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.

You might be able to stop the case from going to court by negotiating an arrangement with your 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.

The court might agree 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 might 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 negotiating an arrangement with your lender 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, negotiating an arrangement with your lender
• 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 this page 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 to change a court ruling after it has been made

What your lender must do before starting court action

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.

Your mortgage lender must follow the FCA rules when dealing with rent arrears - unless you took out your mortgage before 31 October 2004.

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. 

Pre-action protocol

You and your lender must follow certain procedures before your lender takes any court action - this is called a pre-action protocol.

If your lender takes you to court, they must complete a checklist to confirm they followed the protocol. Your lender must give copies of the checklist to you and the judge.

If they haven't completed a checklist, they must give the court a clear reason. The outcome of the case might be affected if the court isn't satisfied with your lender's reason. For example, you could use this to persuade the judge you shouldn’t have to pay the lender's costs.

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 or 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)

You can read the pre-action protocol in full on GOV.UK.

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.

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. If you need help answering your lender's letters, talk to an adviser.

When your mortgage lender can delay starting court action

The pre-action protocol says your lender should consider avoiding court action if you:

• 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
• applied for a Support for Mortgage Interest (SMI) loan or Universal Credit (UC), you expect your application to be successful, and you can pay a mortgage instalment not covered by your SMI or UC
• applied to your local council for homelessness prevention support and you expect they will provide support
• are struggling to pay because of another specific personal or financial difficulty and you need time to get free independent debt advice, or you have a confirmed appointment with a debt adviser
• take steps to sell your home and pay off the mortgage - you should get independent financial advice before doing this
• are complaining to the Financial Ombudsman Service (FOS) about the way your mortgage lender has dealt with your arrears
• booked an appointment with a debt adviser and you expect an improvement in your financial circumstances in the near future - for example, 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.

You might be able to get an SMI loan if you get benefits - check if you can apply for an SMI loan.

For more information about selling your home to clear the mortgage arrears, see Selling your property to clear mortgage debts.

Your lender starts court action

You might be treated differently depending on when your lender started court action against you.

You can find out what happens when your lender starts court action and how to challenge the possession.

If there's a court hearing

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

The judge might also put the case on hold if:

• you haven't been able to get legal advice - for example, you were in hospital
• moving out of your home would cause serious problems because of your health 

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.

Make an outright possession order

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.

Make a suspended possession order

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. If the court agrees, you’ll get an eviction notice 14 days before the eviction date.

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 without having to take you to court again.

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.

Changing a possession order after the hearing

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.

You can find a solicitor on the Law Society’s website.

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 download the N244 form on GOV.UK or get one from the court.

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.

Costs

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.

Costs include:

• court fees
• solicitors and barristers fees and expenses
• witness expenses

Costs will be added to your mortgage account for every hearing.

The court might, however, be able to order that some or all of the costs are not added. They might do this if they think the costs are unreasonable or your lender has behaved unreasonably in starting possession proceedings. For example, if your lender didn’t follow the pre-action protocol.

The situation may be different if you are getting legal aid. Your solicitor will be able to tell you more about this. You can:

• check if you can get legal aid
• find a solicitor on the Law Society’s website

Further help

More information about mortgage arrears

For more information about how to deal with mortgage arrears you can read:

• How to sort out your mortgage problems
• Your mortgage lender takes you to court – how to prepare for the court hearing
• Eviction for mortgage arrears

National Homelessness Advice Service

Go to www.nhas.org.uk.

The Money Advice Service

Go to www.moneyadviceservice.org.uk.

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.

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)

Website: www.unbiased.co.uk

Institute of Financial Planning (IFP)

Email: enquiries@financialplanning.org.uk
Website: www.financialplanning.org.uk

Personal Finance Society (PFS)

Email: customer.serv@thepfs.org
Website: www.findanadviser.org