Repossession

Repossession refers to the legal process by which a lender takes ownership of a property due to the borrower’s failure to meet mortgage repayments. It is a way for the lender to recover some, or all, of the money they lent to the borrower. Here’s a step-by-step guide to the process

1. Missed Payments

Before repossession proceedings can begin, the borrower typically misses multiple mortgage payments. Lenders don’t generally start repossession actions after just one missed payment, but consistent arrears can trigger the process.

2. Pre-action Requirements

Before a lender can take court action to repossess a home, they must follow certain pre-action requirements, which include:

  • Providing the borrower with clear information about the terms of the loan, arrears, and any charges incurred.
  • Making reasonable efforts to agree on a repayment plan for the arrears.
  • Offering the borrower advice on how to obtain financial advice and information.
  • Taking account of any steps taken by the borrower to sell the property or to raise funds to clear the arrears.
  • In addition, in 2023 many lenders signed to the UK government’s ‘mortgage charter’, whereby lenders agree take additional steps to help borrowers stay in their homes. The most significant of the commitments in the charter is that a borrower in arrears should not be forced to leave their home less than a year from their first missed payment.

3. Issue a calling up notice

If the arrears aren’t cleared and no agreement is reached, the lender can serve a “calling up notice.” This gives the borrower a two-month notice, stating that they must repay the entire outstanding loan. If you don’t repay the loan or come to some other agreement then the lender can proceed to court.

4. Issue a Section 24 notice of intention to repossess

Under the Conveyancing and Feudal Reform (Scotland) Act 1970 the lender has to formally notify the borrower of their intention to repossess their property. This is known as a section 24 notice. They also have to notify the local authority of the calling up notice and their intention to repossess

4. Court Proceedings

If the borrower fails to comply with the calling up notice, the lender can apply to the court for a repossession order. This doesn’t mean repossession is guaranteed. A court will review the circumstances:

  • They’ll check if the pre-action requirements have been met.
  • They’ll consider whether it’s reasonable to grant a repossession order, looking at the conduct of both parties, and any alternative solutions
  • They’ll look at the circumstances behind the default and whether the borrower is likely to be able to repay the arrears and manage to pay the debt going forward.
  • The court can decide to grant a full repossession order, delay the order to allow the borrower time to pay off the arrears, or refuse the order.

5. Right to Appeal

If the court decides in favour of the lender, the borrower can appeal the decision, but this needs to be done promptly.

6. Eviction

If the repossession order is granted and the borrower hasn’t appealed or vacated the property, the lender will apply to the court to evict the borrower. The borrower will be given a date by which they need to leave the property. Sherriff court officers can also physically evict a person from a property who is refusing to leave

7. Sale of the Property

Once repossessed, the lender will sell the property, typically at a value to recover the debt quickly. If the sale price exceeds the outstanding mortgage and associated costs, the surplus is returned to the borrower. If it doesn’t cover the debt, perhaps because the borrower was in negative equity, the borrower remains liable for the mortgage shortfall.

Conclusion

Repossession is a last resort for lenders, and there are many steps along the way where agreements and solutions can be reached. If facing potential repossession in Scotland, it’s crucial for the borrower to communicate with their lender and seek independent advice as early as possible.

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