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Ask Clare Your Own Question
Clare, Solicitor
Category: Property Law
Satisfied Customers: 34898
Experience:  I have been a solicitor in High Street Practise since 1985 with a wide general experience.
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If a bank sends a final demand, then do not act on it at

Customer Question

If a bank sends a final demand, then do not act on it at all, do they lose the right (in law) to recover the debt after a certain time?
Our mortgage lender sent a "formal demand" letter in November 2012 after we had failed to pay our mortgage for just over one year.
We told them we could not pay, offered to negotiate and asked them for details of the repossession process and have records of calls we made and attempts we made to sort it out.
However, to cut the story short, the lender simply did not act on the "formal demand" threat at all or put it into court or make attempts, say, to force a sale.
We also tried to find out more about their repossession process as it all was very frightening, the not knowing what might happen, and I have records of meetings and telephone calls of us requesting details of the repossession process but we never got it at all so to date we do not know what the lender's process is.
Bizarrely, we have simply continued not to pay and they have continued not to make good on their formal demand.
To date, we have continued to live in the property, in effect, mortgage free, but no action whatsoever has been taken to get us out by the bank, though they are fully aware of the situation and it has been a huge worry to us.
In March 2015, approx. 2 1/2 years later, we received a second final demand and the lender has now (as of July 2016) lodged the debt with the court.
We have pointed out to the bank that this is the second time they have issued this threat and they are conveniently ignoring the fact that it is a repeat performance but have still not clarified the process or anything surrounding it.
I would like to understand if, in the circumstances (i.e. they did not act on the original demand at all) we can conclude that they are "out of time" to recover the debt?
I know we may have been a bit naive and maybe we should have written to them and said something like "if you don't repossess now we will consider the debt null and void" which we didn't do, but in the circumstances, what is the best way forward as the law stands?
Submitted: 1 year ago.
Category: Property Law
Expert:  Clare replied 1 year ago.

Thank you for your question

My name is ***** ***** I shall do my best to help you.

It is bad news I am afraid

Where there is a mortgage there is no Time Limit at all.

You have been lucky and given substantial extra time to address the issue - selling the house yourself if necessary, but that time has now come to an end.

This is the point at which you now need to plan your next step.

It would be much more financially effective to sell the property yourself rather than wait for the Mortgage Lender to repossess

Please ask if you need further details

Customer: replied 1 year ago.
How does fair treatment of the person with the mortgage by the lender come in? After threatening to foreclosure/repossession, is there nothing that forces the lender to act in a timely fashion?
Expert:  Clare replied 1 year ago.

I am afraid that in these circumstances the Mortgage Company would be sen as being fair since it gave you extra time to deal with the problem.

Customer: replied 1 year ago.
We appreciate the point you are making. If this is the defence that the lender will give, can you tell us what acts or laws you, and the lender eventually, are referring to.
Expert:  Clare replied 1 year ago.

The lender does not have to give any defence.

They hold a Charge on Your property.

If you do not take steps to settle the Charge they can apply for repossession

Whether they do it immediately or two years later is immaterial

Customer: replied 1 year ago.
Can you let me have a reference to the law that applies here, please.
Expert:  Clare replied 1 year ago.

Which particular part - I ask because there is a fair amount of legislation and I need to know which part you wish to have details of?

You can find the pre action protocol clearly explained here

Customer: replied 1 year ago.
Other than the pre-action protocol, which actual laws does the lender have to follow to effect a repossession?
Expert:  Clare replied 1 year ago.

The process is described here

and here

The basic law is still contained in the law of Property Act 1925 (as amended)

Customer: replied 1 year ago.
I've been looking through my mortgage files and comparing them to the buying process details I can find online and there seems to be something odd in that we were never given an Offer in Principal by the lender nor were we given a formal mortgage offer, nor was a formal offer sent to our conveyancing solicitor ( at least, none is in his files and we have a "complete" copy of them)
In fact, there was a survey and we did get a copy of the report (not sure if our solicitor got one, I don't think he did becasue we sent it to him later) .
Anyway,I understand that the offer normally would be sent about the time the valuation report was completed. This never happened with us, we never got an offer letter at all and I know our mortgage document was only put together shortly before completion (ie, 3 days before) and that was the first time we had seen it so we never had time for a cooling off period or anything..Is that normal ? clearly we are in dispute with the lender now so something has gone seriously wrong with the mortgage, but what is the significance of not getting a mortgage offer?
Expert:  Clare replied 1 year ago.

Was this a first or second mortgage, when was it taken out and what has "gone wrong" with it?

Customer: replied 1 year ago.
This was the first and only mortgage we took out for this property when we bought it in 2009.
Ultimately, we are trying to work out what went wrong with the mortgage. The lender is not behaving in the way you would expect a lender to behave (i.e. either negotiate a new agreement or foreclose/repossess): he is simply sitting there waiting for us to take him to court while the mortgage isn't being paid.
Expert:  Clare replied 1 year ago.

Who is the lender and was it mean to be a short term bridging loan?

What was the amount borrowed and over what term?

Why have you stopped making payments an dhow did you plan to pay off the capital?

Customer: replied 1 year ago.
Hello Clare.
I don't really want to name the lender on the public internet, however, suffice it to say, it was a well known high-street bank.
The amount borrowed was 70% loan to value over a 25 year term, so no bridging or short-term loan. The loan took into account the performance of the business that came with the house (I say house advisedly, I'm living here) in that the lender required a cash-flow-projection for the business to show that the loan was payable by the business.
Almost immediately after moving in, it became clear that the business could not possibly sustain the loan and after two years in which the lender promised to help and restructure the mortgage again and again but ultimately refused, it was simply no longer possible to pay the mortgage; therefore payments stopped at that point. That was in 2011.
A sale of the property is not possible for the amount that the lender is demanding from us as the lender's valuer - as it turns out - overvalued the property by about 112%, i.e. giving it a value more than twice what it was actually worth.
Expert:  Clare replied 1 year ago.

Right - that is indeed avery different story.

How much is the property actually worth an dhow much is outstanding on the mortgage.

Why are you not making token payments?

have you asked for a copy of the actual mortgage offer?

Customer: replied 1 year ago.
The property is worth about 2/3 of the outstanding mortgage. Suffice it to say, if I sold it, I would not be able to live anywhere and the debt remaining to the lender would still be in the region of a mortgage for an average terraced house in Sheffield.
We tried to negotiate a payments schedule with the lender, but they have refused anything other than full payments as per the original schedule.
It transpires that we do not have a Facility/Offer Letter for the mortgage, but we do have a signed mortgage contract.
Expert:  Clare replied 1 year ago.

Why are you not paying what you can?

Who prepared the Cash flow?

Have you asked the lender for a copy of the offer?

Customer: replied 1 year ago.
The lender took the mortgage payments out of a current account held with them that was set up at the time of the mortgage (as it transpired, I have no paperwork relating to that current account whatsoever, no terms and conditions, no signature by me to set it up, nothing). The current account had various overdraft limits, initially agreed by me, then unilaterally imposed by the lender (as in: I said, I didn't want an overdraft limit, the lender put one in place anyway). In continuing to take the mortgage payments out of this current account, it went beyond the overdraft limit (whether agreed or not) and now itself stands at a size that could almost buy you a house in Sheffield.
Thus, the payment of the mortgage was an all-or-nothing affair: the lender simply took the money out of the current account (which, needless to say, I stopped using), whether I liked it or not.The cash flow was prepared by myself, however, I was new to the particular part of industry as the lender was well aware of. I prepared the cash flow and passed it to the lender for review. The lender professed to have special knowledge of the particular part of business. I have no email from the lender saying "we reviewed it" but I do have one saying "that looks great". There is clearly an argument from the lender to say: we never said we'd reviewed it. The court would have to make a decision on whether they believed me or them.I have asked the lender for a copy of the Facilities/Offer letter for the mortgage and the lender admits that it doesn't exist. However they claim that in the presence of a signed mortgage contract (by me only, not by the lender) a Facilities/Offer letter is not required.Thanks for your help.
Expert:  Clare replied 1 year ago.

You must on occasion feel that you have gone down the Rabbit hole!

Ask for copies of ALL the paperwork involved and then seek advice from a Direct Access barrister as to the possible negligence claim that you may have!

Customer: replied 1 year ago.
Hi Clare.
The question being: what paperwork should I have? Should I have something for the current account for example? Is the lender right in their assertion that in the presence of the mortgage contract the absence of the Facility/Offer Letter is no issue?
Expert:  Clare replied 1 year ago.

YOu should have paperwork relating to the setting up of the account - and the terms of the mortgage offer

The absence may not invalidate the contract - but it does raise serious questions about the terms of the Transactions and who is responsible for the problems that you have

Customer: replied 1 year ago.
To what extend do you feel the Consumer Credits Act 1974, section 140B can be used in this case?
Expert:  Clare replied 1 year ago.

I do not think it can be used at all I am afraid

Customer: replied 1 year ago.
Even though the mortgage contract specifically states that section 140B applies to the mortgage despite it being unregulated?
Expert:  Clare replied 1 year ago.

Even so - it is simply hard to see how the threshold would be reached - more about such cases here