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What happens when your mortgage lender takes you to court
If you are in mortgage arrears, your mortgage lender will want you to clear them. If you don’t do this, your mortgage lender will start court action. This is called possession action and could lead to you losing your home.
However, don't panic, because you can stop this from happening. But you must take action straight away.
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.
For more information about how to negotiate an arrangement with your mortgage lender, see Dealing with your mortgage lender.
Even if it's not possible to stop the case from going to court, this doesn't necessarily mean that you will lose your home.
Your lender might want the court to grant a suspended possession order. This will allow you to stay in your home as long as you keep to an arrangement to pay off the arrears.
You may be able to argue that your lender has acted unfairly or unreasonably, or has not followed the proper procedures. This could help to get court action delayed or persuade the judge to issue a suspended possession order instead of an outright order which could lead to you being evicted from your home.
The important things to remember are:
- it's almost never too late to try and come to an agreement with your lender, even if court action has already started
- you can get free help and advice to deal with a claim for mortgage arrears
- if there's a court hearing, make sure you go to it. It may be the last chance you get to stop you from losing your home.
On the following pages you can find out:
- what happens when a mortgage lender starts court action
- how you can try to avoid the case going to court
- what a mortgage lender must do before they start court action
- what decisions the court can make and what these will mean for you
- how you can defend a claim for mortgage arrears
- how to change a court ruling after it has been made.
Second mortgages or secured loans
The information on these pages only deals with what happens when you are taken to court for arrears on a first mortgage on your property.
Some people take out second mortgages on their property to pay for things like home improvements, repairs, a car, or to pay off other debts.
You may also have taken out a loan from a bank or finance company, using your property as security. This is known as a secured loan.
If you are in arrears with a second mortgage or secured loan, the lender may start court action to try and get possession of your property. They will want to sell your property in order to pay off the loan.
If you are in arrears on a second mortgage or other secured loan, you should get advice from an experienced 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.
Your mortgage lender should not start court action against you without following the Mortgage Conduct of Business (MCOB) rules laid down by the Financial Conduct Authority (FCA). 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 got nowhere.
If you took out your mortgage from 31 October 2004 onwards, your mortgage lender has to follow the FCA rules when dealing with mortgage arrears.
If your mortgage lender doesn't follow these rules, you can complain to the Financial Ombudsman Service.
As well as following the FCA rules, your mortgage lender should go through certain other procedures before they start court action. These are called a pre-action protocol. If the case does go to court, the judge will take into account whether or not your lender has followed the protocol. This could affect the outcome of the case. For example, if your lender hasn't followed the protocol, you can use this to help you persuade the judge to grant a suspended possession order rather than an outright possession order.
From 6 April 2015 there is a new pre-action protocol, which sets out the procedures you and your lender must follow before the lender takes any court action.
What you must do
The main things you have to do are:
- keep in touch with your lender
- act fairly and reasonably with your lender
- try to sort out payment of your arrears.
What your lender must do
Under the protocol, your lender must give you information about your legal rights if you miss any payments. They must also:
tell you the total amount of your arrears
tell you how much is still left to pay on your mortgage or home purchase plan, and whether interest or charges have been, or will be added
where appropriate, give you the details or an estimate of the interest or charges that may be payable on your mortgage or home purchase plan
give you information on the current monthly instalments and the amounts paid for the last 2 years
where appropriate, provide you with the required regulatory information sheet or the National Homelessness Advice Service/Shelter/Cymru booklet on mortgage arrears
seek information about whether the property is occupied by an authorised tenant
discuss with you of your representative the cause of the arrears, your financial circumstances and proposals for repayment
advise you to make early contact with the local housing authority, and where appropriate, refer you to independent debt advice
- allow you a reasonable period of time to consider a proposal for payment made by them (also giving you enough detail for you to understand how it works and how it will affect you).
Your lender has to consider any reasonable request from you to change when or how you pay.
If you make an offer to repay the arrears, your mortgage lender must get back to you quickly with an answer. If they refuse your offer, they must let you know why in writing within 10 business days of the offer.
Your lender should not start court action while you are trying to come to an agreement.
For more information about trying to come to an agreement with your mortgage lender, see Dealing with your mortgage lender.
You can get help to talk to your lender if you need it, for example, from a Citizens Advice Bureau. You can also get advice about whether or not your lender has followed the protocol. To search for details of your nearest CAB, including those that can give advice by email, click on nearest CAB.
If you make an agreement to repay the arrears but don't keep to it, your mortgage lender will start court action. But they should tell you in writing that they plan to do this at least 15 working days’ in advance.
Don't ignore any letters from your lender or their solicitors. You can always get help to answer them, if you need it.
Under the pre-action protocol, your lender must consider not starting court action in certain circumstances. These are when:
- you have made a claim to an insurer under a mortgage payment protection policy, you expect the insurer will pay it, and you can pay a mortgage instalment not covered by the insurance; or
- you have made a claim to the Department for Work and Pensions (DWP) for Support for Mortgage Interest (SMI) or if appropriate Universal Credit (UC), and you expect to be eligible for payment, and you can pay a mortgage instalment not covered by your claim to the DWP; or
- you have applied to a local authority for help under a mortgage rescue scheme or other homelessness prevention support provided by the local authority, and you expect they will provide support
- you are struggling to pay because of another specific personal or financial difficulty and you need time to seek free independent debt advice, or you have a confirmed appointment with a debt adviser
- you take steps to sell your home and pay off the mortgage. You should get independent financial advice before doing this
- you are making a complaint to the Financial Ombudsman Service (FOS) about the way your mortgage lender has dealt with your arrears.
- you have a confirmed appointment with a debt adviser and you expect an improvement in your financial circumstances in the near future (e.g. a new job or increased income from a lodger).
Under the protocol, your lender should not start a possession claim while you are exploring an arrangement with them. This might include:
extending the term of the mortgage
changing the type of mortgage
deferring payment of interest due under the mortgage
capitalising the arrears
- making use of any Government forbearance initiatives in which the lender chooses to participate.
If your lender decides to start court action anyway, they should tell you this in writing.
For more information about mortgage payment protection policies, see Payment protection insurance in Credit and debt fact sheets.
For more information about how to claim help with your mortgage costs from the DWP, see Help with mortgage costs if you're out of work.
For more information about selling your home to clear the mortgage arrears, see Selling your property to clear mortgage debts.
If your lender starts court action, you will get a claim for possession of property from the county court. This will give you details about a court hearing and full details about the case against you.
Your lender should have followed a pre-action protocol first before taking this action. In some cases, they must also have followed Financial Conduct Authority guidelines. You should also have been contacted by your lender before court action is started.
If you haven't been contacted by your lender before court action, you should get advice from an experienced 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.
As well as the claim for possession from the county court, you should also get a notice from your lender saying that court action has been started. The notice won't have your name on it and will be addressed to 'the tenant or the occupiers'.
The particulars of claim will set out how much you owe your mortgage lender, how much you should be paying and what steps the lender has taken to collect the arrears. If there is any wrong or missing information on this form, you should tell the judge at the hearing.
Along with the claim form, there will be a defence form. You can use this to tell the court about your financial and personal circumstances and what attempts you’ve made to deal with the arrears. There’s also a list of the money coming in and out of your household for you to complete. This is so the judge can see how much you can afford to pay towards your arrears.
If you think you're not legally responsible for paying the mortgage, or you disagree with anything the lender has said in the particulars of claim, you should use the defence form to say why. Other things you might want to say in your defence include if:
- you were pressurized by your partner into signing the mortgage agreement
- you think your lender has treated you unfairly or unreasonably
- you think your lender hasn't followed the procedures under the pre-action protocol.
It is not a defence to say you can't afford to pay the mortgage
You should send the defence form back to the court before the hearing if possible, but don’t worry if you can’t – just take it along on the day. If the lender has completed an online claim, you can send your defence to the court online at: www.possessionclaim.gov.uk/pcol.
If you think you have a legal defence you should get help straightaway from an experienced adviser. A Citizens Advice Bureau should be able to help. To search for details of your nearest CAB, click on nearest CAB.
You’ll receive between three to eight weeks notice of the hearing, so there’s still time to try and come to an agreement with your lender.
But even if you do come to an agreement with your lender, this might not be enough to stop the case going to court. Your lender might want the court to grant a suspended possession order. This will allow you to stay in your home as long as you keep to the agreement to pay off the arrears.
It's essential that you attend the hearing even if the lender tells you that you don’t need to. If you don’t go, the court might grant an outright possession order which means you could be evicted from your home.
There are certain things you can do to prepare for the court hearing.
For more information about what happens at the court hearing and how to prepare for it, see Your mortgage lender takes you to court – how to prepare for the court hearing
If there are no complicated issues of law to decide, the judge will usually make a decision there and then, providing they have enough information.
If your case is more complicated, the judge may not be able to make an immediate decision. In this situation, the judge may put the case on hold (adjourn the case) and give directions about what will happen next. The court will confirm these directions in writing later.
The decision the judge makes at or after a hearing is called a judgment. The judge may make one of the following judgments.
Adjourn the case
An adjournment is when the judge puts the case on hold. The case could be adjourned for several reasons, including:
- to allow either side more time to provide more information
- to allow time for you to make a complaint to the Financial Ombudsman Service
- if your lender doesn't turn up at the hearing
- a general adjournment with no date set for another hearing. This could happen if you have paid off all your arrears by the time of the hearing. If you fall into arrears again, the lender can start proceedings from where they left off, rather than start from the beginning.
Adjournments can result in more costs for you to pay.
Dismiss or strike out the case
If, after hearing all the evidence, the judge isn't satisfied that your lender has proved they have a right to take possession of your property, they can dismiss the case. If the case is dismissed, you can ask the judge to make an order that your lender should pay their own legal costs.
If the judge makes an outright possession order, this means that your lender has been given permission to take possession of your property. You will have to leave by the date given in the order.
For more information about outright possession orders and what happens when you don't leave by the date on the order see Eviction for mortgage arrears.
If the judge makes a suspended possession order, this means that you will be able to stay in your home as long as you keep to an arrangement to pay off the arrears. The terms of the arrangement will be set out in the order. You will need to pay off the arrears at a fixed amount a week or month on top of your normal mortgage payment. You will need to be able to pay off all the arrears by the end of the mortgage term.
If you don't stick to the arrangement, your lender can apply to the court to evict you. You won't be told in advance if they do this.
For more information about what your lender can do if you don't keep to the terms of a suspended possession order, see Eviction for mortgage arrears.
In some cases, the judge will issue a suspended possession order to give you time to sell your home. They will only do this if you can make enough from the sale to clear the whole mortgage debt. This includes all the money you borrowed as well as your arrears.
For more information about selling your home to clear the mortgage arrears, see Eviction for mortgage arrears.
Make a money judgment
As well as a possession order, a money judgment can be issued by the judge at the same time.
A money judgment allows your lender to get back all the money owed on your mortgage.
This means that if your lender evicts you and isn't able to get back all the money you owe from selling the property, they can force you to make up the difference. They won't need to go to court again to do this.
If the possession order is suspended, the money judgment will usually be suspended as well. This means that it won't come into force unless you don't keep to the terms of the suspended possession order and your lender is allowed to evict you.
After the hearing, you may be able to change the order made by the judge. You may be able to:
Appeal against the order
If you believe that the judge was wrong to make a possession order, you may be able to appeal to a higher court. You may be able to do this if you think the correct procedures weren't followed, the law wasn't applied properly or the facts the judge used to make a decision at the hearing were wrong. There is a time limit of 21 days to apply.
If you think you have reasons to appeal, you should get expert legal advice.
For more information about how to get legal advice, see Using a solicitor.
Set aside the order
You may be able to apply to set aside the possession order. For example, if you had good reason for not attending the hearing and you have a defence against the claim.
If you think you have reasons to set aside the order, you should get expert legal advice.
Vary a suspended possession order
If the court has made a suspended possession order, you can apply to change (vary) the terms of the order. You might want to vary the terms if, for example, you can no longer afford to keep up the payments ordered or the sale of your property is taking longer than the court has allowed.
You can apply to vary the terms of the order on form N244. You can get this from the court or you can print one off from the Ministry of Justice website at: www.justice.gov.uk.
There will be another court hearing. You should attend the hearing with evidence to support your application.
For more information about the kind of evidence a court might need to see, see Your mortgage lender takes you to court – how to prepare for the court hearing.
Suspend an outright possession order
For information about suspending an outright possession order, see Eviction for mortgage arrears.
In mortgage cases, the lender is usually allowed under their contract to pass on all their recovery costs to you, the borrower. They do not need a court order to do this.
- court fees
- solicitors and barristers fees and expenses
- witness expenses.
Costs will be added to your mortgage account for every hearing.
The court may, however, be able to order that some or all of the costs are not added. For example, if the court thinks they are unreasonable or your lender has behaved unreasonably in starting possession proceedings.
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.
More information about mortgage arrears
For more information about how to deal with mortgage arrears see:
- How to sort out your mortgage problems
- The mortgage arrears fact sheet in Credit and debt fact sheets
- Your mortgage lender takes you to court – how to prepare for the court hearing
- Eviction for mortgage arrears.
On the National Homelessness Advice Service website
Go to www.nhas.org.uk.
The Money Advice Service
Financial Ombudsman Service
If you're not happy with the way your lender deals with your case, you can make a complaint to the Financial Ombudsman Service. You will need to use your mortgage lender’s internal complaints procedure first.
Financial Ombudsman Service
Consumer helpline: 0800 023 4567 (free for people phoning from a landline) or 0300 123 9123 (free for mobile-phone users who pay a monthly charge for calls to numbers starting 01 or 02) (Monday to Friday from 8.00am to 8.00pm; Saturday from 9.00am to 1.00pm)
Independent financial advice
If you have mortgage arrears and you are thinking about selling your home to pay them off, you should get independent financial advice. The following organisations can help you find an independent financial adviser:
Independent Financial Promotions (IFAP)