Mortgagee's remedies and the protection of mortgagors

When a mortgagor defaults, the mortgagee has four principal remedies: possession of the property, sale, foreclosure, and the appointment of a receiver. Each remedy has its own procedural requirements, doctrinal limits, and protections for the mortgagor. The doctrinal landscape combines common-law remedies (developed since the seventeenth century) with statutory protections (Administration of Justice Act 1970 s 36; Consumer Credit Act 1974; Financial Services and Markets Act 2000 / FCA MCOB) that have substantially modernised the regime.

This week studies the four remedies and the protections that constrain them. Possession: the mortgagee''s right to take possession of the property, subject to s 36 AJA 1970 protection for residential mortgages. Sale: the power of sale under s 101 LPA 1925 and the duty to obtain the best price reasonably obtainable. Foreclosure: the equitable remedy that extinguishes the mortgagor''s equity of redemption — now rare in practice. Receiver: the appointment of a receiver under s 109 LPA 1925 to manage the property pending sale.

The topic builds on W13 (creation and priorities of mortgages) and connects to the law of consumer protection (FSMA 2000 regulation) and to ECHR Article 8 / Article 1 of Protocol 1 (the human-rights overlay).

The mortgagee''s remedies have been part of English mortgage law since the medieval period. The original remedy was foreclosure: the lender could obtain absolute title to the land on default. Equity developed the equity of redemption to protect the mortgagor; the courts of equity then developed foreclosure procedures (Bills of Foreclosure) that allowed the mortgagee to extinguish the equity of redemption while preserving its protective function until the deadline.

The Conveyancing Act 1881 and the Law of Property Act 1925 codified the modern statutory remedies. Section 101 of the 1925 Act consolidated the power of sale; section 109 codified the appointment of a receiver. The Administration of Justice Act 1970 s 36 introduced the modern judicial protection for mortgagors in possession proceedings: the court may adjourn proceedings or postpone delivery of possession where the mortgagor is likely to be able to pay sums due within a reasonable period.

The post-2008 financial crisis produced significant regulatory tightening (FCA MCOB 2014 reforms; mortgage-affordability rules), and the post-2010 case-law has applied human-rights principles to possession proceedings (Manchester City Council v Pinnock [2010] UKSC 45 — though this concerned local-authority tenancies; the position for private mortgages remains broadly similar).

(1) Possession. The mortgagee has the right to take possession from the moment of execution of the mortgage (Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317), but the right is rarely exercised without default. Section 36 of the Administration of Justice Act 1970 permits the court to adjourn possession proceedings or postpone delivery where the mortgagor is likely to be able to pay sums due within a reasonable period. Section 8 of the Administration of Justice Act 1973 extends this to instalment-mortgages and similar arrangements.

Five graded practice questions in the panel below.

See the Further Reading panel for Megarry and Wade, Gray and Gray, the post-Norgan case-law, and the FCA MCOB analysis.