12 February 2012
This information applies to Scotland only
If you have mortgage arrears, your mortgage lender will want you to clear them. If you don’t do this, your mortgage lender could start court action to repossess the property to sell it. If your lender started court action after 30 September 2010 it has legal responsibility to take reasonable steps called pre-action requirements to find an alternative to repossession. If your lender started legal action before 30 September 2010, for example you have been served with a writ you will need to get legal advice because the procedure for prepossession will be different. A lender should also comply with the standards set down by the Financial Services Authority for how to handle mortgage arrears. These include trying to negotiate a new repayment structure with you as an alternative to taking proceedings to repossess, and devising a repayment plan tailored to your individual needs. The code of guidance also advises that a lender should only repossess the property when all other reasonable attempts to resolve the position have failed.
You may be able to stop the case from going to court by negotiating an arrangement with your lender. You can get free help to do this.
You can also get help to talk to your lender if you need it, for example, from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
For more information about how to negotiate an arrangement with your mortgage lender, see Dealing with your mortgage lender.
If you have already had an arrangement with your lender and this has broken down you may be facing legal action to repossess the property. Even if an arrangement has broken down the lender can still try another arrangement to avoid evicting you.
If it's not possible to stop the case from going to court, this doesn't necessarily mean that you will lose your home. There are procedures that must be followed, beginning with notices that you must be sent by your lender to warn you that repossession procedures are starting.
Don’t ignore letters from your lender. The letters will provide details of the legal action being taken and they are very important because they explain the time limits in which you have to respond. There are different time limits for you to respond to in the different procedures.
You should get some legal help to make sure that you follow all the procedures and have the best chance of not losing your home. It is particularly important that you have legal representation if you disagree with the lender about the amount of arrears that you owe. You could be eligible for help with legal costs both for advice before any court hearing and for representation at the court hearing.
See Using a solicitor and Help with legal costs.
If you are the tenant or lodger of a private landlord, you could find yourself facing eviction if they fall behind with their mortgage payments. See Repossession by your landlord’s mortgage lender.
From 30 September 2010 lenders must complete a series of steps called the pre-action requirements which demonstrate that reasonable efforts have been made to find way of dealing with your mortgage arrears without resorting to court action to repossess your home. The lender must:
For more information about pre-action requirements see www.keepingyourhome.co.uk.
If you took out your mortgage from 31 October 2004 onwards, your mortgage lender has to follow the FSA rules when dealing with mortgage arrears.
Your mortgage lender should not start court action against you without following certain rules laid down by the Financial Services Authority (FSA). The rules say that your mortgage lender must treat you fairly and give you a reasonable chance to make arrangements to pay off the arrears, if you are able to. They must consider any reasonable request from you to change when or how you pay. Your mortgage lender should only start court action as a last resort, if all other attempts to collect the arrears have failed.
If your mortgage lender doesn't follow these rules, you can complain to the Financial Ombudsman Service.
When you have mortgage arrears for the property you live in there is a number of procedures the lender can use to start repossession proceedings. This action will usually only be taken if you have already had several warnings by letter asking you to deal with the arrears. The procedures involve writing to you to ask you to pay back the arrears and warning you that further legal action will be taken if you don’t. The form that the letters take and what they ask you to do are:
From a UK Supreme Court judgement on 24 November 2010 it has been decided that the only legal route to start a repossession is with a calling up notice. If you have had taken action against you by a notice of default or an initial writ get specialist advice from a CAB adviser or Shelter.
It should explain clearly in the letter which procedure is being followed.
For more details about the action the lender can take see www.keepingyourhome.co.uk.
If you have arrears on a loan for which your home is a security (a secured loan or a second mortgage) the lender may be able to demand the whole amount of the loan or second mortgage. If you have this type of loan or a business loan you should get advice from an experienced money adviser. You can get money advice from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
If you have not come to an agreement with your lender to repay the arrears and the lender can prove that it has met the pre-action requirements it will apply to the court to repossess your home.
It's worth remembering that it is almost never too late to try and come to an agreement with your lender.
Even if your lender been awarded a decree to evict you, you might still be able to come to an agreement that would allow you to avoid eviction.
Your repossession case must be heard in court unless you have decided to opt for voluntary repossession. The person with the mortgage and other occupants known as entitled residents can appear in court.
For more information about voluntary repossession see Selling the property or handing back the keys.
The entitled residents are:
If your relationship with the owner or the person with the mortgage has broken down and they have moved out you will still be able to apply to suspend the lender’s action if:
Your lender has to tell you that you have these rights or the notice to take legal action for repossession is illegal.
For more details about your rights see www.keepingyourhome.co.uk.
When a lender serves you with a notice to repossess the property you live in, it has to also let the local authority know that it is taking this action and that you might end up being homeless. The local authority has specific legal duties to you if you are homeless.
This notice is called a section 11 notice. The local authority may get in touch with you to offer support and advice about housing. It may also get in touch with the lender if you want it to try to work out a solution. If you have not received a section 11 notice and the legal action is progressing get in touch with the local authority's housing department.
More detail about a section 11 notice on www.keepingyourhome.co.uk.
There will be a court hearing for repossession. It is advisable to have a solicitor or an approved lay representative to represent you. If you use a solicitor you might be entitled to help with legal costs, particularly if you are not working.
You should definitely attend the court hearing. Lots of people might choose not to go because they are very anxious about the process and too embarrassed about having mortgage arrears.
It is important to go to make sure that your legal representative or approved lay representative does everything that can be done to protect your position.
Don't worry - you will not have a criminal record or be at risk of going to prison because you have a repossession case at the sheriff court. You will not be evicted from your home on the day of the court hearing.
If you think that you can clear all of your mortgage arrears in a short amount of time, you can ask for the court to give you time to do this. This is called asking for the case to be continued. If your case is continued, another date will be set for your case to call back at court. If you have cleared all the arrears, no further action will be taken, but if you have not kept to the agreement, the sheriff will then decide whether your lender should be allowed to repossess the property.
You or your legal or lay representative will be asked to explain:
Your lender will have legal representation. The solicitor should tell the court:
The court can make a number of decisions about the case for repossession and your application to suspend the lender’s action. In summary the court can:
For more detail about what happens in court and what decisions the court can make see www.keepingyourhome.co.uk.
You can also get help from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
If you or one of the entitled residents did not appear and was not represented in court when the decree was granted you can ask the court to recall the decree. The sheriff will consider at the case again.
The lender has a decree to repossess the property and to evict you. It is never too late to negotiate with your lender. If it has a decree it may be prepared to let you have a bit more time. You will probably have to make a new offer of payment towards the arrears and a plan for how you can continue paying the mortgage to avoid being evicted. You can ask the court to recall the decree if you did not appear or were not represented in court when the decree was granted.
Once the court has granted a decree you will usually be given 14 days to leave the property. If you have not left by the date of repossession you will receive a letter from sheriff officers telling you when they intend to evict you on behalf of the lender.
It may only be a few weeks before you have to leave the property. You should get some advice and support from an experienced adviser to help you to:
For help and advice, go to the Scottish Legal Aid and Shelter website at www.keepingyourhome.co.uk.
You can also get help from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
The date of the eviction is when the property is repossessed by the lender. It can then be sold. The sheriff officers will make sure you have vacated the property then they will secure it to ensure that you can’t get back in.
A representative of the lender may also attend so that they can repossess the property. It is normal practice for the locks on the property to be changed to stop you re-entering.
If the sheriff officers arrive when you are not at home and change the locks, and your possessions are still in the property, you will need to contact your lender. Your lender should then arrange to let you into the property to collect your possessions.
More information about eviction see www.keepingyourhome.co.uk.
You can also get help from a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
The lender has repossessed your property to sell it. It is still your property and you are still liable to pay the interest on the outstanding loan, buildings insurance and repairs until it is sold.
Your lender has a duty of care towards you when selling your property. This means that they must get the best price that they can for it. However, in practice, lenders often sell properties at auction, and repossessed properties sold in this way often sell for less than they would on the open market.
If you believe that you have been treated unfairly by your lender, for example, because they took a long time to sell your property and your arrears went up because of this, you should complain to the Financial Services Ombudsman.
For more information about the Financial Ombudsman Service see How to use an ombudsman in Scotland.
Once your lender has sold your property they will:
If the money from the sale of the property is not enough to repay what you owe, you will have to pay the difference. This is called a shortfall. The lender will send you a bill for the shortfall. The lender may go to court to force you to pay this amount.
If you don't pay off the mortgage shortfall and then buy another property, the lender of your first property may apply to court for powers to force you to pay back the shortfall. This could include making you bankrupt.
If there is a shortfall after your property has been sold, you should get advice from an experienced debt adviser, for example, at a Citizens Advice Bureau. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
In mortgage cases, the lender is usually allowed to pass on all their recovery costs to you, the borrower. They do not need a court order to do this.
Costs include:
Costs will be added to your mortgage account for every hearing.
The court may be able to order that some or all of the costs are not added. For example, if you are getting legal aid. However the terms of your mortgage agreement might entitle the lender to recover its costs from you.
The situation may be different if you are getting legal aid. Your solicitor will be able to tell you more about this.
For more information about legal aid, see Help with legal costs.
For more information about finding a solicitor, see Using a solicitor.
If you’ve been evicted for mortgage arrears, you may have problems taking out another mortgage. This is because details of any payments you have missed are held on file by credit reference agencies, such as Experian or Equifax. Mortgage lenders will contact them to find out whether you have a good credit rating.
Your past credit history may not stop you taking out a mortgage, but if you still owe money on a mortgage and try to take out another one, you may have difficulty getting a loan.
If you're not happy with the way your lender deals with your case, you can make a complaint to the Financial Ombudsman Service. The Financial Ombudsman Service is independent and impartial. It will decide if the lender has acted fairly in your case. It may take a few months for your case to be settled. You will need to use your mortgage lender’s internal complaints procedure first.
South Quay Plaza
183 Marsh Wall
London
E14 9SR
Tel: 0845 080 1800
Fax: 020 7964 1001
E-mail: complaint.info@financial-ombudsman.org.uk
Website: www.financial-ombudsman.org.uk
Website: www.unbiased.co.uk
Tel: 0117 945 2470
E-mail: enquiries@financialplanning.org.uk
Website: www.financialplanning.org.uk
E-mail: customer.serv@thepfs.org
Website: www.findanadviser.org
Disclaimer, copyright and privacy policy, Copyright © 2012 Citizens Advice. All rights reserved.
