Sometimes in life, just when you think all is going well and you’ve overcome your last adversary, something comes along to shake the foundations, move the goalposts and spark a whole new set of challenges.

That may very well be what is in store for a mortgagee when it comes to exercising his power of sale. The Timeshare Vacations Act (TVA) has a provision with some sharp teeth, which could very likely nibble away at a mortgagee’s sense of security (no pun intended).

This article looks at an instance where the law in relation to a mortgagee’s power of sale is settled (for now), and one that presents a new challenge.

RECENTLY SETTLED LAW

The Registration of Titles Act (RTA) gives a registered mortgagee the power to sell the mortgaged premises in order to recover a debt owed, following a mortgagor’s default in payment of principal or interest.

It is not necessary to commence proceedings in court in order for a registered mortgagee to exercise his power of sale.

In the recent case Dagor Limited v Mutual Security Bank and National Commercial Bank Jamaica Limited, the Judge found that limitation periods imposed by statute on the commencement of an action, suit or other proceeding do not apply to the exercise by a registered mortgagee of his statutory power of sale.

In that action, the claimant sought a declaration that a mortgage had been extinguished by the passage of 12 years since the last payment on account without the mortgagee having exercised its power of sale. The court found that the Limitation of Actions Act did not apply. In so finding, the Judge said “There is, it appears, no time limit on the exercise of the statutory power of sale contained in the Registration of Titles Act”.

The LAA imposes a limitation on the period within which an action can be commenced in court. Different periods apply to different things.

In the case of an action to recover possession of land, the period limited for bringing it is 12 years from the time the right to recover possession first accrued. However, in Jamaica by virtue of the RTA, a mortgagee does not need to bring an action in order to exercise his power of sale, so his exercise of that power is not subject to a limitation period. He can exercise his power to sell once the mortgagor is in default.

An appeal of the decision in Dagor has been filed, so we wait to see if anything changes. For now, however, a mortgagee may be comforted knowing that there is no applicable limitation period affecting his exercise of his power of sale.

A NEW CHALLENGE?

The TVA came into effect in May 2016, and it brings to the table long-awaited and welcome regulation to the timeshare subsector of the wider tourism industry. This Act contains a provision that should be of interest to mortgagees.

Where a timeshare contract has been executed by a timeshare vendor and purchaser before a registered mortgagee’s exercise of his power of sale over the property subject of a timeshare plan, the Act provides that the timeshare purchaser’s right to occupy the accommodation he purchased is not extinguished by the mortgagee’s exercise of his power of sale.

Simply put, a mortgagee exercising his power of sale cannot interfere with that timeshare purchaser’s right to enjoy his timeshare accommodation.

Some may say this provision is an attractive safety net for an overseas investor in a timeshare, while money lenders may be of the view that the peace of mind it brings to the tourism sector comes at their expense to the extent that they cannot sell the mortgaged property free from any timeshare interest acquired before exercising the power of sale. Although that is true, it is so only because the mortgagee has consented to the restriction.

An application to register a timeshare plan cannot be granted unless the timeshare registrar is satisfied that certain conditions have been met. One of those conditions is that an existing mortgagee must give his consent.

It therefore stands to reason that if a mortgagee does not wish to have any fetter on the exercise of his power of sale, he simply would not give his consent.

Rachel McLarty is an Associate at Myers, Fletcher & Gordon and is a member of the firm’s Litigation Department. Rachel may be contacted via rachel.mclarty@mfg.com.jm or you can visit the firm’s website at www.myersfletcher.com. This article is for general information purposes only and does not constitute legal advice.