What Is Repossession?
Repossessions and foreclosures
are different things.
The definition of repossession
proceedings is: litigation begun in a court of the United Kingdom
by the lender or landlord for purposes of recovering possession
of property that is occupied by the debtor or tenant as her or
his main or sole residence.
Repossession (UK): The lender "takes back" the property,
sells it, uses the proceeds to pay off the amount owed to it,
and then sends the balance to the borrower. In the Building
Societies Act 1997 the lender has to "take reasonable precautions
to obtain the true market value of the mortgaged property". They
don't need a Court Order, 'though that is the norm. They need
not sell the place via an auction. This is good, as they may thereby
get a better price.
Foreclosure (UK): They "take back" the property, sell it,
and keep the entire proceeds. This can only be done via a Court
Order, and is highly ususual nowadays; usually only repossession
orders are granted.
A property will be not be repossessed over one or two missed
payments. You must, however, communicate with your lender
ASAP. Tell them what is happening, and what you will do to
make it up.
Note: "Handing back the keys" is a myth. It does nothing to stop
a repossession.
Fortunately, in the UK, there is the Prevention of Homelessness
Act. It protects residents of England and Northern Ireland.
It prevents mortgage repossession from actually making a
person or family homeless.
Briefly: The court can suspend that eviction or mortgage repossession
order to give that person or family time to find a reasonable
alternative place to live, if the property is their sole dwelling.
You make an application to the Court. The judge has wide discretion
as to how long the suspension lasts.
The law is that a court can decide to suspend the repossession
for mortgage arrears, or eviction for unpaid rent, to prevent
you from sleeping rough or having to live in a place unfit for
humans.
The court can actually change the rate of interest that the debtor
is paying if that is a reasonable thing to do to prevent repossession
and homelessness. The rate can't be less than that set by the
UK Department for Work and Pensions. The court can also waive
fees and charges associated with the loan, and even legal and
court costs.
Further, the mortgage may be paid by public assistance. All of
this is at the Court's discretion.
You would be unwise to rely on this to save your home.
What happens in a repossession:
They send you a letter or telephone you to remind you about your
missed payments. Now is your chance to reach an agreement with
them and catch up on your arrears while continuing to repay your
mortgage.
If you ignore them, or no agreement is made, and if the arrears
continue for four to six months, they'll refer your account
to a solicitor. Full payment will be demanded. You will be warned
of repossession. You must contact the solicitor at this stage.
You should try to come to an agreement with the solicitor
if you can't pay the arrears and repay the loan.
After six months, or sooner, the repossession proceedings will
start. A County Court hearing will be set and it would be in your
best interest to attend, unless you don't mind losing the house.
Before the County Court will even consider granting a possession
order it first has to be satisfied that every avenue has been
explored by the lender and borrower.
A number of decisions are possible at this hearing:
1. The case could be adjourned to another date.
2. If the arrears are paid in full then it can be dismissed.
3. There can be a suspended order for repossession. If you can
pay off the arrears a bit at a time and maintain monthly instalments,
the repossession can be suspended.
4. It can grant an outright possession order. The lender can take
possession of the property which will usually happen within 28
days.
Later: If you still default after a suspended order, or you haven't
moved out of the property after the date given, you will then
be served with an eviction order. The court will give a time and
date when you have to be out of the property. On that date a court
representative along with a bailiff will turn up to take your
property formally.
Once the lender has vacant possession, they will then change the
locks, disconnect utility services, and inform the local police
of the possession.
Even after the repossession, the borrower can still redeem
the mortgage up until the point of sale. This can sometimes happen
if the borrower can organise a remortgage.
If the property is sold, and the lender loses money on it, it
may take further action if it believes the borrower has the financial
means to make good the loss i.e. you can still be hounded for
the remainder.
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