Repossession is always a last case scenario, with most other options generally considered before any court will give a lender the right to repossess your home. However, it does happen, and if you feel it might happen to you then you’re probably going to want a little guidance regarding what happens, when it happens, why it happens and how you can make the process as painless as humanly possible.
What is Repossession?
Repossession is a legal process in which a lender (the bank more often than not) takes back ownership of a property because a mortgage, or other loan taken against the property, hasn’t been paid. Repossession generally occurs as a result of mortgage “arrears,” (owed money) which build up if you don’t or can’t pay off your mortgage at times when your payment is due. Before repossession proceedings begin, it will be up to your mortgage lender to explore all other avenues available to help you repay your loan. If they cannot come to an agreement with you, they are free to begin repossession proceedings. Once the lender has repossessed your home it will almost certainly be sold on in order to recoup their lost costs.
The Stages of House Repossession
Here, we’ll break down the stages of house repossession step by step in order to give you some idea of what to expect so you’re not caught off guard and are prepared for every eventuality. Remember that until step 6 there are still options available to you to delay or even halt the repossession entirely, so don’t give up hope until the bailiffs are at your doorstep. Even then, in fact, there are measures you can take, but hopefully it will never get that far.
Step One: Lender contacts you regarding mortgage arrears
The first step on the road to home repossession begins with your lender contacting you regarding mortgage arrears. Arrears refers to a state that a mortgage account falls into when a homeowner is unable to make their full monthly payments. Because part of that monthly repayment will be to cover the interest, the mortgage balance will increase and that leads to more interest being charged. Your lender is under a legal obligation to contact you with information regarding how to prevent repossession, so if you have fallen behind with your payments, the first thing they will do is simply ask you to sort out the problem. If you don’t respond, or the lender is unhappy with your response, then they will contact you again informing you that they intend to start court proceedings. Before it gets this far you could try negotiating with the lender, make payments towards your arrears, check your insurance (if you have fallen behind on payments due to an accident, illness or redundancy), check if you are eligible for government benefits, rent out your home or even sell it.
Step Two: Lender applies to court for possession order
If you and your lender cannot come to an agreement or you are simply unable to meet their demands then they will be able to apply to the court for a repossession order on your home. The lender is required to make a formal application to the local courts outlining the reasons they feel they are entitled to repossess your home. It is then up to the judge to make the final decision. It’s important to note that, without the express permission of the court, it is illegal for the lender to repossess your home outright. These laws were written to protect homeowners from predatory lenders and they could be your saviour, as throughout this process there are still steps you can take to fight it.
Step Three: Hearing date set
The court date where a judge will decide whether you or the lender has the legal rights to your home will be sent to you as a claim form, which will include the specifics of the claim made by the lender and a defense form for you to complete and return. At this point, you should begin preparing a defense, gathering evidence and even negotiating further with the lender and their solicitors, as chances are they will want to keep this out of the courts. If you can’t come to an agreement, however, you’ll want to sort yourself out some defensive representation. If you can’t afford a defense, there are advice centers that can help offer you support and valuable information.
Step Four: Judge hears the repossession case
At the hearing, the judge will hear evidence from both you and your lender and will use this information to come to an impartial decision. There is rarely a jury used in repossession cases, so the decision is 100% down to the judge. After both sides have made their case, the judge will come to one of four conclusions:
- Possession Order – This is a worst case scenario. It means the judge will have agreed that the lender has won the case and that you can be evicted from your home at a set date (generally around 28 days after the order is filed) and the lender can then sell the home on to repay your debts.
- Suspended Possession Order – This order is less severe, and means that you will be allowed to stay in your home as long as you abide by the conditions set out in the order. This will probably include repaying your mortgage arrears in installments.
- Adjournment – This will happen if the case needs to be postponed so that you and/or the lender can gather more information and take certain steps in order to make the case viable.
- Dismissal – A best case scenario. This means the judge will agree that the lender has no legal right to file a repossession claim against your home and the claim will be thrown out.
Step Five: Order made for repossession
If the judge grants your lender a possession order then the first thing they’ll do is set a date for you to leave. This will generally be 28 days, but will depend on each individual case. In most circumstances, you’ll be able to apply for more time to get your affairs in order, but not always. At this point there might also be court costs you’ll be ordered to pay. Note that at this point you can make an appeal to a higher court if you believe the judgement to be unfair; if the correct procedures were not followed or if you feel the judge made his decision based on false information or a lack of information. If a suspended possession order was granted, then it will be drawn up based on the terms agreed upon at the hearing.
Step Six: Bailiffs sent
If you do not leave by the court-ordered date, bailiffs can be sent to remove you by force. Bailiffs will also be sent if you have a suspended order filed against you, and you have neglected to stick to the terms within it. Note that the court can actually order you to pay the costs for the bailiffs that have been hired to evict you, so it’s in your best interest to be gone before they are called. The lender must apply for a bailiff’s warrant before they can legally be called, and you can challenge an eviction by bailiffs if you feel you have the legal grounds to do so.
Step Seven: Lender sells your home
Once you have moved out, the lender will begin the process of selling your home. After the sale, the lender takes what they are owed from the profits and you will receive any additional balance. If the money from the sale is’t enough to repay what you owe, you will have to pay the difference. This is known as a shortfall. If you can’t pay the shortfall, the only way out is to file for bankruptcy.
Taking out another mortgage after falling in to arrears can be difficult. There’s also the emotional distress and sheer inconvenience to consider. As such, repossession is something you really never want to have to experience. We hope that we’ve helped you to understand the repossession process a little clearer today.
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