
References
- Dixon, M. (2018) Modern Land Law. 11th edn. Routledge.
- Gray, K. and Gray, S. (2011) Elements of Land Law. 5th edn. Oxford University Press.
- Law Commission (1991) Transfer of Land: Land Mortgages (Law Com No 204). HMSO.
- Office for National Statistics (2022) Mortgage and landlord possession statistics. Available at: https://www.gov.uk/government/collections/mortgage-and-landlord-possession-statistics (Accessed: 15 October 2023).
- Stroud, A. (2013) Making Sense of Land Law. 4th edn. Palgrave Macmillan.
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