Reposession order semi commercial property

[histor98]

Please help if you can...Yorkshire Bank have issued repossesion of my semi commercial property, court date 15th Dec 2010

I owe £4000 in mortgage arrears after the tennants who least my property went bankrupt leaving without paying rent for 8 months...

I called the bank loads of times for help and even wrote asking for help such as a mortgage holiday or moving to interest only payments, all fallen on deaf ears...the bank will simply not help..

I hav moved back into the property and pay the mortgage every month but their is a £400 shortfall as the small commercial part of the property is not yet let.

I have over hundred thousand pounds in equity in the property.

I'm so frightened I will loose my home.

I need to know how I stand legally in court with a semi commercial mortgage..?

Four fifths of the property is residential with only a very small commercial part which has in fact been empty for 10 months..

Do I have the same protection in law as someone with a full residential property?

If anyone has a questions please ask....

Thankyou in anticipation

[Killerschick]

Hi Histor98,

I am sorry to see you haven't had a response to date and hope it's not too late with your hearing being listed for 15th. It's an interesting situation and further information would be needed to clarify.

You say that you have moved back into the property implying that at some point you weren't living there at all. What was the position when you took the mortgage out? Did you take out a buy-to-let or commercial mortgage on the basis that you would not be resident at the property?

Residential property is defined under the Financial Services and Markets Act 2000 and Consumer Credit Act 1974 as property 'at least 40% of which is used, or is intended to be used, as or in connection with a dwelling by the borrower or by a related person'.

As things stand your property sounds residential as from your description you occupy more than 40% of it. However, it is important to look at whether it was intended that you would occupy the property at the time the mortgage was taken out. If at that point it was intended that the whole property would be let and you took out a commercial or buy to let mortgage, the fact that you have moved into the property would not alter the status of the mortgage and you would not have the same protections as someone who took out a residential mortgage. In fact, if you moved in without the mortgage lender's consent this could constitute a breach of the mortgage terms in itself for which the mortgage company could take enforcement action. The implications of this would be that the mortgage lender does not have to go through the steps outlined in the pre-action protocol which applies to residential mortgages.

On the other hand, if, when you took out the mortgage, you or a relative intended to occupy 40% or more of the property and you took out a residential mortgage your lender should follow the pre-action protocol (unless you later converted the mortgage to a buy to let basis while the property was fully let).

In either event in order to avoid repossession you need to have some sort of proposal to put to the court regarding the clearance of the arrears. You say that currently you cannot afford the full monthly payment and on that basis you may need to look at other options. The bank has refused (or ignored) a request to transfer to interest only, in the current climate this is not surprising as the FSA are clamping down heavily on lenders giving interest only mortgages where there is no realistic plan to repay the capital (selling the property at the end of the term is not considered realistic) and many lenders have ceased offering interest only mortgages as a consequence. It sounds as though reducing the payments is not a likely prospect so you either need to come up with a way of paying more or consider the alternatives such as a sale.

From what you say, if you could let the commercial part of the property you would be able to afford the whole mortgage. For this argument to be successful in court and, ultimately, for it to be viable for you to keep the property you need to progress this (and I am sure you are doing everything you can). Otherwise even if you go to court and propose to pay the arrears from the rental income and the court grants a possession order suspended on those terms, if you can't pay, the lender will simply enforce the order and you will still lose your property.

If there is no realistic prospect of letting the commercial part in the near future it may be worth thinking about a sale. Properties sold by owners in occupation achieve better prices than those sold by mortgage companies in possession so you would maximize the equity you got back and keep control of the situation. It's a hard decision to make but if repossession is likely otherwise it's (usually) the lesser of two evils. If you can present evidence to the court that you are actively marketing the property they may grant longer than the standard 28 day possession order to give you time to achieve a sale. Usually the court would want to see that a sale has actually been agreed but as you have a lot of equity the judge may use discretion. You would probably need a minimum of a contract with an estate agent and print outs from rightmove or similar to show the property is being marketed, it would also be useful to have solicitors' details to demonstrate you were serious. This may persuade the judge to grant a 56 day order instead it may not sound like much, but you can go back to court during that period to apply for a further suspension if you get an offer. If you are paying at least the interest in the meantime so the lender's position isn't getting any worse this will be in your favour.

 

Hope some of this is helpful.

 

KC