Mortgage Repossessions – Understanding the process and protecting yourself

Mortgage repossession is a course of action that a mortgage lender may take when a borrower defaults on their mortgage payments. This remedy means the lender can take possession of the property, should the borrower fail to meet their payment obligations. 

The Law of Property Act 1925 (LPA 1925) and the terms of the mortgage explain a lender’s right of repossession in a situation where there has been a default of the mortgage – for example, the loan amount has not been repaid in full by the end of the mortgage term, or the borrower has defaulted on their mortgage during the term. 

However, mortgage repossession is only one of several remedies available to lenders if a borrower has defaulted on their mortgage, and there are steps that must be taken before the situation reaches that point.  This article focuses solely on legal steps that must be followed before a lender repossesses a property, so that borrowers and lenders alike are aware of the requirements.  

Steps a lender must follow before starting repossession proceedings: 

Borrowers should be aware that there are strict procedural rules lenders must follow before instigating any repossession proceedings. Being informed on these steps can help you to avoid facing repossession of your property or home by getting ahead of the situation before it reaches that stage and will help you to know whether your case is being handled fairly and legally. 

Equally, lenders should also be aware of their requirements to ensure that any possession proceedings have been issued as a last resort and are issued correctly. 

1. Pre-Action Protocol

Before a lender can commence any repossession proceedings, they must follow the Mortgage Pre-Action Protocol (MPAP) enshrined by the Civil Procedure Rules. 

The spirit of the protocol requires that a lender seriously engages with a borrower and ensures that all alternatives to repossession have been explored and considered. 

For example, if faced with repossession, a borrower should have the chance to clearly communicate to a lender if an extension of time is needed to clear mortgage arrears, or to make proposals to raise funds and form a sensible repayment plan. Clear communication from both sides, and fair consideration of all proposals, is vital in avoiding repossession proceedings being issued with the Court. 

If a borrower is not clear on the arrears that are owed or anything concerning the terms of the mortgage, a lender has an obligation to provide any requested information to help the borrower understand their position and the terms of the mortgage. 

2. Issuing Possession Proceedings

Only after all attempts to resolve the default of the mortgage have been taken may the lender issue possession proceedings in the County Court. The lender must correctly particularise their claim, detailing the amounts owed, the default, and the steps taken to avoid repossession. Seeking legal advice to carry out these steps is beneficial.  

The lender must also correctly serve these documents on all parties to the mortgage. A possession hearing will then be listed by the Court.  

3. Court Hearing

At the hearing, a judge will consider the evidence from both the lender and the borrower. Any sensible proposals from a borrower to clear mortgage arrears will also be considered by a judge. It is therefore important for both the borrower and the lender that they continue negotiation prior to the hearing. It is also important for both parties to seek professional legal advice and representation.  

At the hearing, the judge may rule any of the following: 

• Possession Order: Granting the lender possession of the property. 
• Suspended Possession Order: Allowing the borrower to stay in the property provided they adhere to strict conditions that must not be broken, such as a payment plan.  
• Adjourned or Dismissed Hearing: If a borrower requires further time to clear the arrears and demonstrates reasonable prospects that mortgage arrears can be cleared by them, it’s possible a judge may adjourn the hearing to allow time for further negotiation or raising of funds to allow resolution between the parties.  
  If the lender has not complied with the pre-action protocol mentioned above properly, the proceedings can be dismissed.  

4. Eviction

If a possession order is granted and the borrower does not vacate the property, the lender must apply for a warrant of possession with the Court to lawfully repossess the property.   

It is important to note that after repossession, the lender will typically sell the property to recover the outstanding mortgage debt. Any surplus proceeds of sale must be returned to the borrower, while any shortfall will remain the borrower’s liability.  

5. Seeking Legal Advice

Whether you are a borrower or lender, navigating a case of defaulted mortgage payments is far easier and more beneficial with reliable legal advice and support. As the above steps have shown, approaching this process in the right way early on can bring an earlier and more peaceful resolution, as well as protecting your interests should the case reach Court. 
 
Our dispute resolution solicitors are experienced in advising borrowers and lenders alike regarding any stage of the repossession process, ensuring your rights are protected and that any repossession proceedings are carried out fairly and correctly. 
 
We will work to your best interests, seeking a peaceful and beneficial resolution where we can. Get in touch and find out how we can advise and support you through the mortgage repossession process today.