Will the Court Give Me Time to Sell My Property?
When a court is deciding whether or not to make a possession order – and what sort of possession order to make – they will generally have one question in mind. Is the borrower likely to be able to clear the arrears in a reasonable time?
There are a number of ways in which a borrower might be able to clear the arrears. One of these is to sell the property to pay off the whole of the outstanding mortgage balance.
The Law on Mortgage Repossessions and a Proposed SaleMortgage repossession law is heavily influenced by previous cases. Often this case law can appear to be conflicting. There are broadly two different approaches that judges hearing mortgage repossession cases may take to a proposed sale.
The first approach is that judges may allow borrowers up to 3 months to sell the property before it can be repossessed by the lender. There is also case law which suggests that a borrower might be given as long as a year to sell property in order to pay off the mortgage debt. However, the latter principal related to a hypothetical scenario where a borrower who owned a large piece of land, such as a farm, might be able to sell it off in separate chunks over that period of time in order to reduce the debt owed to the mortgage company.
The second approach to a proposed sale by the borrower is stricter. This states that a mortgage lender should not be prevented from repossessing a property unless there is firm evidence that a particular sale is about to complete. The reasoning behind this is two-fold. Firstly, the starting point is that the mortgage lender is entitled to repossess the property. Secondly, a mortgage lender has a duty to sell the property for the best price they can get. Therefore, unless a sale really is on the verge of completion, the court should not interfere with the mortgage lender's entitlement to repossess.
The Approach Taken by Judges to Proposed SalesIn practice most judges tend to allow borrowers an initial 56-day period in which to sell the property before the lender can repossess it. If contracts are exchanged during this period the mortgage lender will generally be happy to wait for completion to take place. If the mortgage lender does issue a warrant of eviction, the borrower can apply to the court to stop the eviction going ahead until the sale completes.
Preparing for a Mortgage Repossession CaseMost judges do not expect to see evidence that a sale is about to complete. However, a judge could adopt a strict approach to the case law and borrowers should be ready to persuade the judge that the mortgage debt will be cleared more quickly if they are allowed to sell the property themselves. Now that the requirement for Home Information Packs has been abolished there is no real excuse for delay in marketing a property.
Any documents which show that a property is being marketed and / or that there has been interest in it should be brought to the court hearing. This includes letters from estate agents, proof that an offer has been received and letters from conveyancing solicitors regarding the timetable for completion. The more advanced a proposed sale is, the happier a judge (and the mortgage lender) will be to allow the borrower the time they need to complete the sale.
Judges have very wide powers when hearing mortgage repossession cases and different judges may take different approaches. Some judges may seem more willing to give borrowers the benefit of the doubt. Others may expect to see documentary evidence to support what the borrower says. It is always a good idea to err on the side of caution and come to court with all the documents that a judge might want to see.
Properties in Negative EquityThere is a major exception to the general principal that a borrower may be given time to sell their property. If the property is in negative equity the judge should not postpone the mortgage lender's entitlement to repossess it. The mortgage no longer offers sufficient protection to the lender because the property is worth less than the mortgage debt. By delaying repossession there is a likelihood that the gap between the value of the property and the mortgage debt will increase.
Even if there is negative equity it may be worth arguing that the borrower will get a better price if allowed to sell the property themselves. Judges may still allow a borrower some time to sell especially if the borrower has evidence of a sale at an advanced stage or of an ability to make up any shortfall.