29. Lender's Legal Rights And Remedies Flashcards
What are the 5 legal remedies that lenders are able to take?
- Sue for possession
- Exercise the Power of Sale
- Sue on the borrower’s personal covenant for recovery of debt
- Appoint a receiver
- Foreclosure
Which is the most common legal remedy?
Sue for possession and exercise the power of sale
What body must the lender petition to to receive a possession order?
County Court
What is an Outright Possession Order?
Lender can take possession within 28 days
What is a Suspended Possession Order?
Borrower must make payments in accordance with the court’s decision. If they don’t, the court then grants a Final Possession Order.
What is the third decision a that can be made in relation to possession orders (other than outright possession and suspended possession order)?
Adjourn or suspend the case.
What is the date of possession?
The date granted by the court when the lender is allowed to repossess the property. Borrowers to vacate by this time or be subject to bailiffs.
The relationship between lender and borrower is not over once possession has taken place. Name the 3 ways in which there is still a potential relationship.
- The lender has a duty of care to the borrower
- The borrower is still allowed to settle the mortgage debt up until the lender exchanges contracts with a new buyer.
- The lender must pass any surplus from the sale on to the borrower.
In which circumstances can the lender exercise the power of sale without going to court to gain possession? (3)
- If the mortgage is not paid within 3 months of serving notice to the borrower requiring full repayement
- The borrower is more than 2 months into arrears.
- The borrower breaches a non financial mortgage covenant
How often is the power of sale exercised? What must the lender do if it does occur?
Very rarely for residential property. Lender must take care to obtain a “proper” price.
Why is exercising the right to sue the borrower on their own personal covenant not a very popular remedy?
The borrower may not have the personal finances to pay
What is the right to appoint a receiver? What type of properties does this apply to?
For properties being rented out. The receiver collects the rent directly from the tenants and gives it to the lender to reduce the overall debt.
Who can be an appointed receiver? Who appoints them? Who are they an agent for?
Anyone can be a receiver. They are appointed by the lender and can even be an employee of the lender. However, they act as an agent of the borrower, and have a duty to manage the property in the borrower’s best interests.
What is the remedy that is no longer used today? Explain what it is and why it is no longer used.
Foreclosure - when the borrower forfeits all rights to the property, allowing the lender to sell the property and keep any surplus after debt is settled. The borrower is not able to settle the debt after possession. No longer used as it is deemed unfair.
What must lenders follow before formal possession proceedings can take place? What type of property does this apply to?
The Ministry of Justice’s Pre-Action Protocol for Possession Claims. For residential properties.
