Enforcing possession orders when the arrears have been repaid

Updated June 2011

A possession order can still be enforced even if the original arrears under that possession order have been repaid in full. This has been confirmed by the Court of Appeal in the case of Zinda v Bank of Scotland.

Background

The customer, Mr Zinda, defaulted on his mortgage. In October 2005 the Court granted the Bank an order for possession, which was suspended providing Mr Zinda paid the contractual instalment plus £96.02 per month towards the arrears. In 2008 the Bank capitalised the remaining arrears.

Mr Zinda subsequently fell into arrears and the Bank sought to enforce the 2005 possession order. In response Mr Zinda applied to suspend execution of the warrant on the basis that the clearance of the arrears (the capitalisation) had extinguished the Possession Order. The application was dismissed and Mr Zinda appealed, ultimately, to the Court of Appeal.

Mr Zinda’s appeal was based on two points:

1. He contended that the capitalisation of the arrears discharged the possession order.

2. He argued that the nature of the possession order was disproportionate and illegal.

The Court of Appeal judgment

It was accepted by the parties that the effect of the capitalisation was to clear the arrears. The Court then focused on the effect of the possession order and, based on the following analysis of the law, rejected Mr Zinda’s argument that clearance of the arrears satisfied the possession order.

The Bank’s mortgage conditions (as with most lenders’ conditions) provided that in the event of default the full amount of the debt became payable and in such circumstances the Bank was entitled to possession. The Court has the discretion to suspend the terms of a possession order on the conditions it thinks fit where the customer can demonstrate that they are able to pay the arrears within a reasonable period of time and, importantly, future instalments.

In the Zinda case, and as is normal practice, the conditions the court attached to the suspended possession order were that Mr Zinda pay (1) £96.02 per month towards the arrears and (2) the ongoing contractual monthly instalments.

While the capitalisation of arrears in 2008 had satisfied the first condition of the suspended possession order, the Court accepted that Mr Zinda’s failure to maintain the contractual monthly instalment meant that he had not satisfied the second condition of the Order. Accordingly the Bank was entitled to enforce the 2005 possession order and Mr Zinda’s appeal was dismissed.

The learning points

The issues raised in this case are, in our experience, not uncommon. Should a lender commence fresh proceedings where an order has previously been made but the arrears have subsequently been cleared? Our advice has always been that it is not necessary to commence fresh proceedings.

The Court of Appeal’s judgment, which approves the earlier decisions of lower courts, is welcomed because it provides a clear and binding precedent. It will make it easier to respond to customers challenging the enforcement of possession orders on such grounds.

Comment

Whilst customers may feel some disappointment that a possession order will remain in place after the arrears have been cleared, it does mean that they will not incur the costs of fresh proceedings being issued. Also, the customer is not disadvantaged in that the court can suspend the warrant, where it can be demonstrated that the arrears can be cleared within a reasonable period.

It should be noted that when a possession order is more than 6 years old, permission of the court is required to enforce it.

If you require any further information please contact Julian Wintle. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2011. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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