Understanding repossession law

In order to obtain a loan, most lenders will require some form of security from the borrower. Security is a charge over an asset which, on default of the repayment of the loan, can be repossessed and sold in order to pay off the remainder of the loan. A mortgage is a charge over property and a common form of security for obtaining a loan.

Repossession law governs what happens when a borrower defaults on their loan repayments. The repossession and sale of a property is used by the lender as a last resort to retrieve the money owed under the loan.

If a lender decides to repossess a property which is residential in nature, the borrower can apply to the court to have the repossession deferred under s.36 of the Administration of Justice Act 1970. In order for the court to agree, the borrower must prove they will be able to pay the arrears within a reasonable time. A reasonable time can be up to the whole term of the mortgage. The court must also be convinced of the borrower’s ability to maintain future repayments of the loan.

However, due to the High Court’s decision in a case involving Horsham Properties, if a borrower is behind on their loan repayments, the lender may be able to sell the residential property without a court order. This means the new owners of the property can then evict the borrower, who has effectively become a trespasser in their own home, and repossess the property.

Repossession law is currently under review by the Government. The Home Repossession (Protection) Bill 2009 is currently being examined by Parliament. This bill will offer extra protection to borrowers facing the repossession of their home and, if passed, will overrule the judgement in the Horsham Properties case.

If you are facing repossession, or are worried about your ability to keep up future loan repayments, an expert property solicitor who specialises in repossession law should be consulted as soon as possible.

If you would like to obtain legal advice on repossession law, Contact Law can put you in touch with a local specialist property/ repossession law solicitor free of charge. So, if you have any questions or would like our help in finding local property / repossession law solicitors please call us on 0800 157 7566 or complete the web-form above.