The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Royal Bank of Canada (RBC) bungled its bid to initiate legal proceedings to realise its mortgage security on a couple's home by failing to comply with the Homeowners Protection Act.

Justice Ian Winder, in a December 7, 2020, ruling "struck out" its action against Lawson and Rhonda Hall after finding that the Canadian-owned lender had breached the Act's section 4 (1) by failing to serve them with the proceedings personally or by registered post.

The Supreme Court found there was no explanation or evidence to support RBC's decision to serve the couple via "a general delivery post box" when it knew they lived at the mortgaged property on Swordfish Drive in Stapledon Gardens. There was also no evidence provided by the bank to support that this was the Halls' last postal address.

"I find that the service purported to have been made pursuant to the Homeowners Protection Act on the defendants was inadequate in the result that the plaintiff did not fulfill its obligation under the Homeowners Protection Act. I did not accept that there was service by post on these defendants," Justice Winder ruled.

"The purpose of the Homeowners Protection Act legislation was to provide meaningful protection to homeowners by ensuring a true and proper discourse between the mortgagor and the mortgagee prior to taking the significant and ultimate step of recovering the security through litigation.

"Its provisions ought to be strictly complied with otherwise mortgagees would be precluded from instituting proceedings." The judge struck out RBC's action, finding that it was in non-compliance with the law. However, he added that RBC was free to begin fresh proceedings once it adhered to the Act.

The ruling is among the first occasions where a lender's bid to realise its mortgage security was thwarted by the Homeowners Protection Act, which was passed by the Christie administration to make troubled borrowers more secure and less prone to sudden loss of their asset.

The Act inserts the courts into the foreclosure and 'power of sale' process, requiring lenders to give delinquent borrowers 30 days' notice before either invoking their 'power of sale' under the mortgage or seeking a court-approved foreclosure.

In both cases, borrowers can apply to the Supreme Court for relief. On the foreclosure process, the court can either adjourn, stay or suspend the matter if it believes the borrower will be able to pay principal and accrued interest within six months.

As for the 'power of sale', the Act allows the court to postpone this for "a reasonable period where a sum equal to at least one half of the principal, and accrued interest, has been paid at a specified time".

Sir Franklyn Wilson, the Arawak Homes chairman, previously urged the Government to "urgently review" the Homeowners Protection Act, branding it "a real disaster" for the Bahamas' struggling mortgage market.

He argued that it imposed overly-burdensome restrictions on what banks and other mortgage lenders "can and cannot do" in relation to their distressed properties, and introduced concepts and definitions that were unworkable in practice.

In particular, Sir Franklyn said the requirement that delinquent real estate assets be sold at 'market value' was unduly subjective, given that a single property could attract five different appraisal values from five different appraisers.

In addition, the Act prevents mortgage lenders from selling distressed homes to relatives of their staff, including cousins. Given the tight-knit nature of Bahamian society, Sir Franklyn said this requirement - especially given the absence of definitions - would be extraordinarily difficult to comply with "because almost everyone's a cousin".

He conceded, though, that there was "no disputing the need" to appropriately protect Bahamian homeowners and consumers.