CML voluntary statement on s101 of the Law of Property Act 1925 following the Horsham Properties v Clark and Beech case

Horsham Properties v Clark and Beech

The recent case of Horsham Properties v Beech has caused a considerable amount of interest, and has led to concern that following default by a customer a lender can sell the customer’s home without first obtaining a court order for possession. Although not clear from some of the reports the loan to the borrower was a buy to let loan.  

It is the case that a lender (or a receiver appointed by a lender) could in theory sell an occupied  residential property without a court order to a third party. However for residential properties this would only occur in exceptional circumstances.  

However because of the concern that this case has raised and to demonstrate that residential first charge secured mortgage lenders treat their customers fairly members of the Council of Mortgage Lenders have on a voluntary basis confirmed that :- 

In respect of mortgages secured against owner occupied residential properties CML members will not seek to sell a mortgaged property when the borrower is in default without first obtaining a court order for possession.  In addition CML members will not appoint a receiver to sell a residential property without first obtaining a court order for possession. 

This voluntary agreement only applies to mortgages secured over owner occupied residential properties (the customer’s home) and does not apply to commercial transactions (which would include buy to let loans, business loans secured against a residential property or bridging loans.) It does not apply to vacant or abandoned properties or to cases of fraud. In addition there may be exceptional cases where the sale takes place with the full informed consent of the borrower and the statement would not apply in such circumstances.

 The CML is aware that the government is looking into this issue and CML lenders may review their position in the light of this.