This was the finding of the High Court in Thakker and another v Northern Rock (Asset Management) PLC in which the lender sought possession of Thakker's property following an accrual of arrears.
Thakker sought to defend (by way of counterclaim) the possession claim on the basis that the lender had breached the Mortgage Conduct of Business Rules (MCOB):
- by failing to treat him fairly and reasonably in respect of subsequent mortgage advances,
- in refusing to meet him, and
- in failing to take all other reasonable steps to find a resolution before commencing possession proceedings.
The court held this amounted to an equitable set-off which could not defeat a possession claim.
Thakker appealed, arguing that there was no right to possession if MCOB had not been complied with.
The High Court held that there were two stages in possession claims:
- First, did the mortgagee have a right to possession?
- Second, if so, should the court exercise its discretion to stay possession pending the hearing of a counterclaim?
Thakker had no defence to the claim and his argument in relation to breach of MCOB was inconsistent with the Financial Services and Markets Act 2000 s151(2) which provides that the contravention of a MCOB rule does not make any transaction void or unenforceable. Even if the breaches alleged were proven, they did not give rise to the counterclaim put forward by Thakker.
Things to consider
MCOB requires lenders to take reasonable steps to reach agreement over repayment of arrears and, in effect, to treat repossession as a last resort. Once those efforts have been exhausted, the lender is entitled to repossess. MCOB does not alter the mortgagees underlying rights.