10 Years+ to apply for possession order. What is Bank of Scotland playing at?

Briefing Document Legal Consequences of Delay by a Mortgagee in Obtaining or Enforcing a Possession Order

1. Introduction The increasing number of cases appearing before the Chancery Court in Northern Ireland, particularly those involving the Bank of Scotland, where delays of up to 10 years in applying for possession orders are occurring, raises significant legal and procedural concerns for both mortgagees and borrowers. Additionally, mortgagees often fail to engage meaningfully with mortgagors even at a late stage, constituting a breach of the Pre-Action Protocol for Possession Claims. Furthermore, reports indicate that a certain Chancery Master has summarily refused applications for stays of enforcement purely on the grounds of long delays in mortgage payments, disregarding case law and fundamental consumer rights to a fair hearing. This document examines the legal consequences in Northern Ireland when a mortgagee either:

• Delays obtaining a possession order for over six years after the mortgage has not been paid, or
• Obtains a possession order but does not enforce it within six years.

The analysis is primarily based on Northern Ireland legislation and case law, supplemented by relevant Great Britain jurisprudence where common principles apply.

2. Statutory Framework

(a) Limitation Act 1980 Under Section 20 of the Limitation Act 1980, which applies in Northern Ireland, actions to recover land (including mortgaged property) must be brought within twelve years of the right of action accruing. However, an action for arrears of interest is subject to a six-year limitation period under Section 20(5).

(b) Administration of Justice Act 1970 The Administration of Justice Act 1970, particularly Section 36, provides courts with discretionary powers to postpone possession orders in certain circumstances, typically when the borrower can demonstrate an ability to repay.

(c) Order 88, Rules of the Court of Judicature (NI) 1980 This Order governs possession proceedings in the High Court and details procedural requirements.

3. Consequences of Delay in Obtaining a Possession Order

If a mortgagee does not apply for a possession order within 12 years of the borrower defaulting, the mortgagee may be statute-barred from recovering possession under Section 15 of the Limitation Act 1980.

However, where the mortgagee seeks only arrears and does not claim possession, they must initiate proceedings within six years under Section 20(5) of the Limitation Act. If they fail to do so, they lose the right to recover interest payments in arrears but may still claim possession within 12 years.

Relevant Case Law:

• RBS v. Walker [1999] 1 WLR 1119 – "A mortgagee must bring an action for arrears within six years or risk losing the right to recover interest payments."
• Palk v. Mortgage Services Funding [1993] Ch 330 – "The mortgagee has a duty to act fairly and reasonably when seeking possession, considering the borrower's position."
• Clydesdale Financial Services Ltd v. Smoker [2008] NICh 7 – "A lender who delays unduly in asserting rights may face difficulties in enforcement where it causes unfair prejudice to the borrower."

4. Consequences of Delay in Enforcing a Possession Order

Where a possession order has been granted but remains unenforced for more than six years, the mortgagee faces procedural barriers under Order 46, Rule 2 of the Rules of the Court of Judicature (NI) 1980, which requires the court’s permission to enforce an order after six years.

Key Considerations:

• The mortgagee must show valid reasons for the delay to obtain leave for enforcement.
• The borrower may argue that prolonged inaction creates an unfair detriment and seek to have the order set aside.
• Courts may refuse enforcement if the mortgagee’s delay is deemed unreasonable or prejudicial to the borrower.

5. Breach of Pre-Action Protocol

The Pre-Action Protocol for Possession Claims requires mortgagees to engage with mortgagors at an early stage to explore alternative solutions before commencing possession proceedings. Failure to comply with the protocol may lead to adverse cost consequences or even dismissal of the possession claim.

Relevant Case Law:

• Bank of Scotland v. Alexander [2017] NICh 14 – "Failure to engage meaningfully with the mortgagor in line with the pre-action protocol may lead to adjournments or refusals of possession orders."
• HSBC Bank v. Brown [2019] NIQB 32 – "A mortgagee that does not attempt reasonable engagement with the borrower prior to proceedings risks an unfavorable cost order."
• Santander v. O’Neill [2021] NICh 3 – "The court has discretion to stay proceedings where the lender has not adhered to pre-action requirements."

6. Mortgagee Continuing Enforcement During Negotiations

Where a mortgagee continues with enforcement while the mortgagor is actively attempting to negotiate a settlement, courts may consider whether the mortgagee’s actions are unreasonable or unfairly prejudicial. Courts have discretion to stay proceedings where a borrower is making genuine attempts to restructure the mortgage or negotiate a payment plan.

Relevant Case Law:

• Bank of Ireland v. Keehan [2015] NICh 8 – "Where a borrower demonstrates a sincere effort to negotiate, courts may intervene if the mortgagee acts disproportionately by continuing enforcement."
• Birmingham Midshires v. Sabherwal [2000] 80 P & CR 256 – "A mortgagee should not act oppressively by pressing for possession while negotiations are ongoing."
• Northern Rock v. Spicer [2008] NIQB 36 – "Courts retain discretion to suspend possession orders if active negotiations could lead to a viable resolution."

7. FCA Rules and Regulatory Considerations

The Financial Conduct Authority (FCA) sets out conduct rules for mortgage lenders, emphasizing fair treatment of customers. MCOB (Mortgage Conduct of Business) 13 provides relevant guidance:

• Lenders must treat customers fairly when enforcing possession (MCOB 13.3.1R).
• Firms should only seek possession as a last resort and explore alternative arrangements where feasible (MCOB 13.3.2G).
• Unfair treatment of borrowers due to excessive delay could be challenged under the FCA’s Principle 6 (Treating Customers Fairly).

Regulatory breaches may lead to FCA enforcement actions, fines, or compensation claims by affected borrowers.

8. Conclusion Solicitors and barristers need to carefully consider these issues rather than simply asserting that a borrower has no defense due to prolonged non-payment. A more nuanced approach is required to ensure that both legal principles and fairness are upheld in possession proceedings.