Can You Challenge a Defective PLA Notice? 

According to New Zealand’s Property Law Act (2007), a mortgagee reserves the right to call up as payable, the entire principal amount, interest, and any fees and penalties being secured by a mortgage if the mortgagor (you the homeowner), stops paying their repayments, defaults or fails to meet or perform obligations as agreed on the contract. The mortgagee issues a PLA Notice to set in motion a mortgagee sale process. 

Section 119 of the Property Law Act (200) stipulates what the Notice should convey to the mortgagor. 

But what if the lender serves a defective PLA Notice? Can a mortgagor challenge a defective PLA Notice? 

Read on and find out more about PLA Notices and the threshold for defects. 

What Should the PLA Notice Convey? 

A mortgagee should give notice under section 119 of the Property Law Act if a mortgage is in default. The notice conveys a demand for remedial action on a defaulted mortgage. It also gives a period within which action should be taken. 

In the notice, the lender must adequately inform the homeowner of: 

• The nature and magnitude of the default; 
• The action the mortgagor should take to remedy the default; 
• A time limit in which the default must be remedied; and 
• The consequence of failure to remedy the default.
   

How is A PLA Notice Served? 

When the lender drafts a PLA Notice, they must ensure the homeowner receives it. This means it must be served in person. However, if the lender cannot reach the homeowner, the lender has the option of publishing the notice in a newspaper. 

What if the Lender Issues a Defective PLA notice? Can You Challenge it? 

New Zealand has a robust justice system and all Kiwis enjoy the right to justice. This includes the right to seek legal redress when a person feels aggrieved. 

So, yes! Anyone can challenge a PLA Notice if they feel it is defective or violates their rights. 

This is partly why you must seek legal guidance, from an independent, qualified professional such as a lawyer, when facing a mortgagee sale. 

Amongst many court cases filed against lenders, Gary Owen Burgess’ case against TSB Bank stands out. 

Case Law Review 

In Gary Owen Burgess vs TSB Bank, Gary, the mortgagor, challenged a ‘defective’ PLA Notice issued by TSB Bank. His claims were: 

• That the PLA Notice did not adequately inform him of the actions required to remedy his defaults. 
• The Notice wrongly claimed interest that was not due at the time of issuance of the Notice. 
• The Notice failed to adequately inform him of the consequences of not remedying the default. 

Unfortunately for Gary, the Court ruled against all his claims.   

Of key importance is what Justice Gendall, of the High Court, noted in his ruling. 

The High Court ruled that none of the alleged defects had materially prejudiced Gary’s position to such an extent as to invalidate the Notice. 

Here’s the bottom line. If you’ve received a PLA Notice, you stand a better chance to stop the impending mortgagee sale by negotiating with the lender. As you’ve seen in Gary’s case, before you challenge a ‘defective’ Notice, the defects must be seen to have materially prejudiced your interests as the mortgagor. Banks and lenders are sticklers for rules so the best bet you have is working with a lawyer and using common sense to overcome these isssues.