A trend has emerged this week regarding the court’s procedure for requesting Warrants of Possession in relation to suspended possession orders (SPOs)”, which is carried out by using Form N325.
Presently lenders’ common practice is to leave the following fields in Form N325 blank:
- 4 (A) – Balance due at the date of this request
- 4 (B) – Amount for which Warrant to issuef
Until this week, courts have been happy to issue Warrants where Form N325 has been completed in this way. However, we have received calls from the Medway, Burnley and Central London County Courts who advise that a new approach has been adopted which requires lenders to complete the above fields when applying for a Warrant.
These courts are refusing to issue Warrants unless we complete fields 4 (A) and (B) of the form. We anticipate that other courts will follow suit and we understand that other solicitors are experiencing the same issue.
The court rules
Although there is little guidance available, fields 4 (A) and (B) appear to be intended to collect information required by Civil Procedure Rules (“CPR”) 83.26 (7) (a) and (b), which state:
“(7) In a case to which paragraph (6) applies or where an order for possession has been suspended on terms as to payment of a sum of money by instalments, the creditor must in the request certify—
- (a) the amount of money remaining due under the judgment or order; and
- (b) that the whole or part of any instalment due remains unpaid.”
Paragraph (6) of CPR 83.26 concerns Warrants to repossess goods and has no application in this context. However, the courts mentioned above are clearly of the view that CPR 83.26 (7) applies to SPOs made in respect of land and the wording of the rule clearly provides scope for such orders to be brought within its remit.
How should lenders proceed?
Field 4 (A) clearly requires a lender to confirm the outstanding balance at the date upon which the Warrant is requested, and we see no issues with providing this information. We would recommend that lenders begin inserting outstanding balance figures in this field.
With regards to field 4 (B), it is possible that the court will be satisfied with lenders inserting the outstanding balance figure once again. There is an argument to say that this is the appropriate figure given that in many cases the lender will have called in the entire debt. It might also suffice for lenders to insert an updated arrears balance. However, the court might not be satisfied with this approach and may require lenders to insert the SPO arrears figure into field 4 (B) before it will issue a Warrant.
The wording of field 4 (B) is ambiguous but, read in the context of CPR 83.26 (7) (b), the courts might be expecting lenders to quote the amount of any arrears which have accrued in relation to payments due under an SPO. For example, where a customer is required to pay £500 per month and has missed four payments, the amount inserted into field 4 (B) would be £2,000.
Whilst lenders can proceed on this basis, and in the short term may have no choice, we would have concerns if this is the approach which the court has adopted. When an SPO is not adhered to, the suspension of the order is lifted leaving the lender free to issue a Warrant and seek possession. The onus is on the customer to make an application to suspend the Warrant if they believe there are grounds for a suspension. Often lenders will not be satisfied with an offer from a customer to clear the arrears on the SPO arrangement because many customers will have broken several arrangements in the past and obviously cannot afford their mortgage in the long term.
It is not clear whether this information will be provided to Defendants. Nor is it clear whether the court is suggesting that it will now refuse to execute Warrants in circumstances where a customer proactively clears arrears of SPO payments (but does not clear the arrears balance on their account). However, if lenders insert the amount of the SPO arrears into field 4 (B) when applying for the Warrant, it is foreseeable that some Bailiffs at least will refuse to evict customers who are willing to pay that amount on the day of the eviction. This could lead to adverse outcomes for lenders and increased costs and interest liabilities for customers.
If the court is adopting the approach suggested above, lenders will no doubt wish to adopt this practice in the short term but possibly with a view to challenging the Court’s decision in the long term, either by way of a judicial review, an appeal or industry lobbying. The approach could be vulnerable to challenge in our view because arguably CPR 83.26 (7) is not intended to be engaged where a suspended possession order has been made in mortgage repossession proceedings and also runs contrary to principles laid down in case law such as Bank of Scotland v Zinda.