A Pre-Action Protocol for Mortgage Possession Claims in Northern Ireland will take effect from 5 October 2009. It will apply to mortgage repossession cases commenced after that date.
The Protocol largely follows the Pre-Action Protocol for Mortgage Possession Claims in England & Wales, which came into effect from 19 November 2008.
The Protocol will apply to proceedings brought in the Northern Ireland in relation to arrears on all residential mortgages including those regulated by the Financial Services Authority and those which are unregulated and fall under the Consumer Credit Act 1974. The Protocol states that it will not apply to buy-to-let mortgages.
As with the Protocol in England & Wales, the Protocol in Northern Ireland provides guidance to lenders and borrowers to ensure that repossession proceedings are taken only as a last resort. It also allows lenders to show that they are treating their customers fairly and taking court action only where appropriate.
The key provisions of the Protocol in Northern Ireland are as follows:
1. When a borrower falls into arrears the lender should provide the borrower with:
· the required regulatory information sheet; and
· information as to the total amount of arrears; the total outstanding amount of the mortgage; whether interest or charges will be added, and if so, an estimate of the interest or charges payable.
2. The lender and borrower should take reasonable steps to discuss the cause of the arrears, the borrower’s financial circumstances and proposals for repayment of the arrears.
Where the Property is subject to a co-ownership agreement then these discussions should also involve the Northern Ireland Co-Ownership Housing Association. Under usual co-ownership arrangements, the Association undertakes to indemnify the lender for any loss when the property is sold and is a significant source of advice and support for the owners.
Lenders should also advise the borrower to contact the Northern Ireland Housing Executive and refer them to the appropriate sources of independent advice.
3. The lender should consider a reasonable request from the borrower to change the payment date or method of payment. If the lender refuses the request, it should provide the borrower with a written explanation of the reasons for the refusal.
4. The lender should respond promptly to any proposals for payment by the borrower. If the lender refuses to accept the proposal, it should give reasons for the refusal in writing within 10 working days of the proposal being made.
5. If the lender makes a proposal for repayment, the borrower should be given a reasonable amount of time to consider the proposal. The proposal should be sent out in sufficient detail for the borrower to understand the full implications of the proposal.
6. If the borrower fails to comply with an agreement, the lender should give the borrower 15 working days’ notice of its intention to start a possession claim unless the borrower remedies the breach of the agreement.
As with the Protocol in England and Wales, there are provisions in the Protocol for Northern Ireland requiring the lender to consider not starting a possession claim where the borrower has submitted a potentially eligible claim to an insurer under a mortgage payment protection policy with the evidence required to process a claim. Also a lender should consider postponing the commencement of a possession claim where the borrower can demonstrate reasonable steps have, or will, be taken to market the property for a sale at an appropriate price.
The courts will take the view that starting possession proceedings is usually a last resort and should not be started if settlement is still being actively explored by way of alternative dispute resolution.
During the consultation on the draft Protocol, it was queried whether a Pre-Action Protocol is required in Northern Ireland given the additional checks and balances available in that jurisdiction, which are not available in England and Wales. The procedure for repossessions in Northern Ireland includes:
· a pre-hearing stage whereby a notice is sent to the borrower setting out the court’s powers to delay possession;
· most of the repossession cases being heard by the same Chancery Master in the High Court in Belfast ensuring consistency of approach;
· Suspended Orders not being enforced without returning to court; and
· no system of bailiffs but rather a Single Enforcement of Judgments Office with enforcement officers who speak with borrowers about any proposals they might have and put borrowers on notice of any scheduled eviction.
However, the parity between the Protocol in England & Wales and that being introduced in Northern Ireland is welcomed as it will help promote a common standard of best practice across the two jurisdictions. Those lenders who are already familiar with the Protocol in England and Wales will be well prepared to apply the new Protocol in Northern Ireland.
For further information please contact Georgina Squire or the Partner with whom you usually deal