Can a mortgagee issue a claim for possession where there is no outstanding capital balance only arrears of interest?

Can a mortgagee issue a claim for possession where there is no outstanding capital balance only arrears of interest?

This Q&A assumes that:

• the property is residential

• the mortgage is not a consumer credit agreement

Subject to the terms of the mortgage, a legal mortgagee has a right to possession of property even if the mortgagor is not in default, and (in principle) without a court order although this is rare in practice. See: Ropaigealach v Barclays Bank plc.

In practice, it is common for the mortgage to provide that the mortgagee will not be entitled to possession until there is default following a demand (which may relate to interest as well as capital). The terms of the mortgage must therefore be checked carefully.

The right to possession is limited by section 36 of the Administration of Justice Act 1970 where the mortgagee seeks an order for possession. It enables the court to adjourn proceedings, delay the execution of a judgment or postpone the date for delivery of possession of a property if it is satisfied that the mortgagor will be able to repay any sums due under the mortgage, or rectify any default, within a reasonable period. For details of the factors relevant to the exercise of the court’s power, see Commentary: Exercise of the statutory powers: whether mortgagor likely to be able to pay within a reasonable period: Fisher and Lightwood's Law of Mortgage [29.44].

Although a claim for possession may be issued, such claims are currently stayed by virtue of CPR PD 51Z. See Practice Note: Coronavirus (COVID-19)—implications for property, in particular section: Coronavirus Act 2020—restrictions on forfeiture, protection from eviction etc. Some mortgage lenders have also agreed to payment holidays and a moratorium on possession action, see Practice Note: Coronavirus (COVID-19)—implications for property, in particular section: Mortgage payment holidays.

For further information, see:

• Commentary:

◦ Mortgagee's right to possession of land: Fisher and Lightwood's Law of Mortgage [29.1]

◦ Introduction to issues of enforcement of security: Claims to the Possession of Land [F1.9]

• Practice Notes:

◦ Mortgagee in possession

◦ Mortgagee’s 'self-help' power of sale

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