Mortgagee Selling by power of sale: certification that charge is not a housing loan

The committee directs practitioners’ attention to the PRA practice direction ‘Transfers of registered land’, which was recently amended.

Section 100(2) of the Land and Conveyancing Law Reform Act 2009 (the 2009 act) provides that a mortgagee’s power of sale shall not become exercisable without a court order granted under subsection (3), unless the mortgagor consents in writing to such exercise not more than seven days prior to such exercise.

Section 100(3) of the 2009 act provides that after expiration of the 28 days’ notice period required by subsection (1), a mortgagee may apply to the court for an order authorising exercise of the power of sale and, on such application, the court may, if it thinks fit, grant such authorisation to the applicant on such terms and conditions, if any, as it thinks fit.

Section 96(3) of the 2009 act states that the provisions relating to the powers and rights conferred by chapter 3 of the act (including section 100(2) and (3)) apply to any housing loan mortgage, notwithstanding any stipulation to the contrary and notwithstanding any powers and rights expressly conferred under such a mortgage.

The PRA requires evidence of a court order or relevant consent in relation to powers of sale exercised under charges dated on or after 1 December 2009.

The following amendment to the PRA’s previous practice direction was made on 18 August 2018:

“A court order or relevant consent under section 100(3) is not required if evidence is lodged that the charge is not a housing loan mortgage and that the provisions of section 100(2) and (3) have been contracted out of in the deed of charge. The evidence that the charge is not a housing loan mortgage can be either; the chargor/mortgagor is not a natural person or, if the chargor/mortgagor is a natural person, the PRA will require a solicitor’s certificate that the charge/mortgage is not a ‘housing loan mortgage’ within the meaning of section 3 of the Land and Conveyancing Law Reform Act 2009 and section 2(1) of the Consumer Credit Act 1995 and the chargor/mortgagor is not a ‘consumer’ within the meaning of section 2(1) of the Consumer Credit Act 1995 for the purposes of the relevant charge/mortgage.”

The committee confirms that a purchaser’s solicitor, acting on behalf of an applicant for registration lodging a transfer from a mortgagee selling under a power of sale, is not the appropriate party to provide the required solicitor’s certificate, and that only the bank’s solicitor, if familiar with the circumstances in which the relevant loan was originally granted, can so certify. The same applies in relation to the provision of evidence that section 100(2) and (3) were contracted out of by the original borrower in the deed of charge. Such certificate and evidence of contracting out should be furnished by the vendor’s solicitor to the purchaser’s solicitor on closing.

The bank’s solicitors should be wary about giving such certificates and should ensure they are satisfied that, at the time the loan was advanced, the loan was not a housing loan and the provisions of section 100(2) and (3) were contracted out of in the deed of charge.

In the event of any doubt, or where the bank’s solicitor is not in a position to give the certificate, a court order or the mortgagor’s consent to the sale should be obtained.