How does repossession work?
Repossession can be avoided and you should take all steps possible to make sure that you do not have your home repossessed unnecessarily. But if you have taken full advice and this is your best option, or no longer avoidable, it is important to have a full picture of the process.
We believe that repossession should not be a taboo subject, it does need to be spoken about. The process needs to be explained, as anyone’s financial situation can change and having a clear guide on how to handle repossession will help.
How does repossession work?
You can’t just be given an ‘order for possession’ and evicted from your house overnight. This will only happen at the end of a formal legal process, where there will have been opportunities for you to stop the repossession process or contribute to it.
Repossession is a legal process which will involve the courts and to which legal deadlines (sometimes called statutory timeframes) apply. We know that the idea of legal proceedings can be daunting, and you may feel too afraid to defend your rights. It can be very tempting to stick your head in the sand and ignore what is happening, but once the repossession process has started, it will not just go away. You should make sure that you understand what will happen and what you can do at each stage.
If you can, you should take legal advice and make sure that you are represented in all court proceedings. Please remember that the court and the judge are not on anyone’s side and will always listen to you if you write to the court, or even appear yourself.
What is the repossession process?
The repossession process is the formal process which lenders must follow in order to take your home and sell it. There are a number of steps which must happen before any lender can start the repossession process. Most importantly, the loan or borrowing must be secured against your home. This is obvious in the case of mortgages, which are already secured on your home, but it can be easily forgotten when you start to fall behind on other lending commitments. Unless you give a voluntary charge over your property (normally a very bad idea!), it is very difficult for any bank or lender to secure your borrowing against your house. This is a lengthy legal process in itself, and one which you can stop if you get in contact with the lender and the court, where necessary.
In order to ask the court for a charge over the property the lender must first have obtained a court judgement (CCJ) against you, and you must have ignored this. The simple answer is not to ignore demands for payment – even if you cannot pay, speaking to your lender can stop extreme action like court action or repossession.
Repossession proceedings only become likely when you have defaulted on your mortgage payments and are not cooperating with your lender to find another solution to pay your mortgage.You should know that mortgage companies do not want to repossess your home, they just want you to be clear and honest with them if you are struggling with your payments.
Repossession is long and expensive process for the lender to follow. They will not necessarily recover everything that you owe, and it will take them a long time to get back the costs of the repossession process. You will need to pay those costs, but if you cannot pay in full you may have these hanging over you for many years, meaning the lender does not get paid quickly. It is also much more difficult to sell a repossessed property for a good price. The lender knows all of this and will take steps to avoid repossession if at all possible.
Once the lender has made the decision to repossess your property, they start a legal process called enforcement. You should make sure you are familiar with this process and what you can do to stop repossession both before and during the process.
What happens during the repossession?
In the UK there is a seven-step process for the repossession of a house which we will guide you through step-by-step.
The overall process, and the time taken to complete, does depend heavily on your contact with the lender. Our advice is that you do not ignore them – pick up the phone as soon as possible and speak with them, it may not be too late to convince them to stop. If you cooperate, this could also gain you more time further on in the process. This is also a good way to negotiate with the lender, this could lead to stopping the repossession process altogether. That said, you should make sure that you take expert advice as soon as you are able. There are a lot of not-for-profit organisations who can help, even if you cannot afford the cost of a lawyer.
Step One – your lender will give you notice that they intend to apply for possession of your property.
This will be formal and in writing to your home address. It is likely to give you some options to avoid repossession, and a timeframe in which to take action. This may include paying arrears or coming to an alternative payment plan. Even if you are not able to take any of these actions, or even make any payment to your lender, DO NOT IGNORE THE LETTER from your lender (or any correspondence at any stage). By trying to forget the situation, it will only make it worse – the lender is not making empty threats at this stage and serious action will follow.
Here you should consider your options, especially if you can not carry on paying your mortgage. It is not too late to speak with your lender and to propose how you can deal with the arrears. They do not want to make you homeless and will help where they can.
Step Two – the lender makes an application to the court asking for permission to start possess proceedings.
This is when the lender will apply to the court for a repossession order. It is important to repeat that the court is not on anyone’s side, it is absolutely possible that a repossession application will be denied.A judge will never be in favour of making someone homeless if there are any other options. For more about stopping repossession proceedings please see our advice.
Step Three – the court sets a date for the hearing.
If the lender’s application is allowed, a date will be set in which you must appear in court. At this hearing it will be decided if your property will be repossessed. At this point you should seek legal advice to help you prepare for this hearing. You can represent yourself at any court hearing and should (unless you have a lawyer who can represent you). Even if you do not plan to oppose the repossession, this hearing will set out important information and timeframes, including the date that you must leave your home. You really must attend the hearing as you can influence all of these details. There could still be room for negotiation with your lender at this stage and there are steps you can take to defend and stop the repossession.
Step Four – a possession order is granted.
Whether you attend or not, the court session will go ahead. At this hearing, the judge make a final decision about the repossession of your home. If you do not go to the hearing, or try to defend the proceedings, your lender will be granted the repossession order.
There are usually only four possible outcomes:
- The lender will be granted a repossession order.
- There will be a suspended repossession order. This is where the judge will decide whether you will be given a second chance to keep your home. This will usually give you some time to come to alternative arrangements with your lender – if you do not keep up your commitments then your lender will already have permission to repossess your home.
- The case may be adjourned, which means it will be postponed until a later date.
- The case could be dismissed altogether. This can happen either because the lender has not followed the correct procedure or where you have been successful in defending yourself.
If the proceedings are dismissed, you have won and will keep your house. The lender cannot try to take your house again unless there are substantial and material changes in the position – but this does not mean that the original debt has disappeared, you still owe that money and should come to an arrangement to pay.
Once your case has been to court, the process tends to move a lot quicker.
Step Five – the timeframe for leaving your home.
If your home is being repossessed, then the judge will make a decision on the date by which you have to leave your home. You need to really think about your options here and where you are going to live once you have been asked to leave. A repossession order is not the same as an eviction warrant. If the judge has made an outright possession order, this order will set out the date by which you are required to leave your house. You should not leave before this date. If the lender has been granted a suspended possession order, you will not be required to leave your home unless you break the terms of that order. Where you do not leave your property by the deadline, the lender could apply to the court for a eviction warrant, which will be enforced by bailiffs.
Step Six – being evicted (highly avoidable).
You must leave your home within the time frame you are given.
A VERY IMPORTANT NOTE: you may feel at this stage that you have nothing to lose. You may be tempted to stay in your home until you are forced out, this is a very (very) bad idea. Defying an order of the court is never advisable. Do not forget that the cost of obtaining a warrant and evicting you will be added to your debt, this could add several thousand to the amount you are required to pay.
Step Seven – your property is sold.
Once your property has been repossessed, it will be sold on by the lender. This usually happens well below market value.
Up until the house is sold, you are still responsible for its upkeep including the mortgage interest, insuring the property, the costs of repossession including bailiff charges, court costs and the costs of marketing the house. This is the end of the repossession process, but unfortunately it is unlikely to be the end of your mortgage debt. You will owe the full outstanding value of the mortgage and any of the costs incurred by the lender (these can easily add up to tens of thousands of pounds), you will also still owe any other debts that were secured against the property.
The proceeds of the sale will be applied to these debts. If there is enough to pay them off, then any excess will be sent to you. If there is not enough money to pay everything you will still owe the shortfall and may be paying this for many years to come.
How long does it take to repossess a house?
The process of repossession can take anywhere from around six months to about a couple of years. The factors which can affect this include:
- Your relationship with your lender;
- If you try to stop the repossession;
- How busy the courts are;
- Whether you comply with the court’s orders in relation to eviction;
- The terms of the repossession granted by the court (eg when they say you must leave your property, or whether they give you an opportunity to avoid / delay repossession);
- If your personal circumstances change during the process (eg you fall pregnant or suffer bereavement).
There are many ways to stop possession of your property, or at least to delay this and give you a chance to pay.
Repossession is rarely the end of mortgage debt and is an extremely demanding process. You should make sure that you have expert help and advice if you are at all worried about the prospect of repossession or mounting mortgage debts.