What Are the House Repossession Laws?

If a homeowner falls behind with mortgage repayments there’s a real worry the bank or mortgage lender could repossess the property. Technically a person who misses one payment is “in arrears” — but repossession does not happen overnight. Mortgage lenders are bound by certain laws and regulations that aim to ensure homeowners are treated fairly.

If you have overdue mortgage repayments, the best plan of action is to gain a better understanding of your situation and the house repossession laws. There may be some steps you can take to remedy the situation and keep your home.

What Does “Repossession” Mean?

If a homeowner cannot make their mortgage repayments, they are in arrears. Most lenders allow a 15-day grace period before contacting the borrower to find out what the problem is. It may be possible to agree on a short-term repayment plan that allows the borrower to get back on track financially and resume normal repayments after a fixed period.

If the homeowner’s financial difficulties are unlikely to change and they continually miss repayments, the lender is entitled to pursue repossession of the property in court. If permission to repossess a property is granted, the lender can sell your home to recover the money owed. The homeowner will be “evicted” from the property, meaning they have to move out.

How Common Is Repossession?

According to the Ministry of Justice, mortgage repossession claims increased by  15% in April to June 2023 when compared to the same period in 2022. In the three months of April to June,  3,986 households had a repossession claim made against them. The Money Charity estimates that as of August 2023, a home is repossessed every 3 hours and 35 minutes in the UK.

Repossession is to be used as a last resort, yet it is a real and present danger for many.

What Do the House Repossession Laws Say?

All mortgage lenders are regulated by the Financial Conduct Authority (FCA). They must abide by the FCA’s Mortgage Conduct of Business (MCOB) rules, which stipulate how lenders must deal with their clients.

The MCOB rules apply to any mortgage contract entered into after 31 October 2004. The regulations cover a broad range of lender activities, including arrears and repossessions. The purpose of the rules is to ensure lenders treat their customers fairly. A lender should only seek repossession of a property where all reasonable attempts to resolve the situation have failed.

Alternatives to repossession that your lender should consider include:

• Delaying interest payments
• Extending the mortgage term
• Switching you to a different type of mortgage
• Adding the arrears onto your total mortgage debt.

If none of these alternatives is possible or helpful, the borrower should be allowed time to sell the property.

Selling a house on the open market can take months. Waiting for a buyer to come along while facing repossession is a stressful experience and one most homeowners are keen to move on from as soon as possible. The good news is that there are quicker ways to sell a home. Using a house buying service such as House Buyer Bureau can speed up the house selling process dramatically, allowing the homeowner to repay their debts and make a fresh start. We can give you a fast cash offer, regardless of the condition or location of your property and funds can be in your bank account in as little as seven days. Contact us to find out more.

If you cannot agree on an alternative payment plan with your lender and you choose not to sell, court proceedings are likely to follow. According to the UK Government website, a lender must take the following steps before starting repossession proceedings:

• Tell you how much you owe.
• Consider your proposals for remedying the situation.
• Respond to any offers of payment you make.
• Provide reasons for rejecting an offer of payment within 10 days.
• Allow a reasonable amount of time for you to consider any proposals they make.
• Give a 15-day warning before starting court action.
• Tell you the date and time of a repossession hearing.
• Let your council know within five days of receiving notification of the court hearing date.

If repossession proceedings begin, you will receive a “defence form”, which you can use to provide the court with reasons why the lender should not repossess your home. The court will also send you additional forms along with a hearing date.

Are the Repossession Laws Different in Scotland?

Yes, the laws in Scotland are different. Repossession is still a last resort option for lenders and is usually only taken after all other options to address problems have been tried and failed. When a lender applies to the Sheriff’s Court for a property to be repossessed, they have to demonstrate that they have explored other options and given the owner ample opportunity to bring arrears up to date and maintain mortgage payments going forward. 

What to Do If You are at Risk of Repossession

If you’re in arrears with mortgage repayments, you may be able to delay or stop your home from being repossessed. Remember your lender should only submit a repossession claim as a last resort. They must allow you to make reasonable proposals to repay any money owing and resume regular repayments. Even if your lender starts court action, you may still be able to agree on an alternative arrangement with them and cease proceedings.

You must understand your position and seek professional advice about your options. Free advice is available from various organisations such as Citizens Advice, National Debtline, Shelter and your local council.

Speak to your lender, explain the situation and try to come to an alternative repayment agreement for a fixed period.

Assess your finances and make savings where possible. There may be additional sources of income to be explored, such as taking in a lodger or applying for benefits.

If your financial situation is unlikely to change any time soon, making ongoing mortgage repayments impossible, consider selling the property. A quick guaranteed sale will allow you to repay any money owed to the mortgage lender and move into a more affordable property or rented accommodation. You can start afresh, debt-free.

Contact us for your quote today.