Bristol & West Building Society v Ellis and another

Arrears — Mortgagee seeking possession — Suspension of order on terms — “Reasonable period” to pay sums due required by statute — Court of Appeal holding that evidence insufficient to conclude arrears repayable within reasonable period — Only justifiable order was for immediate possessionThe building society was mortgagee of the respondents’ matrimonial home. The loan was £40,000 repayable in one sum at the end of 25 years. The monthly interest-only payments were £432. The respondents fell into arrears. The building society applied for a possession order of the property and payment of the arrears amounting to £8,449.30. A suspended possession, order was made with which the respondents did not comply. In 1995 the building society applied for a warrant for possession, which the court granted. The respondents said that they would be able to discharge the entire debt by selling the house once their children had completed their education in approximately three to five years. Two estate agents gave estimates of likely sale prices of between £80,000 and £85,000. Therefore the warrant was suspended on terms that a lump sum of £5,000 should be paid within a month and the balance at the rate of £10 per month in addition to monthly interest instalments. At that rate it would take 98 years to pay off the arrears. No term was imposed as to sale of the house. The building society appealed. Held The appeal was allowed. 1. In the absence of unusual circumstances and where discharge of all arrears by periodic payments was proposed, the outstanding period of the mortgage, whether term or repayment, was the starting point in determining the reasonableness of the period for payment of sums due under a mortgage: see Cheltenham & Gloucester Building Society v Norgan [1995] EGCS 198. 2. There should be evidence before the court of the likelihood of a sale, the proceeds of which would discharge the debt and of the period within which such a sale was likely to be achieved. If the court was satisfied on both counts and the necessary period for sale was reasonable, it should, if it decided to suspend the order for possession, identify the period in its order. 3. Where the property was already on the market and there was some indication of delay on the part of the mortgagee, it might be that a short period of suspension of only a few months would be reasonable: see Target Homes Loans Ltd v Clothier [1996] 1 All ER 439. 4. Where there was likely to be considerable delay in selling the property and/or its value was close to the total of the mortgage debt and arrears so that the mortgagee was at risk as to the adequacy of the security, immediate possession or only a short period of suspension might be reasonable. Where there had already been considerable delay and/or the likely sale proceeds were unlikely to cover the mortgage debt and arrears or there was no sufficient evidence as to sale value, the normal order would be for immediate possession. 5. Given the uncertainty as to the movement of property values over the next few years and the reserve with which the courts should approach estate agents’ estimates of sale prices, no court could be sanguine about the adequacy of the property as a security for the mortgage debt and arrears. 6. The material before the court did not justify any order other than one of immediate possession. Michael Duggan (instructed by JW Ward & Son, of Bristol) appeared for the building society; Jan Luba (instructed by Bobbetts Mackan, of Bristol) appeared for the respondents.