After repossession

If a lender has obtained possession, there may still be outstanding issues to consider.



This content applies to Scotland

Responsibility for the mortgage payments

The borrower ceases to be liable for future mortgage payments once the loan has been called up under the Conveyancing and Feudal Reform (Scotland) Act 1970. After that date the loan agreement has been terminated.

In the case of a notice of default under the 1970 Act, if the borrower has objected, the loan will remain in force and mortgage payments will still be due until at least the date of a decision on the objection.

In all cases the borrower will remain responsible for the interest on the outstanding balance of the loan until the loan is discharged, that is until payment of the proceeds of sale to the lender. The lender will deduct the amount due in respect of the loan from the proceeds of sale.

Responsibility for the property: maintenance and repairs

The borrower remains the owner of the property until a new purchaser (who buys the property from the lender, following repossession) acquires title to the house. As a result the borrower is liable for the cost of repairs and maintenance of the property up to that point. The lender may arrange for any work to be carried out, but it should do only what is reasonable and necessary, for example, replacing locks and broken windows and cutting the grass. Any charges for maintenance work will be deducted from the proceeds of the sale.

Responsibility for insurance and other costs

The borrower also remains responsible for the insurance of the property until the sale has been completed. The fact that the property is vacant may invalidate the insurance policy; this depends upon the terms of the individual policy. The borrower will have to contact the insurance company or an insurance broker to check the situation and, where necessary, arrange temporary cover. The premiums for this may be high.

The borrower stops being liable for council tax payments once s/he has moved out and the lender has repossessed the property. At this point the property becomes exempt from council tax until a new owner moves in. [1] Liability does not transfer to the lender.

Footnotes

  • [1]

    Local Government Finance Act 1992 Part II; The Council Tax (Exempt Dwellings) (Scotland) Order 1992 SI 1992/1333