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Discuss and analyse the legal rules relevant to the question posed.

Mortgagees and their changing approach

Mortgagees in the past have been considered by any as “stone hearted… pounding the faces of the poor and exploiting the innocent”. However the situation is not the same in relation to the mortgagees when it comes to the contemporary society. There is immense competition among mortgagees in the present with respect to reaching out to the people who are working their way up the elevator of property ownership by providing them special officers of mortgage. This has given effect to a wide market place and thus the law has to intervene on various occasions to determine the rights of the mortgagors and mortgagees in situation which leads to a dispute between them. The courts do so based on their discretion relying upon the existing statues.  In the case of Cheltenham and Gloucester Building Society v. Norgan  it had been seen that the position of the Mortgagor is superior as compared to that of the mortgagee when it comes to the ownership of property.

On the other it has been argued by Ghent (2014) that mortgagees are provided under English law an unqualified right to possession as soon as the mortgage is initiated, but such rights are restricted via the implementation of statues and case laws. However the fact that a de facto possession may be obtained by the mortgagee in relation to a property through the exercise of statutory or contractual power of sale not subjected to restrictions have been overlooked by English law. The proper exercise of these powers transfers the rights of the mortgagor to the new purchaser. No court order in required in the situation as mortgagees get their money, the purchaser gets a new property and the mortgagor has to part with his property. This position has been confirmed in 21st century case laws and the Human Rights legislation has not altered this position.

The purpose of this essay is to determine the position of the mortgagor and the mortgagee in terms of the possession of the property which has been mortgaged. The paper argues that the position of the mortgagor is much stronger than the mortgagee in the contemporary legal system and the right of the mortgagee has been eroded with respect to protecting the mortgagor. The paper provides arguments in favor of the statement and then discusses about the critiques before coming to a conclusions in relation to the rights of the parties.

The rights of mortgagors and mortgagees in property ownership


The question before the court in the case of Cheltenham and Gloucester Building Society v. Norgan was to determine the rights of the mortgagor and the mortgagee with respect to the possession of the property which was subjected to mortgage. The mortgagors’ right to possession is in reality a right. Many mistakenly assume that such right in reality works as a remedy which the mortgagee may put to use when there is a default on the part of the mortgagor towards the mortgage. However in reality the situation is different and has been appropriately explained by Harman J while providing one of his judgments. He stated that the right to possession of a mortgagee where there is no contract does not have to rely upon a default on the mortgagor’s part. As soon as the mortgage is initiated the mortgagee has the right to take the possession of the mortgaged property unless there is an express or implied term in a contract that the mortgagee has himself contracted out of the right.  However if this is the case it will be prima faice evident that the right of  the mortgagor is unfavorable severely when compared to the right of the mortgagee.

Through the introduction of the Administration of Justice Act 1970 section 36 and AJA 1973 section 8 the right to possession of a mortgagor had been clearly set out. These sections have provided the courts the right of statutory discretion with respect to providing the right to possession to the mortgagee with respect to a property which is being dwelled. This power is only applicable in situation where the mortgagee has brought an action in relation to the possession. In addition the discretion of the court can be applied in the situation when the court is able to identify that the mortgagor will be able to pay the amount which he is supposed to pay under the mortgage within a reasonable period. However one of the primary issues which arise in this case is that none of the legislations has provided a meaning in relation to what time frame constitutes a reasonable period.  This is a period for which the court has the discretion of denying the mortgagor the right to possession of the property. Prior to the decision provided in the Norgan case the relief had a very limited application and the courts determined a 2-4 year period as a reasonable period of repayment. It was recommended by the judicial study board that the reasonable time in relation to the statues should be a two year period.

The position of the mortgagee in relation to property possession rights


In the Norgan a property had been mortgaged by Mr Norgan (the defendant) for a 22 years period to Cheltenham and Gloucester for $90000 required to fund her husband’s business. There was a failure on the part of the respondent to pay and subsequently fell into arrears worth $7000.  A possession order which was worth $225000 had been applied by Cheltenham and Gloucester. The possession order had been postpone by the court for a period of four years with a condition that interest and arrears would be paid within this time. However the respondent was not able to meet the condition and another possession claim had been made by the appellants in this case. This time the district judge provided the possession order in favor of the appellants and decided that the respondents do not have the capacity of replaying the mortgage within a reasonable period. This order provided by the district court had also been upheld by the county court before it is appealed again before the court of appeal.

Arguments can be provided that on first appeal and on first instance the court’s decision was towards the mortgagee’s favor. The decision of the court signified that a precedent has been created in relation to the reasonable period which is now of four years to pay of the arrears and continue to make payments in relation to the mortgage. However in this case Waite LJ had made a statement that he is “strongly in favour of adopting the full term of the mortgage as the starting point for calculating a 'reasonable time' for payment of arrears”. He relied upon the commentary provided in the case of Middlesbrough Trading and Mortgage Co Ltd v. Cunningham by Scarman LJ. It had been stated by the judge that as the purpose of the installment of the mortgage was with the agreement of the mortgagee, providing the mortgagor the time of mortgage to pay the interest and the capital, there is a power presumption that the reasonable period begins with the fact towards the benefit of the period of the mortgage. However the case was before section 8 of the AJA 1973 had been enacted and Waite LJ being aware of this took a view that the reminder of the mortgage term has to be allowed as a correct approach for the purpose of repayments of arrears. In addition the dictum provided in Western Bank v. Schindler by Buckley LJ had also been used by Waite LJ. It had been stated by the judge that where suitable the whole remaining life of the mortgage can be used as the reasonable period.

The case of Cheltenham and Gloucester Building Society v. Norgan

However the application of this case was in situation where there was no default on the part of the mortgagor to repay. In addition support was also sought by Waite LJ in relation to his judgment by commenting that the term of the mortgage which is remaining as the starting point of the reasonable period makes sure that parties to the case would not be subjected to coming to the courts for many year frequently and thus their cost would be reduced.


There was an agreement between Evans LJ and Waite LJ in relation to the judgment. However the former took into consideration the interest of both the parties to the proceedings as the word “reasonable” has to mean reasonable for all the parties to the case. In this case it has stated that the interest of the mortgagee is merely financial and the interest of the shareholders of the bank therefore depends upon the payment of the mortgage by the mortgagor. On the other hand the interest of the mortgagor is much more than mere financial interest. The home of the mortgagor and their families is in the said property. However the interest of the parties was not a deciding factor in this case however it is a good reason for providing the mortgagor the whole term of mortgage for repayment.

However, in possession cases the capacity of the mortgagor to make the repayment of loan along with the interest within a reasonable period has to be determined by the court. If it is found by the court that the mortgagor has the capacity of keeping up with the require payments than the grant of possession to the mortgagee can be delayed by the courts at their discretion. The primary difference which has been made by the Norgan case is that a reasonable period now does not have a fixed limit. It can be two years, four years or may even extend to twenty two years depending upon the time of the mortgage. Thus the court now has to take into consideration the mortgage term which is remaining in form of a starting point towards determining a reasonable period. The situation would also be in favor of the mortgagee as the longer period will make it more reasonable for them to take possession. However it is very likely in the situation that only the amount of time which would not subject the financial interest of the mortgagee to any risk would be allowed by the court.  In situation where the interest and the capital reach a amount which is  more than the overall value of the mortgaged property than the financial interest of the mortgagor would be deemed to be at a risk as he would not be able to recover the amount by the sale of the property.

The importance of statutory discretion in possession cases

In the Norgan case the value of the property was more than the amount which was owed by the mortgagee and if the right to sale were granted it would have been more than amount owed. However when a case comes up where the mortgagors position is unfavorable in relation to the situation and the right of sale would not exceed the value of the property and in addition were the financial interest of the mortgagee would be at risk a reasonable period would not be extended any longer by the court. Keeping in mind this situation it can be stated that the decision provided by the court in the Norgan case was in favor of both the mortgagee and the mortgagor. There is no interest of the mortgagee in relation to the situation whether the mortgagor is allowed to be in possession of the mortgaged property where the financial interest of the mortgagor is duly satisfied.

The position of the mortgagor in the present situation is stronger as compared to the mortgagee where he has the right to establish before the court that he has the capacity and financial means to pay off what he owes in relation to the mortgage within the remaining term. However it can also be stated that not all mortgagors are provided with a stronger position as the statue would not be applied in relation to those cases where the mortgagors do not seek possession from the courts. In addition those mortgagors who find themselves stuck in negative equity would not be provided with the opportunity to get their mortgage terms extended. Opportunities are still available to the mortgagee for the purpose of ensuring their financial interest and it would not be put at risk. Through the case it is also clear that although Mortgagees are likely not to lose out on their financial interest the position of the mortgagors is now in a much more welcoming position.

There have been significant arguments which have been provided against the findings that the rights of the mortgagee are eroded because of the stronger position of the mortgagor in relation to possession. It has been argued by Grant, et al (2014) that the position of the mortgagee is stronger as compared to the position of the mortgagor. The position has remained the same even after the enactment of the Human Rights Act 1998 and the AJAs. This has been done in order to ensure that there is no considerable negative impact upon the economy. As discussed in the above case of Four-Maids Ltd v. Dudley Marshall and in  Citizens Permanent Building Society v.Caunt, there is an unqualified right to possession bestowed upon the mortgagee. In these cases only modest limits had been imposed by the courts in relation to the rights of the mortgagee. In the case of Ropaigealach v.Barclays the statutory consideration under s36 of the AJA was rendered impotent in the light of s2(1)(iii) of the Law of Property Act 1925.

Evaluating the definition of 'reasonable period'

In addition the hope which had been provided through the passing of the HRA in relation to the right of possession to the mortgagors had been brought down through the case of Horsham Properties v.Clark. In this case there has been a default on the part of the mortgagor towards repayment and the mortgagee here had expressed contractual power  in addition to his implied power under s101(1) LPA to sell the mortgaged property in order to extract the defaulted amount. It had been claimed  by the mortgagors that such actions would constitute the violation of several provisions provided by the HRA. The primary basis of  the argument made by them was in relation to Article 1 First Protocol which provided the right to peaceful enjoyment of possession.

However the argument had been rejected by the court in this case on every occasion. Although the equity of redemption of the mortgagor is a possession under A1FP had been accepted by the court, the argument in relation to the engagement of the article on the facts where the equity of redemption had been lost by the mortgagors through the virtue of contractual terms instead of statues had been rejected by the court. In the case of Pennycook v. Shaws Ltd it had been further stated by the court that the application of section 101 does not take away the right of an applicant as provided by A1FP. In the case of Harrow London Borough Council v Qazi it had been ruled by the court that the convention had been initiated for the purpose of addressing the arbitrary intervention of the states into the right of the citizens. However as stated in Wood v UK the convention was never intended to alter the balance of power established by law of the land between the borrowers and the lenders, towards the benefits of the borrowers. There had been several reforms and proposals which had originated in response and whereby a few have strengthened the position of the mortgagors and few have not. For instance the position of the mortgagor has been seemed to be enhanced through the House Possession Court Duty Scheme and House Possession Court Duty Scheme. However, although these schemes on paper were in  relation to enhancing the position of the mortgagor but in reality these schemes had little impact on the situation. It had been provided through reports in July 2009 that only 16 mortgagors had been provided support through these schemes.

The impact of the Norgan case on possession cases

Further as stated by William (2013) presently the mortgagee is provided with a technical right to claim possession of the property owned by the mortgagor in case there is a default in payment without obtaining a court order. This is done by taking contractual position advantages by the provisions in mortgage deed or statutory authority. The various attempts made to enhance the position of the mortgagor end up being a failure as they are very rigid and do not have much impact on the system. However these arguments come into the context only where the mortgagor does not have the capacity to make a repayment.

From the above arguments it can be stated that the position of the mortgagor and the mortgagee in relation to a mortgagee is subjected to the circumstances of the case. On one hand it is clear that in possession cases the capacity of the mortgagor to make the repayment of loan along with the interest within a reasonable period has to be determined by the court. If it is found by the court that the mortgagor has the capacity of keeping up with the require payments than the grant of possession to the mortgagee can be delayed by the courts at their discretion. In addition the time of the reasonable period has been made flexible through the decision provided in the Norgan case. It can be two years, four years or may even extend to twenty two years depending upon the time of the mortgage. Thus the court now have to take into consideration the mortgage term which is remaining in form of a starting point towards determining a reasonable period. The arguments which state that the position of the mortgagee is stronger are in circumstances where the mortgagor has the capacity to make a repayment. The position of the mortgager has certainly been made stronger by setting a precedent for a longer reasonable period. Opportunities are still available to the mortgagee for the purpose of ensuring their financial interest as it would not be put at risk. Thus through the case it is clear that although Mortgagees are likely not to lose out on their financial interest the position of the mortgagors is now in a much more welcoming position.

Bridge, Michael. Personal property law. OUP Oxford, 2015.

Campbell, John Y. "Mortgage market design." Review of finance 17.1 (2012): 1-33.

Cheltenham and Gloucester Building Society v. Norgan [1996] 1 All ER 449

Citizens Permanent Building Society v.Caunt  [1962]Ch 883(HC)

Four-Maids Ltd v Dudley Marshall (Properties) Ltd [1957] Ch 317

Ghent, Andra. "How do case law and statute differ? lessons from the evolution of mortgage law." The Journal of Law and Economics 57.4 (2014): 1085-1122.

Hanlon v Law Society [1981] AC 124, HL per Lord Denning MR

Harrow London Borough Council v Qazi [2003] UKHL 43(HL)

Hunt, John Patrick, Richard Stanton, and Nancy Wallace. "Rebalancing Public and Private in the Law of Mortgage Transfer." Am. UL Rev. 62 (2012): 1529.

McFarlane, Ben, Nicholas Hopkins, and Sarah Nield. Land law: text, cases, and materials. Text, Cases, And Materials, 2015.

Nelson, Grant, et al. Real Estate Finance Law, 6th (Hornbook Series). West Academic, 2014.

Pennycook v. Shaws Ltd [2004] EWCA Civ 100(CA)

Ropaigealach v.Barclays [2008]EWHC 2327

Singer, Joseph William. "Property as the Law of Democracy." Duke LJ 63 (2013): 1287.

Smith, Jim, and Robin Paul Malloy. Real Estate Transactions: Problems, Cases, and Materials. Wolters Kluwer Law & Business, 2013.

Western Bank v. Schindler [1977] Ch 1, CA

Wood v UK (32540/96)(1997)24 EHRR CD69

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