Understanding repossession law


In order to obtain a loan, most lenders will require some form of security from the borrower. Security is a charge over an asset which, on default of the repayment of the loan, can be repossessed and sold in order to pay off the remainder of the loan.

A mortgage is a charge over property and a common form of security for obtaining a loan.

Repossession law governs what happens when a borrower defaults on their loan repayments. The repossession and sale of a property is used by the lender as a last resort to retrieve the money owed under the loan.

If you are threatened by repossession of your property, the key is to act quickly.

Residential property repossession

If a lender decides to repossess a property which is residential in nature, the borrower can apply to the court to have the repossession deferred under s.36 of the Administration of Justice Act 1970.

In order for the court to agree, the borrower must prove:

  • They will be able to pay the arrears within a reasonable time. A reasonable time can be up to the whole term of the mortgage
  • Their ability to maintain future repayments of the loan

However, due to the High Court’s decision in a case involving Horsham Properties, if a borrower is behind on their loan repayments, the lender may be able to sell the residential property without a court order. This means the new owners of the property can then evict the borrower, who has effectively become a trespasser in their own home, and repossess the property.

Changes to repossession law

Repossession law is currently under review, with the Home Repossession (Protection) Bill 2009 being examined by Parliament. This bill will offer extra protection to borrowers facing the repossession of their home and, if passed, will overrule the judgment in the Horsham Properties case.

Many homeowners have been able to avoid repossession proceedings by resorting to the Government's Support for Mortgage Interest Scheme (SMI), under which unemployed individuals can get assistance with their mortgage interest payments.

The scheme kicks in after a waiting period, which until 2009 was set to 39 weeks. However, with the economic crisis and increased unemployment, the waiting period was lowered to 13 weeks. Industry specialists have said that this lower waiting period, combined with better conditions for borrowers, are amongst the principal reasons as to why repossessions have decreased.

The Government is considering bringing the waiting period back up to 39 weeks, which has been discouraged by many specialists as such an increase is likely to see a rise in court actions as more people would be at risk of losing their homes.

If you are facing repossession, or are worried about your ability to keep up future loan repayments, an expert property solicitor who specialises in repossession law should be consulted as soon as possible. For more information on instructing a solicitor to help you, see our information page on housing solicitors.

Do you need to speak to a solicitor about stopping your house from getting repossessed? Contact Law can put you in touch with a specialist property solicitor to help you deal with the matter head on. Please call us on 0800 1777 162 or complete the web-form above.

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