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Pre-Action Protocol for Possession Claims based on Mortgage Arrears in respect of Residential Property


1.1 In this Protocol-
(a) ‘possession claim’ means a claim for the recovery of possession of property under Part 55 of the Civil Procedure Rules 1998;

(b) ‘home purchase plan’ means a method of purchasing a property by way of a sale and lease arrangement that does not require the payment of interest;

(c) ‘bank holiday’ means a bank holiday under the Banking and Financial Dealings Act 1971;

(d) ‘business day’ means any day except Saturday, Sunday, a bank holiday, Good Friday or Christmas day; and

(e) ‘authorised tenant’ means a tenant whose tenancy is authorised as between the borrower and the lender.

2.1 This Protocol describes the behaviour the court will normally expect of the parties prior to the start of a possession claim within the scope of paragraph 3.1 below.

2.2 This Protocol does not alter the parties' rights and obligations.

2.3 It is in the interests of the parties that mortgage payments or payments under home purchase plans are made promptly and that difficulties are resolved wherever possible without resort to court proceedings. However in some cases an order for possession may be in the interests of both the lender and the borrower.

3.1 The aims of this Protocol are to -

(a) ensure that a lender or home purchase plan provider (in this Protocol collectively referred to as 'the lender') and a borrower or home purchase plan customer (in this Protocol collectively referred to as 'the borrower') act fairly and reasonably with each other in resolving any matter concerning mortgage or home purchase plan arrears; and

(b) encourage more pre-action contact between the lender and the borrower in an effort to seek agreement between the parties, and where this cannot be reached

3.2 Where either party is required to communicate and provide information to the other, reasonable steps should be taken to do so in a way that is clear, fair and not misleading. If the lender is aware that the borrower may have difficulties in reading or understanding the information provided, the lender should take reasonable steps to ensure that information is communicated in a way that the borrower can understand.

4.1 This Protocol applies to arrears on –

(a) first charge residential mortgages and home purchase plans regulated by the Financial Conduct Authority under the Financial Services and Markets Act 2000 (as amended by the Financial Services Act 2012);

(b) second charge mortgages over residential property and other secured loans regulated under the Consumer Credit Act 1974 on residential property; and

(c) unregulated residential mortgages.

4.2 Where a potential claim includes a money claim and a claim for possession this protocol applies to both.

4.3 The protocol does not apply to Buy to Let mortgages.


Initial contact and provision of information
5.1 Where the borrower falls into arrears the lender must provide the borrower with –

(a) where appropriate, the required regulatory information sheet or the National Homelessness Advice Service booklet on mortgage arrears;
(b) information on the current monthly instalments and the amounts paid for the last 2 years; and
(c) information concerning the amount of arrears which should include –
(i) the total amount of the arrears;
(ii) the total outstanding of the mortgage or the home purchase plan; and
(iii) whether interest or charges will be added, and if so and where appropriate, details or an estimate of the interest or charges that may be payable.

5.2 The lender should also seek information about whether the property is occupied by an authorised tenant.

5.3 The lender must advise the borrower to make early contact with the housing department of the borrower's Local Authority and, should, where relevant refer the borrower to appropriate sources of independent debt advice.

5.4 The parties, or their representatives, must take all reasonable steps to discuss with each other the reasons for the arrears, the borrower's financial circumstances and proposals for repayment of the arrears (see paragraph 7.1). For example, parties should consider whether the reasons for the arrears are temporary or long-term, and whether the borrower may be able to pay the arrears in a reasonable time.

5.5 The lender must consider a reasonable request from the borrower to change the date of regular payment (within the same payment period) or the method by which payment is made. The lender must either agree to such a request or, where it refuses such a request, it must, within a reasonable period of time, give the borrower a written explanation of its reasons for the refusal.

5.6 The lender must respond promptly to any proposal for payment made by the borrower. If the lender does not agree to such a proposal it should give reasons in writing to the borrower within 10 business days of the proposal.

5.7 If the lender submits a proposal for payment, the borrower must be given a reasonable period of time in which to consider such proposals. The lender must set out the proposal in sufficient detail to enable the borrower to understand the implications of the proposal.

5.8 If the borrower fails to comply with an agreement, the lender should warn the borrower, by giving the borrower 15 business days notice in writing, of its intention to start a possession claim unless the borrower remedies the breach in the agreement.

Postponing the start of a possession claim
6.1 A lender must consider not starting a possession claim for mortgage arrears where the borrower can demonstrate to the lender that the borrower has –
(a) submitted a claim to-
(i) the Department for Works and Pensions ('DWP') for Support for Mortgage Interest (SMI) or if appropriate Univesral Credit; or
(ii) an insurer under a mortgage payment protection policy; or
(iii) a participating local authority for support under a Mortgage Rescue Scheme, or other means of homelessness prevention support provided by the local authority,
(iv) and has provided all the evidence required to process a claim;
(b) a reasonable expectation of eligibility for payment from the DWP or from an insurer or support from the local authority or welfare or charitable organisation such as the Veterans Welfare Scheme or Royal British Legion;
(c) an ability to pay a mortgage instalment not covered by a claim to the DWP or the insurer in relation to a claim under paragraph 6.1(1)(a) or (b);
(d) difficulty in respect of affordability or another specific personal or financial difficulty, and requires time to seek free independent debt advice, or has a confirmed appointment with a debt adviser and
(e) a reasonable expectation, providing evidence where possible, of an improvement in their financial circumstances in the foreseeable future ( for example a new job or increased income from a lodger).

6.2 If a borrower can demonstrate that reasonable steps have been or will be taken to market the property at an appropriate price in accordance with reasonable professional advice, the lender must consider postponing starting a possession claim to allow the borrower a realistic period of time to sell the property. The borrower must continue to take all reasonable steps actively to market the property where the lender has agreed to postpone starting a possession claim.

6.3 Where, notwithstanding paragraphs 6.1 an 6.2, the lender has agreed to postpone starting a possession claim, the borrower should provide the lender with a copy of the particulars of sale, the Energy Performance Certificate (‘EPC’) or proof that an EPC has been commissioned and (where relevant) details of purchase offers received within a reasonable period of time specified by the lender. The borrower should give the lender details of the estate agent and the conveyancer instructed to deal with the sale. The borrower should also authorise the estate agent and the conveyancer to communicate with the lender about the progress of the sale and the borrower's conduct during the process.

6.4 Where the lender decides not to postpone the start of a possession claim, it must inform the borrower of the reasons for this decision at least 5 business days before starting proceedings.

Further matters to consider before starting a possession claim
7.1 Starting a possession claim should normally be the last resort and such a claim must not normally be started unless all other reasonable attempots to resolve the position have failed. The parties should consider whether, given the individual circumstancesof the borrower and the form of the agreement, it is reasonable and appropriate to do one or more of the following-

(a) extend the term of the mortgage;

(b) change the type of a mortgage;

(c) defer payment of interest due under the mortgage; or

(d) capitalise the arrears; or

(e) make use of any Government forbearance initiatives in which the lenderchooses to participate.

7.2 Where there is an authorised tenant in occupation of the property, at the possession hearing the court will consider whether—

(a) further directions are required;

(b) to adjourn the possession claim until possession has been recovered against the tenant; or

(c) to make an order conditional upon the tenant’s right of occupation

Complaints to the Financial Ombudsman Service
8.1 The lender must consider whether to postpone the start of a possession claim where the borrower has made a genuine complaint to the Financial Ombudsman Service (‘FOS’) about the potential possession claim.

8.2 Where a lender does not intend to await the decision of the FOS, it must give notice to the borrower, with reasons, that it intends to start a possession claim.

Pre-Action Protocol Checklists: Form N123

The 50th Update of the Civil Procedure Rules introduced a new N123 Checklist.

The checklist must be completed by all claimants (lenders) or their representatives and two copies must be brought to the hearing - one for the court and the other for the defendant (borrower). Claimants can copy the contents of the form onto their own systems, but the form must not go beyond two sides.

The purpose of the checklist is to assist District Judges in checking compliance wth some of the key requirements of the Protocol. In practice, it is only anticipated that the checklist will need to be produced for the first hearing.

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