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| Housing Law |
| Legal advice for tenant |
Advice about tenants’ legal rights is basic and fundamental to ensuring access to affordable and secure housing. Housing problems such as leasehold or tenancy rights disputes or disrepair can have a devastating short- and long-term effect on individuals and families.
We recognise that as a tenant or leaseholder, a housing law issue may coincide with other problems such as unemployment, ill health or disability. Knowing your tenancy rights or duties and having appropriate legal help at these times can prevent the situation turning into a crisis.We also understand that in some cases you may have been unable to seek advice about tenancy |
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Arrears & Repossession
If you are facing arrears or threatened with repossession we may be able to assist you. Whether you're facing repossession, have missed a mortgage payment or just want to get clued up, finding out about repossession laws ensures you know where you stand. Like any other laws, they must be followed by the home-owner and the lender, no matter how far in arrears you may be with your mortgage repayments.
The important thing to remember about repossession laws is that they are there to protect you, the home-owner, from any unjust actions. They state that the mortgage lenders cannot just take your home away from you even if you are in several months of arrears and cannot afford to repay them. The first law of repossession your lender has to follow is that they must take you to court if they want to repossess your home and it is only a judge that can give the actual repossession order or have you evicted from your home.
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Lenders Pursuing You for Shortfall After Repossession
What happens to your mortgage debt after your home is repossessed?
After your lender takes your property into possession they have a legal duty to sell the property for the best price that can reasonably be obtained. The property will generally go on the market as soon as possible and your lender will get independent, expert advice on the price it should be sold for and the best method of sale.
If the sale of the property results in a surplus after all the money owed to the lender and any other secured lender has been repaid, then this surplus is returned you. Your lender should notify you of the surplus but if you cannot be contacted, the money will either be held by the court or your lender until you can be contacted.
But if the sale proceeds are not enough to pay off the money you owe to the lender, then there is a "shortfall debt" which you still owe your lender after possession.
Interest will usually continue to be charged on your mortgage loan until the property is sold and any shortfall is repaid. There will also be other costs charged to your mortgage account, including estate agents' costs in selling the property and legal costs.
What will the lender do if there is a shortfall debt?
If there is a shortfall, your lender will contact you as soon as possible after the sale of the property telling you that there is a shortfall debt. They will also let you know that the shortfall debt may be pursued by another company.
If interest is being charged on the shortfall debt, your lender will send you regular, written financial statements which will update you on how much you owe. It is important that you keep your lender informed of your new address after you leave the property so that you receive these statements.
The action that your lender takes will depend on the circumstances. A lender may or may not wish to seek repayment of the shortfall debt, but if they do they must notify you within six years.
How long after the repossession can lenders seek the recovery of the debt?
In England, Wales and Northern Ireland, a lender legally has 12 years to contact you to begin the process of seeking repayment of a shortfall debt; this period is usually 5 years in Scotland.
However, lenders are committed to fair and sympathetic treatment of people who have suffered repossession, and accept that individuals should not face long delays before being contacted to discuss repaying the shortfall. Most lenders will contact you fairly soon after possession to try to agree to a manageable arrangement for repaying all or some of the debt.
Lenders who are members of the Council of Mortgage Lenders voluntarily agreed from 11 February 2000 to begin all recovery action for a shortfall within six years of the sale of a repossessed property. If your property was taken into possession and sold more than six years ago, and you have not been contacted by your lender to recover any outstanding debt, you will not now be asked to pay the shortfall. In Scotland, lenders will begin recovery action within five years.
Does this time limit apply to every case?
The new time limit will not affect you if -
- you are already adhering to alternative payment arrangements for the shortfall debt;
- or, you have already been contacted by your lender, even if the initial contact was made by the lender after six years from the date of the sale of the property in possession.
The six year limit only refers to beginning recovery action and does not affect a lender's ability to recover the shortfall debt over a longer period. If there is evidence of mortgage fraud, the time limit will not apply.
After a repossessed property is sold, lenders can often find it difficult to contact former borrowers to advise them of any surplus monies or shortfall debt. If this is the case, your lender will use a variety of measures to identify where you are now living. This might include using tracing agents. If your lender or its third party agent are trying to contact you (for example, by letter or telephone) to discuss repayment of the shortfall, but you choose to ignore such contact (despite the fact that the contact is being made at your new address) then your lender will consider that contact has been made within the six year limit. If you are unclear whether contact has been made within the six year period, your lender will be able to tell you.
This is a general summary and the exact way your lender deals with you may depend on the type of mortgage and the date it was entered into. |
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