Goods Mortgages Bill (HL Bill 148)

Goods Mortgages BillPage 10

(2) An entry in contravention of subsection (1) is actionable as a breach of statutory
duty.

(3) A mortgagee under a goods mortgage who—

(a) wishes to enter any premises for the purposes of taking possession of
5the goods, and

(b) does not have the consent of the appropriate person,

may make an application to the court for an order under this subsection (“an
access order”) against the appropriate person.

(4) On an application under subsection (3), the court may make an access order
10only if the court is satisfied, at the time when it makes the order, that the
applicant is entitled to take possession of the goods.

17 Mortgagee’s power of sale

(1) If the mortgagee under a goods mortgage has lawfully taken possession of the
goods, the mortgagee has power to sell the goods.

(2) 15This is subject to the following provisions of this section and to section 18.

(3) If the goods mortgage is not registered but another goods mortgage over the
goods is registered, the mortgagee under the unregistered goods mortgage
may not sell the goods.

(4) Where two or more goods mortgages are registered in relation to the same
20goods, a subsequent mortgagee may not, except under an order of the court,
sell the goods without the concurrence of every prior mortgagee under a
registered goods mortgage.

(5) Section 101 of the Law of Property Act 1925 (which contains provisions relating
to mortgages made by deed) does not apply in relation to a goods mortgage.

18 25Goods seized not to be sold until five days have passed

(1) If the mortgagee takes possession of the goods to which a goods mortgage
relates, the mortgagee must not sell the goods before the end of the fifth
working day following the day on which possession is taken.

(2) The appropriate person may before the end of the fifth working day apply to
30the court and the court, if satisfied that, by reason of the payment of money or
otherwise, the condition in section 15(2) has ceased to be met, may—

(a) restrain the mortgagee from removing or selling the goods,

(b) order the return of the goods to the appropriate person, or

(c) make such other order as the court thinks just.

(3) 35If the appropriate person and any subsequent mortgagees have agreed with
the mortgagee that the mortgagee may deal with the goods otherwise than by
way of sale, references in subsections (1) and (2) to selling the goods include
references to disposing of them in any other way.

(4) “The appropriate person” means the mortgagor, except that, if the goods have
40become owned by another person, it means that other person.

(5) “Working day” means a day other than a Saturday, a Sunday, Good Friday,
Christmas Day or a bank holiday under section 1 of the Banking and Financial
Dealings Act 1971 in England or Wales.

Goods Mortgages BillPage 11

(6) This section does not apply—

(a) if the mortgagee takes possession under an order of the court, or

(b) in a case where—

(i) the goods mortgage is an exempt goods mortgage,

(ii) 5the instrument creating the goods mortgage includes a
statement that the mortgagor agrees to forgo the protection
given by this section, and

(iii) the goods remain owned by the mortgagor.

Protection of mortgagors

19 10Possession notice required while goods are owned by mortgagor

(1) The giving to the mortgagor of a notice complying with section 20 (“a
possession notice”) is necessary before the mortgagee can take possession of
the goods while they are owned by the mortgagor.

(2) Subsection (1) does not prevent the mortgagee taking possession without
15giving a possession notice if—

(a) the goods mortgage is an exempt goods mortgage (see section 26), or

(b) in the case of a goods mortgage other than an exempt goods mortgage,
the following conditions are met—

(i) the obligation secured is one that can be discharged by the
20payment of money,

(ii) at the time when the goods mortgage was created, the
redemption total could be determined, and

(iii) at the time when the mortgagee takes possession of the goods,
less than one third of the relevant amount has been paid.

(3) 25“The redemption total” means the total sum that is to be payable by the
mortgagor in order to discharge the obligation secured by the goods mortgage,
including interest but excluding any sum payable as a penalty.

(4) Where the obligation can be discharged either by the payment of money or by
other means, it is to be assumed for the purposes of subsection (3) that the
30mortgagor does not discharge it by those other means.

(5) The “relevant amount” means the redemption total, except in a case within
subsection (6).

(6) In a case where—

(a) the goods mortgage secures a regulated credit agreement as defined by
35section 8(3) of the Consumer Credit Act 1974, and

(b) at the time when the mortgagee takes possession of the goods, part of
the indebtedness has been discharged early in accordance with
subsections (3) and (4) of section 94 of that Act (right to complete
payments ahead of time),

40“the relevant amount” means the redemption total reduced by the amount by
which any rebate allowable under section 94 of that Act exceeds any amount
which the creditor claims under section 95A(2) of that Act.

Goods Mortgages BillPage 12

20 Possession notice

(1) A possession notice must be in the prescribed form and contain prescribed
information.

(2) Regulations made by virtue of subsection (1) must require a possession notice
5to—

(a) state that the mortgagee considers that one or more of the conditions in
section 15(2) is met, specifying which condition and why the mortgagee
considers that it is met,

(b) state that the mortgagor may exercise the right conferred by section 23
10(mortgagor’s right to terminate),

(c) state that the mortgagor may within a prescribed period (“the notice
period”)—

(i) require the mortgagee not to take possession of the goods
unless authorised to do so by an order of the court, or

(ii) 15inform the mortgagee of the mortgagor’s intention to seek
advice,

(d) indicate the amount of any costs that may become payable by the
mortgagor under an order of the court if the mortgagor acts under
paragraph (c)(i) and the mortgagee applies for such an order, and

(e) 20state that the mortgagee intends to take possession of the goods unless
within the notice period the mortgagor—

(i) remedies the breach to which the notice relates (if the breach is
capable of remedy), or

(ii) acts under paragraph (c)(i) or (ii) or under section 23.

(3) 25If the mortgagor informs the mortgagee under subsection (2)(c)(ii), within the
notice period, of the mortgagor’s intention to seek advice, the mortgagor may
within a further prescribed period (“the advice period”), require the mortgagee
not to take possession of the goods unless authorised to do so by an order of
the court.

(4) 30Where a possession notice has been given to the mortgagor, the mortgagee is
not entitled to take possession of the goods—

(a) before the end of the notice period, and

(b) if the mortgagor acts under subsection (2)(c)(ii), during the advice
period.

(5) 35If the mortgagor so requires under subsection (2)(c)(i) or (3), the mortgagee
may not take possession of the goods except under an order of the court.

(6) If before the relevant time the mortgagor remedies the breach to which the
possession notice relates, the breach is to be treated as not having occurred.

(7) In subsection (6) “the relevant time” means the end of the notice period or, if
40the mortgagor acts under subsection (2)(c)(ii), the end of the advice period.

21 Defaults under consumer credit agreements

(1) This section applies if the goods mortgage was given to secure the payment of
money under a regulated agreement to which subsection (1) of section 87 of the
Consumer Credit Act 1974 (need for default notice) applies.

(2) 45A possession notice—

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(a) may not be given until the restriction imposed by section 88(2) of that
Act has ceased to apply to the goods mortgage, and

(b) may not be given if, by virtue of section 89 of that Act (compliance with
default notice), the default is treated as not having occurred.

(3) 5If because of section 19(2) no possession notice is required—

(a) the mortgagee is not entitled to take possession of the goods on the
basis that a condition in section 15(2) is met unless the restriction
imposed by section 88(2) of the Consumer Credit Act 1974 has ceased
to apply to the goods mortgage, and

(b) 10section 15(2)(a) to (f) does not apply to a default that is treated by
section 89 of that Act as not having occurred.

22 Wrongful taking of possession by mortgagee

(1) If the mortgagee takes possession of the goods to which a goods mortgage
relates in contravention of section 15(1), 19 or 20, the mortgagor—

(a) 15is entitled to have the goods returned, and

(b) is released from all further liability under the obligation secured by the
goods mortgage.

(2) This section does not apply if the goods have ceased to be owned by the
mortgagor.

23 20Mortgagor’s right to terminate

(1) This section applies to a goods mortgage that is not an exempt goods mortgage.

(2) The mortgagor is entitled to terminate the goods mortgage by—

(a) informing the mortgagee of the mortgagor’s intention to terminate the
goods mortgage, and

(b) 25as soon as reasonably practicable after doing so, delivering the goods to
the mortgagee.

(3) If the mortgagee refuses to accept goods that the mortgagor offers or attempts
to deliver to the mortgagee after informing the mortgagee of an intention to
terminate the goods mortgage, the goods are to be taken for the purposes of
30subsection (2) to have been delivered to the mortgagee.

(4) The right given by subsection (2) cannot be exercised in relation to a goods
mortgage if another goods mortgage over the goods has been registered and
the other mortgagee (or mortgagees) have not agreed to the termination.

(5) The mortgagee may refuse termination under subsection (2) by the mortgagor
35only if one or more of the following applies—

(a) the mortgagee has applied to the court for possession of the goods,

(b) the mortgagee is entitled to take possession of the goods without such
an order and has incurred expenditure in attempting to take possession
of them,

(c) 40the state of the goods is affected by damage deliberately caused by any
person since the creation of the goods mortgage, or

(d) the goods have suffered damage that—

(i) is attributable to a failure by the mortgagor to comply with a
term of the goods mortgage requiring the mortgagor to take
45reasonable care of the goods, and

Goods Mortgages BillPage 14

(ii) has a significant adverse effect on the market value of the goods.

(6) Any refusal under subsection (5) must be communicated to the mortgagor
within a reasonable time and in any event before the end of the period of 14
days beginning with the day on which the goods were delivered to the
5mortgagee.

(7) If the mortgagor terminates the goods mortgage under subsection (2) then,
unless the mortgagee is entitled under subsection (5) to refuse termination and
does so,—

(a) the mortgagor is released from all further liability under the obligation
10secured by the goods mortgage, and

(b) property in the goods is to be taken to have passed to the mortgagee
when the goods were delivered to the mortgagee.

(8) If the mortgagee refuses termination on any of the grounds in subsection (5),
the mortgagee must return the goods to the mortgagor.

24 15Additional powers of court where mortgagee seeks possession of goods

(1) This section applies where—

(a) in any proceedings the mortgagee under a goods mortgage seeks
possession of the goods, and

(b) the goods mortgage does not secure a regulated agreement within the
20meaning of the Consumer Credit Act 1974 (see section 129 of that Act
for powers available to the court in relation to such an agreement).

(2) The court may exercise any of the powers conferred by this section if it appears
to the court that in the event of its exercising the power the mortgagor is likely
to be able within a reasonable period—

(a) 25to pay any sums due under the goods mortgage, or

(b) to remedy a default consisting of a breach of any other obligation
arising under or by virtue of the goods mortgage.

(3) The court—

(a) may adjourn the proceedings for such period or periods as the court
30thinks reasonable, or

(b) on giving judgment, or making an order, for the delivery up of, or the
taking possession of, the goods that are subject to the goods mortgage,
or at any time before the execution of such a judgment or order, may—

(i) stay or suspend execution of the judgment or order, or

(ii) 35postpone the date for the delivery of possession,

for such period or periods as the court thinks reasonable.

(4) The adjournment, stay, suspension or postponement may be made subject to
such conditions with regard to the payment by the mortgagor of any sum
secured by the goods mortgage or the remedying of any default as the court
40thinks fit.

(5) The court may from time to time vary or revoke any condition imposed by
virtue of this section.

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Taking of possession by mortgagee after change of ownership

25 Order for taking of possession while goods owned by third party

(1) The mortgagee under a registered goods mortgage may apply to the court for
an order under this section in relation to goods which are in the ownership of
5a person other than the mortgagor but which remain subject to the goods
mortgage.

(2) The court may order the delivery up of the goods to, or the taking of possession
by, the mortgagee.

Supplementary

26 10Exempt goods mortgage

(1) A goods mortgage is an “exempt goods mortgage” for the purposes of this Act
in the following cases.

(2) A goods mortgage is an exempt goods mortgage if the obligation secured by it
is—

(a) 15a guarantee (see section 6(3) for the cases in which a goods mortgage
may secure a guarantee), or

(b) the obligation of the borrower under an agreement for running-account
credit as defined by Schedule 1 (see section 6(4) for the cases in which a
goods mortgage may secure such an obligation).

(3) 20A goods mortgage is also an exempt goods mortgage if—

(a) the high net worth conditions or the business credit conditions are met,
and

(b) the instrument creating the goods mortgage includes a declaration by
the mortgagor which—

(i) 25states that the mortgagor agrees to forgo the protection and
remedies given by sections 19(1) and 23(2), and

(ii) complies with prescribed requirements.

27 Contracting-out forbidden

(1) A term contained in a goods mortgage, or in any agreement secured by or
30related to a goods mortgage, is void if, and to the extent that, it is inconsistent
with a provision for the protection of the mortgagor contained in this Act or in
any regulations made under this Act.

(2) Where the provision specifies the duty or liability of the mortgagor in certain
circumstances, the term is inconsistent with that provision if it purports to
35impose, directly or indirectly, an additional duty or liability on the mortgagor
in those circumstances.

(3) Despite subsection (1), a provision of this Act under which a thing may be done
in relation to any person only on an order of the court is not to be taken to
prevent its being done at any time with that person’s consent given at that
40time.

(4) The refusal of the consent mentioned in subsection (3) is not to give rise to any
liability.

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28 Interpretation of Part 4

(1) This section has effect for the interpretation of this Part.

(2) In relation to a goods mortgage “mortgagor” includes a person to whom the
original mortgagor’s rights and duties under the goods mortgage have passed
5by operation of law, except that it does not include a trustee in bankruptcy.

(3) In relation to a goods mortgage over an undivided share in goods, references
to goods are to be read, unless the context requires otherwise, as references to
the undivided share.

Part 5 10Repeals and final provisions

Repeals

29 Repeal of Bills of Sale Acts 1878 and 1882

(1) The Bills of Sale Act 1878 and the Bills of Sale Act (1878) Amendment Act 1882
are repealed.

(2) 15In consequence of the repeals made by subsection (1), the following are also
repealed—

(a) the Bills of Sale Act 1890;

(b) the Bills of Sale Act 1891;

(c) section 23 of the Administration of Justice Act 1925;

(d) 20in Schedule 11 to the Constitutional Reform Act 2005, in paragraph 4(3),
the entry relating to the Bills of Sale Act 1878;

(e) in Schedule 13 to the Tribunals, Courts and Enforcement Act 2007,
paragraphs 17 to 19;

(f) in Schedule 9 to the Crime and Courts Act 2013, paragraph 15.

25Final provisions

30 Regulations

(1) Any power of the Treasury or the Secretary of State to make regulations under
this Act is exercisable by statutory instrument.

(2) Any such power includes—

(a) 30power to make different provision for different purposes, and

(b) power to make transitional, transitory or saving provision.

(3) Subsection (2) does not apply in relation to the power conferred by section 35
(but see subsections (3) and (4) of that section).

(4) A statutory instrument containing regulations under any provision of this Act
35other than section 35 is subject to annulment in pursuance of a resolution of
either House of Parliament.

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31 Meaning of “credit” and “credit agreement”

(1) In this Act “credit” includes a cash loan, and any other form of financial
accommodation.

(2) In this Act “credit agreement” means an agreement between one or more
5persons (“the debtor”) and any other person (“the creditor”) by which the
creditor provides the debtor with credit of any amount.

(3) Where credit is provided otherwise than in sterling, it is to be treated for the
purposes of this Act as provided in sterling of an equivalent amount.

(4) For the purposes of this Act, an item entering into the total charge for credit is
10not to be treated as credit even though time is allowed for its payment.

(5) In subsection (4) “the total charge for credit” has the meaning given by rules
made by the Financial Conduct Authority under Article 60M of the Financial
Services and Markets Act 2000 (Regulated Activities) Order 2001 (S.I. 2001/
544), but as if any reference in the rules to a regulated credit agreement were to
15a credit agreement as defined by subsection (2).

32 Meaning of “disposition” etc

(1) In this Act “disposition” means—

(a) a contract of sale, as defined by section 2 of the Sale of Goods Act 1979,
or

(b) 20a contract under which the owner of goods transfers or agrees to
transfer ownership of the goods to another person and—

(i) the other person provides or agrees to provide consideration
otherwise than by paying a price, or

(ii) the contract is, for any other reason, not a contract of sale or a
25hire-purchase agreement;

and “dispose of” is to be read accordingly.

(2) For the purposes of this Act, a person becomes a “purchaser” of goods if, and
at the time when, the person enters into a disposition under which ownership
of the goods is or is to be transferred to the person.

33 30Further general definitions

In this Act—

  • “conditional sale agreement” has the meaning given by section 189 of the
    Consumer Credit Act 1974;

  • “the court” means the High Court or the county court;

  • 35“hire-purchase agreement” has the meaning given by section 189 of the
    Consumer Credit Act 1974;

  • “mortgagee”, in relation to a goods mortgage, means the person or
    persons to whom the security is provided in accordance with section 2
    or 3 or a person to whom the original mortgagee’s rights and duties
    40under the goods mortgage have passed by assignment or operation of
    law;

  • “mortgagor”, in relation to a goods mortgage, means the individual who
    creates (or individuals who create) the charge in accordance with
    section 2 or 3, except that in Part 4 it has the extended meaning given
    45by section 28(2);

  • Goods Mortgages BillPage 18

  • “prescribed” means prescribed by regulations made by the Treasury
    under this Act.

34 Consequential amendments

Schedule 2 (which contains amendments related to the provisions of this Act,
5including repeals of spent provisions) has effect.

35 Commencement

(1) The following provisions come into force on the day on which this Act is
passed—

(a) sections 30 to 33;

(b) 10this section and sections 36 and 37.

(2) The remaining provisions of this Act come into force—

(a) for the purposes of making regulations, on the day on which this Act is
passed;

(b) for remaining purposes, on such day or days as the Treasury may by
15regulations appoint.

(3) The Treasury may by regulations make saving, transitional or transitory
provision in connection with the coming into force of any provision of this Act.

(4) Regulations under this section may make different provision for different
purposes.

36 20Index of defined terms

The following Table sets out expressions defined in this Act for general
purposes.

Expression Provision
business credit conditions section 7 (3)
conditional sale agreement 25section 33
the court section 33
credit, credit agreement section 31
disposition, dispose of section 32
excluded obligation (in Part 2) section 6
exempt goods mortgage 30section 26
goods section 4(2) (see also sections
11(4), 12(6) and 28(3))
goods mortgage section 2(4)
guarantee section 6(6)
high net worth conditions 35section 7(2)

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Expression Provision
hire-purchase agreement section 33
mortgagee section 33
mortgagor section 33
to own (and related expressions) 5section 2(3)
possession notice section 19(1)
prescribed section 33
purchaser section 32
qualifying goods section 4(3)
registered (in relation to a goods
mortgage)
10section 9(9)

37 Short title and extent

(1) This Act may be cited as the Goods Mortgages Act 2018.

(2) Except as provided by subsection (3), this Act extends to England and Wales
15only.

(3) Any repeal or amendment made by this Act has the same extent as the
enactment repealed or amended.