Legislation introduced in 2009, which reformed land and conveyancing law, has led to much confusion over the past 18 months as to if and when a bank can exercise rights which derive from various pieces of legislation which have been repealed by the 2009 legislation.

Under repealed legislation concerning registration of title, a bank could apply to the court for an order of possession of land over which it had a registered charge, when payment under the charge became due.  In the high-profile Start Mortgages case, the judge ruled that the right to apply for an order of possession must have “vested in” or “accrued to” the bank by the date of repeal (being 1 December 2009) in order for that right to be enforceable.  In practical terms, the judge ruled that a bank could only apply for an order of possession in circumstances where repayment of the principal monies became due before 1 December 2009 and a demand for repayment had been made before 1 December 2009.

The ruling in the Start Mortgages case was followed, albeit expanded upon, in two subsequent cases which ruled that in determining as to whether or not the principal monies had become due, the test to be applied was not whether a demand had been made per se, but rather, as to whether the principal monies had become due in accordance with the provisions of the charge itself before 1 December 2009, which may or may not require a demand to be issued.

In a further series of cases, ending most recently with the McEnery case, the High Court examined as to whether the right of a bank to appoint a receiver under repealed conveyancing legislation survived the repeal of that legislation.  In that case the sequence of events was as follows:

  • A Mortgage was entered into on 26 October 2007.
  • A demand letter was issued on 11 April 2011 seeking immediate repayment of all monies due, pursuant to which no payment was made.
  • A receiver was appointed on 12 April 2011.

The bank did not have a contractual power to appoint a receiver, but rather, relied on the statutory power to appoint a receiver contained in the repealed legislation.  The judge distinguished the decision in the Start Mortgages case on the basis that the right to apply to court for an order of possession amounted only to a procedural right, whereas the right to appoint a receiver amounted to a substantive right, thereby allowing the judge to conclude as follows:

  • The right to appoint a receiver under repealed legislation was “acquired” by the bank at the time of execution of the Mortgage, even though the right did not actually “accrue” or become capable of exercise until the money became due.
  • The fact that the money became due after 1 December 2009 (i.e. after the legislation was repealed) was of no relevance.
  • That being the case, the bank had a statutory right to appoint a receiver which survived the repeal of the old legislation.

Whilst the Start Mortgages decision has been appealed to the Supreme Court, no date has yet been set for the hearing of that appeal.  Furthermore, whilst the Government has announced that legislation will be introduced to address the issues arising from these cases, in order to “remove unintended constraints on banks to realise the value of loan collateral under certain circumstances”, we do not know as to if, when and on what terms such legislation will be enacted. In the absence of clarity from either the Supreme Court or the legislature, it remains to be seen as to whether the principles set down in either the Start Mortgages or McEnery cases will be followed.