Defending Mortgage Repossession: Your Rights at Court

The FCA's Mortgage Conduct of Business Rules (MCOB 13) require lenders to deal fairly with customers in financial difficulty. Specifically, MCOB 13.3 requires lenders to consider: payment holidays, capitalisation of arrears, term extensions, switches to interest-only, and other forbearance before initiating repossession. The lender must keep records of what was considered and offered.

If you have not had a meaningful forbearance conversation with your lender, the lender may be in breach of MCOB 13. This is a defence in court and a separate basis for a Financial Ombudsman Service complaint. The FOS can order the lender to take forbearance steps and award compensation. The FOS limit is £430,000 per claim plus £85,000 for distress and inconvenience.

The Pre-Action Protocol for Mortgage Possession Claims (PAP) is part of the Civil Procedure Rules. Before issuing court proceedings, the lender must:

1. Send written notice of the proposed claim, explaining the arrears, the next steps, and what the borrower can do.
2. Provide information about free debt advice services.
3. Allow the borrower a reasonable period to respond and propose alternatives.
4. Consider any proposal made by the borrower and respond in writing.
5. Allow the borrower a reasonable period to make payments under any agreed plan.
6. Confirm in writing the basis for proceeding before issuing.

Failure to follow the PAP can lead to the court refusing to make a possession order, awarding costs against the lender, or staying the proceedings. Always check the PAP compliance — a defective process is a defence.

The Mortgage Charter is a 2023 voluntary commitment from over 50 lenders representing 90% of UK mortgages. Charter signatories have committed to:

• Allow customers to switch to interest-only for 6 months with no affordability check and no credit-file impact.
• Allow customers to extend the mortgage term and switch back within 6 months with no affordability check.
• Give 12 months from the first missed payment before repossession proceedings, unless the customer asks otherwise.
• Allow customers to lock in a new fixed rate up to 6 months before their current rate ends.

If your lender is a Charter signatory (the list is at gov.uk and most major lenders are), insist on these options before any repossession action. Charter breaches can be reported to the FCA and the FOS.

If your case reaches court, possible defences include:

• Section 36 AJA 1970 — the court can adjourn, stay, suspend or postpone possession if you can pay the arrears within a reasonable time. "Reasonable time" can extend to the remaining mortgage term in some cases (Cheltenham & Gloucester v Norgan [1996]).
• Breach of MCOB 13 — the lender did not properly consider forbearance before issuing.
• Breach of the Pre-Action Protocol — the lender did not follow the required pre-issue steps.
• Defective notice — the lender's claim is procedurally defective (wrong amount, missing default notice under CCA 1974 for some loans, missing prescribed information).
• Negotiation in good faith — propose a payment plan in writing before the hearing. Most district judges encourage settlement and will adjourn for a few weeks to let a proposal work.
• Unfair relationship under Consumer Credit Act 1974 s.140A — for regulated mortgages, the relationship can be challenged as unfair (rarely successful but available).

If the court makes a possession order, it can be:

• Outright — you must leave by the date specified (usually 28 days). After that, the lender can apply for a Warrant for Possession; bailiffs (or High Court Enforcement Officers) execute it. You can apply for a stay of the warrant at any point before it is executed — even on the morning the bailiffs arrive — if your circumstances have changed.
• Suspended — you stay in the property provided you pay the agreed monthly amount (mortgage + arrears repayment). Miss a payment and the lender can apply for a Warrant without a further hearing.

Post-possession, the lender sells the property. The mortgage and reasonable costs are deducted. Any surplus is paid to you. Any shortfall is a debt enforceable against you under the Limitation Act 1980 — usually 12 years for the principal mortgage debt, 6 years for interest. Many lenders write off small shortfalls but pursue large ones. The shortfall debt can also lead to bankruptcy.