Consultation on repossessed property

Nia Williams

January 4, 2010

The Ministry of Justice’s paper sets out for consultation a provisional proposal that lenders should only be able to sell owner-occupied homes over which they hold mortgages with the prior approval of the court or the agreement of the borrowers. The consultation is aimed at property owners, lenders, their respective advisers and persons interested in the mortgage market in England and Wales.

The paper was announced in the Consumer White Paper in July 2009 and forms part of a wide range of initiatives by the Government to protect and support homeowners.

The loss of a home due to financial difficulties is a traumatic event for any individual or family. The Government considers repossession action should be a lender’s last resort after other options have been considered first. It also believes that borrowers should not lose their homes without the opportunity of receiving help from the courts. This consultation paper addresses some of the ways in which this might be assured.

The proposals would:

  • allow a lender to exercise the power of sale over residential owner-occupied properties only where they had obtained a court order of the consent of the borrower
  • only apply to residential owner-occupier mortgages and would not apply to buy to let or other commercial loans
  • not affect other remedies open to the lender
  • not change the practice in relation to the majority of cases where lenders already obtain an order for possession before selling
  • not change the practice whereby borrowers hand in the keys and the lender accepts them. In these cases no court order would be required.
  • provide legal certainty in the case of abandoned properties where the property appears deserted and the borrower cannot be contacted by requiring the lender to obtain a court order before selling

HM Treasury is holding a separate consultation on the regulation of the mortgage industry.

Information on the consultation can be found on the Ministry of Justice website: www.justice.gov.uk. It needs all responses by 28 March, with a response to this consultation exercise due to be published in Summer 2010 at: http://www.justice.gov.uk.

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