Cheltenham & Gloucester plc v Krausz [1997] 1 All ER 21
Order to suspend a warrant for possession overturned in case of negative equity
Facts
The respondent borrowers had fallen into arrears on their mortgage payments. They applied for an order suspending a warrant for possession of the property, on the basis that they had identified a buyer and would take steps to arrange for the sale of the property. The appellant lender resisted the proposed sale on the basis that the mortgage debt exceeded the proposed sale price.
Issues
The respondents’ application for an order to suspend execution of the warrant was allowed. The appellants appealed on the grounds that the Court did not have jurisdiction to make such an order.
Decision/Outcome
The Court of Appeal allowed the appeal. The right of the appellant to enter into possession of the mortgaged property was protected strictly at common law (Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883). Furthermore, under section 36 of the Administration of Justice Act 1970, the power to suspend a warrant for possession was only exercisable to allow the lender to pay off instalment arrears but not through the sale of the mortgaged property. If a sale is proposed, then the Court had to be satisfied that the sale proceeds would entirely discharge the mortgage debt. Furthermore, the Court was not justified in exercising its inherent jurisdiction to order the sale of the property, where the appellant was seeking to enter into possession, and sell the property which was in negative equity. Accordingly, there had been no jurisdiction for the judge to make an order which suspended the appellants warrant for possession.
266 words
Updated 19 March 2026
This case summary remains legally accurate. Cheltenham & Gloucester plc v Krausz [1997] 1 All ER 21 is still good law. The Court of Appeal’s interpretation of section 36 of the Administration of Justice Act 1970 — that the court’s power to suspend or adjourn possession proceedings is conditional on the mortgagor being able to pay off the sums due, and cannot be used to facilitate a sale in negative equity where full discharge of the mortgage debt is impossible — has not been overturned. The reference to Birmingham Citizens Permanent Building Society v Caunt [1962] Ch 883 as authority for the mortgagee’s common law right to possession also remains correct. There have been no statutory amendments to section 36 of the Administration of Justice Act 1970 that affect the substance of this decision. Readers should note that the Mortgage Repossessions (Protection of Tenants etc) Act 2010 introduced additional procedural protections for tenants in mortgage possession proceedings, but this does not affect the principles discussed in Krausz. The Pre-Action Protocol for Possession Claims based on Mortgage or Home Purchase Plan Arrears in Respect of Residential Property also imposes procedural obligations on lenders before issuing proceedings, but again does not alter the jurisdictional limits identified in this case.
