With today's prevalent cost-of-living crisis, the year 2024 has recorded a 5-year high surge in mortgage repossessions across the UK. According to recent Ministry of Justice data, mortgage claims, orders, warrants, and repossessions have risen by 28%, 19%, 9%, and 4% respectively during the first quarter from January to March of 2024 in comparison to prior data from previous years.
This significant increase in repossession claims and orders, demonstrates the trends of instability that households experience as a result of increasing living costs and interest rates, thus making it difficult for homeowners to keep up with mortgage payments. If you are at risk of having your property repossessed, this article will navigate key points to help you understand and know your rights.
What is repossession?
If you miss your mortgage payments and you are not in agreement with your mortgage lender on a repayment plan, your mortgage lender might begin court action to repossess your home.
Mortgage lenders’ right to repossess
Pursuant to section 95 of the Law of Property Act 1925 (LPA), the law establishes that a mortgage lender, upon default of payment by the borrower, has the right to take possession of the mortgaged property to enforce repayment of the loan.
In the event of a default in payment, many mortgage documents may include express terms permitting the lender the right to sell the repossessed property. Given the situation where the deed is silent on the matter, section 101 of the LPA 1925 implies the lenders’ power to sell under section 104 of the LPA 1925 into the deed.
However, for lenders to enforce their rights, they must adhere to the Financial Conduct Authority (FCA) Mortgage Conduct of Business (MCOB) regulations which require them to complete certain steps before claiming possession as well as stipulating adherence to the Pre-Action Protocols (PAP) before issuing a claim of repossession. This provides borrowers with payments that have fallen into arrears an opportunity to remedy their situation or come to an agreement before court action takes place.
Before a repossession claim is issued
Typically, lenders pursuing repossession by court action should do so only as a last resort; the Pre-Action Protocol (PAP) for mortgage repossession reinforces this principle. The PAP aims to ensure lenders and borrowers act fairly and reasonably with each other in resolving matters regarding arrears. Additionally, the PAP encourages greater pre-action contact between lenders and borrowers to facilitate an agreement without the need for court involvement. Therefore, ensuring efficient use of the court’s time and resources.
Furthermore, the FCA Mortgage Conduct of Business (MCOB)13: Arears and Possessions, provides that process lenders are expected to follow strictly when seeking possession claims and managing mortgage arrears. In summary, these steps include notifying borrowers that have fallen into arrears within 15 days, such as missed payments, and any charges incurred as a result of the shortfall. Additionally, under MCOB 13 lenders are prohibited from exerting pressure tactics or excessive correspondence to elicit repayment and are required to make reasonable efforts to come to an agreement on a realistic repayment plan with consideration to the borrower’s financial situation. Further, lenders must not repossess the property unless all other reasonable attempts to resolve the situation have failed.
Contact Summerfield Browne Solicitors today
Borrowers facing risk of repossession should seek legal advice as early as they possibly can. Get in touch with our legal team at Summerfield Browne Solicitors to receive expert guidance and further details and advice for homeowners facing repossession.
