Possession & Sale

A mortgage by deed gives the mortgagee the power of sale. This is implied by the Conveyancing Act. In addition, most mortgages by deed incorporate specific powers of sale supplementing the statutory power in detail.

In order to affect a sale, the mortgagee will usually require possession of the property unless surrendered. Where the property is tenanted, it may be sufficient to sell the property with the tenant in place.

The option to sell as above is available to any legal mortgagee. An equitable mortgagee will generally require a court order for sale. Regarding regulated buy-to-let mortgages after October 31, 2004:

The Mortgage Conduct of Business Rules 13.3 provides for substantive fair procedures as to how a lender must deal with a defaulting borrower. He must deal fairly with a customer who is in arrears, in a shortfall, or in breach of a home purchase plan. There must be a written policy dealing with this procedure.

The written procedure must include some reasonable efforts to reach an agreement regarding repaying the shortfall, adapting a reasonable time, approaching over time to a sale shortfall granting, unless there is a good reason otherwise, a request to change the repayment date and the method by which repayment is made, giving consideration to reasonable payment arrangements, and repossessing the property only when reasonable attempts to resolve the position have failed.

The rules provide that customers must be given a reasonable period of time to consider proposals for payments that are put to them. A regulated lender may consider extending terms, changing the type of loan, deferring payment of interest, rolling up payment short. The borrower should be given adequate information to understand the implications of the arrangement.

The Council of Mortgage Lenders has issued practice statements in relation to arrears and possession. A lender must keep records of all dealings with a borrower who falls into arrears.

The borrower must be given certain information as prescribed, including details of arrears, shortfalls, payments missed, outstanding debt, charges. The statement must be renewed if the customer falls into arrears again after having cleared the account.

Before commencing repossession, the lender must provide a statement of prescribed information. It must ensure that the borrower is aware of the need to contact the Housing Executive or Housing Association. It must take a statement of action it will take in relation to repossession.

While the account is in arrears, the lender must send regular statements of the payments due, shortfalls, and charges, including administrative charges, interest, and fees.

The FSA rules regulate the extent of contact which the lender may have. The contact must not be excessive or at unreasonable hours. Generally, they should be between 8 a.m. and 9 p.m. But account must be taken of the particular borrower’s known working pattern or religious faith. This may make contact within those hours unreasonable.

The borrower must be given the FSA information sheet on mortgage arrears as soon as practicable, and within 15 days of the lender becoming aware of the arrears, in any event. The information sheet suggests action which may be appropriate.

The FSA guidelines suggest appropriate action for the borrower, including emphasizing the particular need to contact the lender and possible solutions such as extension of loan term, changing the type of mortgage, exploring personal budget solutions, obtaining advice. It will set out a list of housing bodies that may assist.

It sets out some matters which are undesirable, such as immediate surrender using fee-based debt management companies, sale and rent back, or lending to repay. To state social security benefits which may be available. Selling the property is regarded as a last resort.

The county court has jurisdiction to hear cases where the NAV of the property is less than £500. Most recovery cases are taken in the high court. The Supreme Court rules provide that the chancery division deals with such claims. They are dealt with by the chancery master.

The Supreme Court rules set out procedures for the grant of an order for possession to a mortgagee.

If the property is a matrimonial or civil partnership hold, the non-owning spouse or the civil partner may register a notice. The family legislation requires that a notice be served on parties who are holders of such charges. The application is for possession of the property. The persons’ names are those in possession of the property. Generally, all borrowers will be joined as a party even if not resident. If there are —

The courts may order that a party who was not named by the lender be added to the preceding, whether he is in possession or a tenant. A form of notice is sent notifying the occupiers to whether he wished to be a party to the proceedings and giving the right to notify the master.

If the borrower’s personal representative has taken out a grant of probate or administration, he should be named. However, where no grant of administration is taken out, the state itself should be named.

The application must be made to the master to have a representative appointed. Where there are joint owners, the proceedings may be taken against the survivor.

The order seeks delivery of the property, costs, and ancillary orders. Strictly, the mortgage may provide for liability for costs.

Where the property is subject to the Rent Order 1978 and is a statutory protected tenancy, the court may make an order only if it is satisfied that it is reasonable to do so and that there is alternative occupation to the tenant or will be available to him.

An application for possession is based on an affidavit setting out the debt, mortgage, and the entitlement to enforce the mortgage. If the property is a dwelling house, this must be specified as there is separate special legislation dealing with them.

The statutory right to adjourn the proceedings must set out the state of the account. It must state whether it is a consumer credit act case. It should specify what steps should have taken to obtain security and inquiries made as for the identity of persons in occupation. It should specify whether there is a matrimonial charge registered. This should specify whether possession is required to sell the property.

If the defendant enters an appearance, he should file affidavit evidence within 14 days. The lender may wish to reply by affidavit, and a date for a hearing may be set on application.

There will be no ultimate defense unless there is some legal basis for under challenging the mortgage or the appointee. If the borrower does not appear, the bank/mortgagee may apply for judgment in default of appearance. Consent of court is required. The application must be made to the master.

Proof of the service of the proceedings must be given.

The application must be made to the master whether the application must be served on the borrower notwithstanding that he may not have entered an appearance. The defendant must be served at least four days beforehand. If he has entered an appearance, at least 14 days’ service as his notice.

If the property includes the dwelling house, there is a statutory right under the Administration of Justice Act 1970 to 1973, UK legislation. The lender is obliged to serve a special notice giving notice of the right in advance of the hearing. The form of notice advises the borrowers to take steps, including contacting housing rights or citizens, advise the bureau of preparing budgets of income and outgoings, working out a realistic proposal, filing details of a current proposed sale, attending to explain the circumstances, persons in occupation should be notified of the hearing.

At the hearing, the lender/mortgagor must have details of arrears, evaluation, details of conduct with conduct of the borrower, proof of service of the notice of application and the above form original mortgage.

A different procedure applies to possession in consumer credit cases. The default notices are required in advance of proceedings being instituted. It must contain certain details and give an opportunity to remedy the breach.

Certain information is to be included in the affidavit supporting the summons for possessions. Where a dwelling house is involved, certain powers arise similar to, but different from those in the Administration of Justice Act in respect of giving time and varying the terms of agreement. The above-mentioned rule form of notice in relation to possession of dwelling houses must be given.

Where there is no legal mortgage, a special procedure exists for possession until under an equitable mortgage. This may be required in the case of a mortgage by deposit of deeds.

The proceedings are against all borrowers. The proceedings seek the following: a declaration that the sums claimed are well charged and the interest of the defendant in the land; alternatively, an account of what is well charged on the land and an order that in default of payment within the time specified, the land be sold as the court may direct and that the defendant will have possession for such purposes.

The procedures are broadly similar to the above. A granting affidavit must show the basis of the debt, the default, and in this case, the equitable mortgage.

A creditor may seek an order for the sale of lands comprised in a charging order. A power of sale is conferred by a charging order, and the creditor may seek possession of the property with a view to selling it for such purposes.