Painsmith Landlord and Tenant Blog

A practitioners landlord and tenant law blog from PainSmith Solicitors

Property Owners Beware of Fraudulent Transfers

If you own a property that is registered and do not live in it yourself, you could be an easy target for fraudsters.

One type of fraud that is not new but seems to be becoming more common involves fraudsters transferring a property into their own name with HM Land Registry and then securing a mortgage against it. Having converted the equity in the owner’s property into cash, the fraudster disappears, defaults on the mortgage and leaves the true owner to deal with the consequences.

This is what happened in the case of Barclays Bank plc v Guy 2008. When Mr Guy found out about the fraud on his property, he applied to the Court to rectify the register to show that he was the owner and not the fraudster. The Court found that Mr Guy was entitled to this but he was not entitled to have the mortgage charge removed. The Court found that the mortgage remained valid and so the mortgage company was entitled to seek an order for sale to recover the sum it had lent to the fraudster if they were not paid.

How can this be right? The Court referred to Section 58 of the Land Registration Act 2002 which provides that, if a person is listed as the proprietor of a legal estate with HM Land Registry, that is conclusive evidence of ownership. The Court accordingly found that, the transfer into the fraudster’s name was a mistake and so rectifiable but the mortgage charge was not a mistake as the mortgage company was entitled to rely on the information on the Land Register as conclusive evidence of ownership. The Charge was therefore not rectifiable. This means too that if the fraudster sells the property to an innocent third party, that transaction would be binding.

So, how do you minimise the risk of this happening to you? If you do not live at your property personally you must make sure that you amend the Register to show that (by using a Unilateral Notice) and provide your current address for correspondence. Updating your address with HM Land Registry is free – all you need to do is complete a form and send it to a freepost address with evidence of your identity.

Filed under: England & Wales, , ,

Mortgage Arrears

The arrears on Jayashankar’s mortgage account were in the region of £14,000 and so Lloyds TSB obtained possession.

Jayashankar applied to suspend the warrant for possession but the application was refused because the court was not satisfied that Jayashankar had the financial means to pay the arrears.

The question for the appeal court was whether they had any jurisdiction to entertain an appeal from a refusal to stay a warrant once the warrant has been executed, that is once Lloyds TSB has obtained possession.

Section 36 of the Administration of Justice Act 1970 states:

“36: Additional Powers of the Court in action by mortgagee for possession of a dwelling house
(1) Where the mortgagee under a mortgage of land which consists of or includes a dwelling house brings an action in which he claims possession of the mortgaged property, not being an action for foreclosure in which a claim for possession of the mortgaged property is also made, the court may exercise any of the powers conferred on it by subsection (2) below if it appears to the court that in the event of its exercising the power the mortgagor is likely to be able within a reasonable period to pay any sums due under the mortgage or to remedy a default consisting of a breach of any other obligation arising under or by virtue of the mortgage.
(2) The court –
(a) may adjourn the proceedings, or
(b) on giving judgment or making an order for delivery of possession of the mortgaged property. or at any time before the execution of such judgment or order (my emphasis), may –
(i) stay or suspend execution of the judgment or order
(ii) postpone the date for delivery of possession’
for such period or periods as the court thinks reasonable.

Therefore the courts power under the above section to adjourn mortgage possession proceedings, stay or suspend execution or postpone the date for delivery of possession, comes to an end once a warrant has been executed.

However counsel for Jayashankar stated that CPR 52 allows a judge to suspend the warrant under section 36 on the basis that at the hearing of the appeal from the District Judge the Circuit Judge could exercise all the powers of the lower court and could make any order that the District Judge could have made, that is to suspend the warrant. However, the court was not persuaded and insisted that legal certainty should prevail. Permission to appeal was granted but Jayashankar’s appeal was dismissed.

It is possible that the court may have reached a different decision if the warrant had not been executed but until then, this is the binding precedent.

Filed under: England & Wales, FLW Article, , ,

Mortgage Protection Notice Requirements Set Out

Further to our previous post on the bringing into force of the Mortgage Repossessions (Protection of Tenants etc) Act 2010 the Statutory Instrument setting out the notifications required to be given to possible tenants or occupiers of the property and the form of those notices.

The Dwelling Houses (Execution of Possession Orders by Mortgagees) Regulations 2010 requires that the mortgagee gives notice t the time they apply for a Warrant of Execution to instruct the County Court bailiff to enforce a possession order. When doing so they must also send a notice to the property by first class post or by hand delivery or personal service addressed either to the tenant in their own name or to “The Tenant or Occupier”. The form of this notice is set out in detail and it specifies all the details of the Court who will be dealing with the matter and the details of the mortgagee who is seeking possession. It also spells out the tenant’s new rights under the Act to ask for a stay of 2 months in the execution of the warrant and the process by which this is to be done.

This is a welcome development in ensuring the increased protection of tenants. It is a shame that it has taken so long to implement after so many tenants have suffered short notice evictions due to landlords not seeking mortgagee consent for their letting and then failing to pay the mortgage.

How much use a two month delay will really be to tenants is not clear but it is certainly better than nothing.

Filed under: England & Wales, , ,

Tenant Mortgage Protection Legislation Coming into Force

We have previously posted on the Mortgage Repossessions (Protection of Tenants etc) Act 2010 which was passed through Parliament in the sweeping up process immediately prior to the election. There was some doubt as to whether the new government would actually bring the Act into force but it seems that they have decided to do so.

Briefly, the new Act allows for tenants whose tenancies were not authorised by a mortgage lender to request a 2 month stay on an order for possession or the execution of a warrant for possession by the mortgagee. If the mortgagee will not grant such a stay in writing then the tenant has the power to apply to the Court for the same stay.

The Court is not obliged to grant the stay and will consider the cirumstances of each case and, in particular, will look at the conduct of the tenant and any breaches of the tenancy agreement committed by the tenant. It can also require the tenant to pay the rent direct to the mortgagee during the period of the stay.

The Act also creates a power for the government to set a standard form of notice which the mortgagee must give at the property and they cannot obtain possession until that notice has been given.

The commencement order which has been passed allows for the regulations to enable the notice process to be made immediately and brings the rest of the Act into force on 1 October 2010.

Filed under: England & Wales,

Tenant Protection On Mortgage Repossession

As part of the sweeping up process this week in preparation for the dissolution of Parliament on 12 April a number of bills have been pushed through. One of these is the Mortgage Repossessions (Protection of Tenants etc) Act 2010 which received its royal assent on 9 April.

This Act is intended to provide protection for tenants who find themselves being evicted by a landlord’s mortgagee where the landlord has failed to get proper consent for the let. Where a landlord has obtained consent then the tenant will have a right to remain in the property until the end of the tenancy unless the mortgagee can obtain possession using Ground 2 under the Housing Act 1988. Where a landlord has failed to obtain consent the tenant has no rights at all and the mortgagee is not required to honour the tenancy agreement.

The Act gives the Court the power to suspend an order for possession by up to two months. The Court can only exercise this power prior to the Bailiff actually executing the order for possession. The tenant must apply to the Court for a suspension and they will also need to show that they have previously asked the mortgagee for a similar suspension and the mortgagee has refused to allow it.

The suspension power can only be exercised once in relation to a tenancy so tenants cannot keep making further applications. The protection of the new act only applies to tenancies under the Housing Act 1988 or Rent act 1977. Common law tenants do not have any protection.

This Act is not actually in force yet as a commencement order needs to be made. This will presumably not happen at this stage and it will be for any new government coming into power after the election to decide whether they wish to bring the provisions of the Act into force.

Filed under: England & Wales,

Mortgage Repossession Protocol Changing Behaviour

It seems that the new mortgage repossession pre-action protocol (which we talked about here) is having an effect on mortgagee’s behaviour with a dramatic drop in repossession actions.

Whether the protocol has been responsible for this or whether mortgagees are less inclined to take possession due to the difficulty in recovering their investment by selling the property is a moot point. The key issue from the point of view of the landlord and tenant professional is the increased willingness of mortgagees to appoint receivers and reach sensible commercial arrangements.

From the tenant’s point of view this means that they may be able to remain in a property they have rented by paying rent to a receiver appointed by the mortgagee. However, it should be remembered that the receiver is frequently not accepting the landlord’s responsibilities (just the money!) and so it will still be necessary to look to the landlord to repair the property.

For buy-to-let landlords the new willingness of mortgagees to reach sensible commercial arrangements coupled with a reduction in interest rates may be sufficient to allow them to weather the downturn. However, it is notable that many mortgagees are refusing to remortgage with buy-to-let landlords so this may not be sufficient.

Whether this new attitude from mortgagees will continue when they can more easily sell property remains to be seen but the current change in attitude will benefit landlords who make an effort to negotiate with their mortgagee if things are difficult.

Filed under: Uncategorized, , ,

Mortgage Possession and Tenants

We have previously discussed the problems experienced by tenants when a mortgagee seeks to repossess the property to exercise its power of sale. In a recent alteration to the Civil Procedure Rules some of the issues were addressed by forcing mortgagees to give more notice to occupiers of properties. We reported on this here.

However, providing more notice does nothing to protect tenants whose landlord has not bothered to seek the consent of their mortgagee to the letting. Where the landlord has sought consent the mortgagee is obliged to see out the term of the letting. Non-authorised tenants are not so protected and get short shrift from mortgagees and the Courts. Of course, tenants should always insist on seeing consent to their letting from the mortgagee but this will not help those who find themselves under threat of eviction today.

The government has now produced a consultation on further changes to the process of mortgage eviction in order to help protect unauthorised tenants.

Apparently the government are working with lenders to remind them that they are obliged to see out tenancies which they have consented to and to encourage them to accept unauthorised tenants where possible. We have not seen a great deal of evidence that this engagement is actually working with the worst offenders being Northern Rock and other lenders taken into government control!

The other intended improvement is to make notification to tenants of problems more effective by requiring the letter that is currently addressed to “The Occupiers’ to make specific mention of tenants on its face. This is to come into force in October 2009.

Turning back to unauthorised tenants the consultation intends to achieve a balance between reasonable notice to the tenant and the right of the mortgagee to sell the property with vacant possession. The aim is to allow the tenant two months notice to vacate.

There are a series of different proposals for how this might be achieved ranging from no change through to radical legislative amendment.

There are some real problems with this consultation. For on the government appears to have absolutely no idea how many tenants are affected. They estimate that there are approximately 360,000 properties with unauthorised tenancies but this figure is plus or minus 120,000 which shows the level of uncertainty.

In fact, it is not clear precisely how the government will deal with the situation as a change to assist unauthorised tenants would, in practice, have to be applied in all circumstances where mortgage possession is considered, adding considerably to the cost of mortgage repossession for lenders at a time when they can ill-afford it.

Probably the most practical option is to imporve notification and allow the tenants to attend Court to seek a stay of possession before the judge. Obviously this has the same disadvantage as the current system in that many tenants do not have the knowledge or the desire to attend a Court hearing. Therefore any change is going to have to make the process as painless as possible for those who are, after all, innocent parties. The best option is probably a form sent to the tenant by the lender which permits them to make written representation to the Court.

The consultation is open for responses until 14 October 2009.

Filed under: Uncategorized, ,

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