Possession Claims by Mortgages

Date Added: 11 February 2009

If you think that due to your personal circumstances you are likely to fall into arrears on your mortgage repayments, a new pre-action protocol (guidance issued by the courts recommending how the parties to mortgage repossession claims should act) for mortgage possession cases has been issued and took effect from 19th November 2008 with the intention of making possession proceedings in the case of mortgage arrears a “last resort”.

As long as you follow the guidance, you should be given ample time by your lender to seek legal advice. We can give you advice on the implications of the guidance, and what you should be doing, and be expecting your lender to be doing, to comply with its terms.

The key provisions of the guidance are as follows:

Initial contact and provision of information

Where the borrower falls into arrears, the lenders should provide the borrower with certain information, including:

• (a) the total amount of the arrears;
• (b) the total outstanding of the mortgage or the home purchase plan; and
• (c) whether interest or charges will be added, and if so and where appropriate, details or an estimate of the interest or charges that may be payable

The lender and borrower must act fairly and reasonably and all communications must be clear, fair and not misleading. The parties must discuss the cause of any arrears, the borrower's financial circumstances and proposals for repayment. The lender must give reasons if payment proposals are rejected within 10 days of the proposal.

Postponing the start of a possession claim

Major lenders agreed with the government in late 2008 to allow three or six months before beginning possession proceedings against homeowners who have fallen into arrears with mortgage payments.

Under the guidance, the lender must consider postponing commencing possession proceedings where the borrower is in the throes of making a claim under a payment protection insurance policy, or reasonable steps are/are about to be taken by the borrower to market the property. If the lender in all events decide not to postpone possession proceedings they should inform the borrower of the reasons for the decision at least 5 business days before starting proceedings.

Alternative dispute resolution
Under the guidance, the courts take the view that starting a possession claim is "usually a last resort" and should not normally be started when settlement is actively being explored.

Compliance
Parties should be able, if requested by the court, to explain the actions that they have taken to comply with the guidance.

If the lender has not complied with the guidance then:

• the interest they are allowed to charge on any specified sum (for arrears) they are awarded may be reduced
• they may be prohibited by the court from adding all or part of their costs of the possession proceedings onto the mortgage debt, which they would usually be allowed to do under the terms of the mortgage deed. If the lender has flagrantly disregarded the guidance the court may even order that the lender pays the borrower’s legal costs in the proceedings.

To arrange an appointment for an interview to discuss your personal circumstances and advice regarding complying with the guidance, please contact our reception on 01233 625711 or alternatively contact Marcus Self on m.self@hallettandco.co.uk

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