Response - MOJ: Power of Sale and Residential Property

By: Nicola Hughes  Published: March 2010


The power of sale without court order – albeit rarely used in respect of owner-occupied property – deprives the borrower of the right to have their case heard at court and to put forward proposals for payment of arrears which may enable them to preserve their home.

Summary

It was not widely appreciated that lenders had the right to sell the property over the borrower's head until the decision of the High Court in the case of Horsham Properties v Clark and Beech. In that case, the lender exercised its power of sale with the borrower still in possession – i.e. without having first obtained a possession order. The new owner then brought proceedings to evict the borrower as a trespasser, and the court had no power to refuse this. Furthermore, it appears that the borrowers lost any claim to the equity (the balance of the sale proceeds) as a result.

 

We believe that legislative change is needed. Whilst there is little evidence of the power of sale being abused at present, we do believe that the Horsham case exposed a legal loophole that must be closed to ensure a fair and modern legal framework that effectively protects consumers.

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