The Repossession process: a detailed guide
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1. Your lender writes to you about your arrears and repossession
After you miss you first monthly mortgage payment, your mortgage lender should contact you by letter to chase payment and ask you to resolve the problem. After you miss two monthly payments, your lender will start sending you further letters and warnings about the possible consequences of your delayed payments. Depending on the lender, your interest rate might be increased or an alternative penalty imposed for your payment delay. It is important that you respond in writing as soon as possible, detail your circumstances and make clear your intentions to pay. Dialogue and transparency is key, this can often buy you additional time to try and clear your arrears.
If you do not respond or the lender is not satisfied with your response, it should write to you again, warning you that it will start court action to repossess your home. The law requires your lender to notify you when they are starting repossession proceedings. Remember, you can negotiate with your lender at any of these points. Make sure you have considered all of your options to either increase your income or reduce your expenses, and put forward a proposal to your lender explaining how you intend on dealing with your mortgage arrears.
There are numerous ways in which you can save money to maximise your chances of meeting your mortgage payments and paying your arrears – please refer to our money saving section for tips and further help.
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2. Your lender applies to a court asking for a possession order
By law your mortgage lender cannot repossess your home without the permission of a court. To get this, the lender has to make an application to the local county court explaining why it wants a judge to grant the lender possession of your home.
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3. The court writes to tell you your hearing date
The court will set a date for your court hearing, where a judge will ultimately decide if you can stay in your home or if ownership will instead transfer to your mortgage lender. The court will send you various documents:
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The claim form (setting out your court hearing date)
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The particulars of claim (setting out the reasons your lender wishes to repossess your home)
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A defence form (for you to complete and return to the court)
It is very important to reply to the court using the defence form. If you do not respond the court will grant an order for your home to be repossessed.
At this point you should get advice about what to do next, prepare for the hearing, gather your evidence and negotiate with your lender. You could also try to settle the case out of court directly with your lender’s solicitors. You may wish to consider contacting us to discuss how we can help you, or calling us if that is easier for you.
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4. A judge hears your repossession case
The judge will hear evidence from you and your lender before making a repossession decision in a country court. The judge may rule in one of four ways:
Adjourn the case – this means the case is postponed for another hearing at a later date. The judge may tell you and the lender to work out certain steps before the judge reviews your case in court again.
Dismiss the case against you (‘strike out the claim’) – whilst unlikely this could occur if your lender has been acting against the law.
Suspended possession order – this allows you to stay in the property provided you adhere to certain conditions, agreed at the hearing, such as repaying the arrears in instalments. Keep in mind your lender can still evict you if you break any of these conditions.
Order for possession – this means the judge has ruled in favour of your lender and given permission for repossession. You can be evicted if you do not leave your home by the date that the judge decides and your lender can sell the property to settle your outstanding mortgage debt. Please refer below for further detail.
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5. The court makes an order for repossession
If the judge decides that your home is to be repossessed, a possession order will be granted. The judge will decide a date when you have to leave, and the court order will state when this is. In most cases this is a fixed timeframe, judges normally allow 28 days from the date of the court hearing, but could allow you more or less time than this. You may also be ordered by the judge to pay legal costs of your lenders solicitor and the court costs.
At this point it is important you do not get consumed by fear or negativity, it is not too late to stop repossession of your home and we may still be able to help by arranging for your arrears to be settled or purchasing your home. The speed at which you act is critical at this stage so please do act now if you are at this stage!
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6. Bailiffs are sent to remove you if you do not leave your home
If you are still in your home after your Order of Possession notice period has passed or you default on a Suspended Order of Possession, your lender can apply to the court for formal eviction and for the courts bailiffs to remove you. Your lender cannot simply send anyone to remove you from your home, the court must grant your lender a bailiff’s warrant.
You will receive a date and time from the court and bailiffs as to when you must leave. The court bailiff may arrive with a representative of the lender and a locksmith to take formal possession of your home. Bailiffs must behave professionally and cannot resort to any physicality when they arrive. If you still do not leave when the bailiffs arrive, they are permitted to call the police to remove you.
Even until the day of your eviction, we may still be able to help you so please contact us quickly if you have not yet been evicted. It is not too late to make new financial agreements with your lender. Even from the day the court issues a repossession order up until the day of your eviction, you can still continue to make negotiations with your lender about easier ways to settle your arrears.
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7. Your mortgage lender sells your home
Following repossession, after you have voluntarily left your home or been removed by bailiffs, your mortgage lender will take steps towards its sale. You will still be liable to pay interest on your mortgage until it is sold, which may take many months. Do not confuse possession with ownership, you are still the legal owner of your home therefore will still be liable for other ongoing obligations such as insurance, council tax, repairs, maintenance, and water, gas and electricity bills.
Lenders will typically sell your home at auction, often at a substantial discount to its market value. You will also be liable for the auctioneer’s fees, estate agent fees incurred in advertising the auction, and all legal and other costs associated with the sale. Many vacant repossessed houses can lose their resale value as they start to deteriorate. Mould, rodents and rust are particular risks. For these reasons it can be highly beneficial to sell your house on your terms before the lender takes repossession. Please refer to our FAQs for further detail on how we can help or purchase your home from you before this occurs, without any additional costs to you.
After the sale, your lender will keep the money it is owed and will pay you anything that is left over. If your home is sold at a price that is not enough to cover your mortgage debt, you will still be liable to your lender for this remaining debt, commonly referred to as “shortfall debt”.
If you are unable to pay the shortfall or were in negative equity prior to the sale (i.e. your mortgage debt was higher than the value of your home), you may have to declare bankruptcy. If you are made bankrupt, your possessions and assets will likely have to be sold and much of your income diverted to pay your creditors, leaving only a reasonable amount of money to help with your living expenses. There will be numerous restrictions imposed on how you conduct your financial affairs, including your ability to borrow money or run a business. For example, being bankrupt makes it very difficult for you to secure any credit, loans or a mortgage in future.
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Final word
Reflecting on the steps above it is evident and highly advisable that you take actions at the right times to prevent repossession, or more critically face financial ruin through bankruptcy. In almost all cases it is never the fault of the home owner and tracing the steps back often proves this. What started out as a missed mortgage payment because you were waiting for a payment yourself, were in hospital, suffering temporarily reduced earnings or redundancy, navigating divorce or separation, loaned money to help loved ones only to see it never returned, or interest rates simply moved against you, can quite easily spiral into repossession, eviction and increased debt.
Everyone has tough times. You should not be punished for matters outside of your control, nor should you punish yourself. Be positive. It is a common saying that “good manners are free” but so is a positive state of mind. Long before the letters to the lender, negotiations, court appearances, fighting eviction and so forth, be confident in yourself. Approach the period with a positive outlook - it is not the first time someone has been in your situation and won’t be the last. It is not as if this is a crisis that has no cure and you are trying to develop the remedy for the first time. There are tried and tested solutions and they will be available to you.
Talk to your lender, most will give you a chance to explain yourself. The law dictates that we all have a right to be heard. Above all else your situation will always be better when things are in your control – choosing the car you buy is always better than being forced to purchase one with no say, having the choice to wear and buy whichever clothes you wish to is always better than being forced to, right down to being able to choose the TV channel and show you wish to watch, what meal to eat, and so on. The same principle applies to your home. Stay in control. Repossession can be devastating, but it can be avoided. We survived, and so will you.
Know the facts. Feel free to speak to us, speak to estate agents, speak to other advisors, and be sure to draw on the abundance of resources, knowledge and advice made available by the government. Please refer to our useful links for easy access to these resources.
We wish you all the best on your journey and if there is anything at all you feel we help you with, please do not hesitate to get in touch.
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