When a mortgage lender faces serious arrears, it will seek to protect its position and recover the amount owing. This will normally involve the repossession of the property. Once the property is repossessed, the lender will exercise its power of sale. It acquires the power of sale if the legal date for the redemption of the mortgage has passed. It can exercise the power if:
- a written notice has been sent to the borrower requiring payment of any monies due and three months have passed without the outstanding sum being paid in full;
- there are more than two months’ arrears; or
- the borrower has breached another term of the mortgage – for example, breaking a covenant not to sublet or run a business from the premises.
If the lender obtains an order for repossession of the property, it will then seek to sell it with vacant possession. When this course of action is taken, it becomes responsible for the maintenance of the property from the date on which repossession is granted. The lender owes the borrower a duty of care and is accountable to them for its conduct in dealing with the sale, but that duty does not extend to obtaining the best possible price on sale – it must obtain the ‘true market value’ or ‘proper price’. In general, as long as the lender obtains a valuation of the property and exercises reasonable judgment, and does a reasonable job in marketing the property, it will have done its duty.
If you are behind with your mortgage payments, it is essential to take professional advice. There may be ways in which you could deal with mortgage arrears or debts which would allow you to continue to live in your home. It is important to act as soon as you are aware of the problem. The longer such matters are left, the more difficult it can be to resolve them satisfactorily.
If you are having problems managing your personal finances, contact us.