The Mortgage Arrears Pre‐Action Protocol: An Opportunity Lost
| Date | 01 September 2009 |
| Published date | 01 September 2009 |
| DOI | http://doi.org/10.1111/j.1468-2230.2009.00768.x |
claims for damages during the relevant period. Again we will have towait until the
UK courts have an opportunity to adjudicate on this point.
As far aslenders are considered,the Act is likely to overcome theirreluctance to
send their works of art to the UKand thus facilitate thelending of their artworks
to its borrowing institutions for temporary exhibition. However, as far as private
lenders are concerned, the requirement that detailed information concerning the
lender (or his agent),the object and the circumstances inwhich it was acquired, be
published onthe borrowing institution’s website may lead toa reluctance on their
part tolend their works forsecurity,con¢dentiality andtax reasons. Furthermore,
it will need to be madeclear to lenders thatthe Act does notnecessarily precludea
claimant from proceeding against them for alternative legal relief such as a claim
in conversion for damages or a declaration of r ights. Although, as stated above,
this aspect of the legislation may be tested by a UKcourt at some future date.
Lastly, both borrowing institutions and lenders will ne ed toco ntinue todraft and
manage loan agreements verycarefully. It would be advisable for any con¢dentiality
agreement which a borrowing institution might enter into with a lender to be made
subject to the institution’s statutory disclosure obligations under the new law. There
are also a number of important legal issues on which the Act is presently silent con-
cerning in particular the conditions which must be met in order for an object to be
protected from seizure. This u ndoubtedly leaves the Act vulnerable to chal lenge on
several key points and lenders and borrowing institutions will need, to the extent
possible, to expressly address these issues in a wri tten loan agreement.
The Mortgage Arrears Pre-Action Protocol: An Opportunity
Lost
LisaWhitehouse
n
In February 2008, the Civil Justice Council circulated for consultation a mortgage arrears pre-
action protocolthat proposed some of the most radicaland signi¢cant reformsof the repossession
process for a century. Hinting at a return to the equitable tradition, the draftprotocol required a
minimum level of equitable dealing within the mortgage relationshipcoupled withthe restriction
and, at times, exclusion of the lender’s inherent right to possession.The version which emerged
following the period of consultation, however, bore little if any resemblance to its predecessor.
The Pre-Action Protocolfor Possession Claims Based on Mortgageor Home Purchase Plan Arrearsin Respect of
Residential Property attempts no alteration of the parties’ existing rights and obligations and seeks
merely to encourage rather than compel lenders toview repossession as a last resort.To this extent,
therefore, itrepresents an opportunitylost to a¡ord borrowers greater protection withinthe repos-
sessionprocess.
n
Senior Lecturer in Law, The Law School, University of Hul l. The author would like to thank the
Socio-Legal Studies Association and the Faculty of Arts and Social Sciences at the University of Hull
for funding aspects of this research and the anonymous referees fortheir helpful comments on an ear-
lier draft.
LisaWhitehouse
793
r2009 The Author.Journal Compilation r200 9 The Modern LawReview Limited.
(2009) 72(5) 783^814
INTRODUCTION
Within the context of the current economic downturn evidenced, in part, by
increasing numbers of repossessions,
1
the Civil Justice Council (CJC) implemen-
ted the Pre-Action Protocolfor PossessionClaims B asedon Mortgage orHome Purchase Plan
Arrears in Respect of Res ident ial Property (the revised Protocol) on 19 November
2008.
2
Adopting provisions similar to those contained in the Financial Services
Authority’s (FSA) Mortgage Conduct of Business Rules (MCOB),
3
the revised
Protocol seeks to encourage increased pre-action communication between the
parties to the mortgage while ensuring that they ‘act fairly and reasonably’ with
each other in addressing any concerns relating to the mortgage.
4
While these aims may be considered laudable, upon closer inspection it
becomes apparent that the potential for the revised Protocol to impact signi¢-
cantly upon the behaviour of lenders prior to court action and, thereby, to assist
borrowers in avoiding repossession, is minimal. This is due to the revised Proto-
col’s reliance upon existing provisions that have, to date, proven ine¡ective in
regulating the arrears management practicesof ‘regulated’
5
lenders,
6
coupledwith
a failure to acknowledge and redress the disproportionate weight a¡orded to the
economic interests of the lender within the repossessionprocess.The revised Pro-
tocolwill, therefore, come as a disappointment tothose concerned to enhancethe
protection a¡ordedto borrowerswithin the repossessionprocess.This disappoint-
ment will be felt most deeply, however, by those whose hopes will have been
raised by its original aims and content.
The Mortgage Arrears Pre-Action Protocol (the draft Protocol),
7
circulated for
general consultation between 29 February and 23 May 2008, proposed some of
the most signi¢cant reforms of the repossession process in recent decades. The
basis for this claim derives from the draftProtocol’s rejection of the approach char-
acteristicwithin the law of mortgage, namely, the prioritisation of the contractual
and ¢nancial interests of the lender,
8
in favour of the pursuit of fairness, due pro-
1 The prediction for 2009 is that 75000 homes will be taken into possession by ¢rst charge
lenders, ‘CML News & Views’ (10 February 2009) at http://www.cml.org.uk/cml/publications/
newsandviews/33/108 (last visited 16 April 2009).
2 Available at http://www.justice.gov.uk/civil/procrules_¢n/contents/protocols/prot_mha.htm (last
visited 18 May 2009).
3 Available at http://fsahandbook.info/FSA/html/handbook/MCOB(last visited18 May 2009).
4 Pre-Action Protocol forPossession Claims Based o n Mortgageor Home Purchase Plan Arrears in
Respect of Residential Property 2008, para.2.1.
5 For a de¢ nition see, Financial Services and Markets Act 200 0 (RegulatedActivities) Order 2001,
s 63(1).
6 See Fi nancial Services Authority,‘Mortgage E¡ectiveness Review: Arrears Findings’ (Illuminas,
London, Research Report Project no.30895, August20 08)at http://www.fsa.gov.uk/pubs/other/
mer_report.pdf(last vi sited 15September 2008)and Citi zens Advice,‘SetUpTo Fail: CAB Clie nts’
Experience of Mortgage and Secured Loan Arrears Problems’ (December 2007) at http://
www.citizensadvice.org.uk/set_up_to_fail-2 (last visited 3 November 2008).
7 Civil Justice Council, ‘Consultation Paper: Mortgage Arrears Protocol’ (29 February 20 08) at
http://www.civiljusticecouncil.gov.uk/¢les/mortgage-pre-action-protocol-¢nal290208.pdf (last
visited 3 November20 08).
8 See, for example, P. Luxton,‘Mortgages and Limitation of Actions’ (2007)71Conv 259 andP.Omar,
‘Recoveryof SecuredProperty by Mortgagees:The Balance of Interests’(2005) 16(11) ICCLR 445.
Mortgage Protocol
794 r2009 The Author.Journal Compilation r20 09 The ModernLaw Review Limited.
(2009) 72(5) 783^814
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