Voluntary surrender

Craig961

Hi,

I'm looking for some advice on voluntary surrender in Scotland. I’m not sure if this is the right place to post, we are not at a stage where bankruptcy is necessarily the best option and we are keen to take control now before things get any worse. We have accrued considerable arrears on our mortgage and our mortgage company is now taking us to court for repossession of our home (the date has been set for the beginning of September). We have tried to negotiate, however we were not able to come to agreement with them. Our home is also up for sale and has been for nearly five years, with little interest. We have cut the price down (as advised by our estate agent) but we are still struggling to generate much interest. We now feel voluntary surrender is our only option to avoid this being taken to court.

We have somewhere to move to, and my wife has received the form from the mortgage company (NRAM) to sign and return. I should point out that the mortgage is in my wife’s name alone; however there is also a secured loan which is in both our names. The mortgage has both a secured element and an unsecured element. I know the general consensus is not to sign these forms, but to redraft without some of the statements which are included in the original. In the original form, the following statements have given us cause for concern, should we redraft omitting these?

"I understand that should the sale proceeds be insufficient to pay off the total amount outstanding, You and/or any Insurer providing Mortgage Indemnity Cover (if appropriate) reserve the right to pursue me to cover the shortfall."

"If you have any unsecured balances with us, in the event that the proceeds of sale of our mortgaged property, after deduction of the costs of sale and associated expenses, exceed the amount of the secured element of my loan, then I hereby confirm that those excess monies may be applied in reduction of my unsecured borrowing. I understand that the foregoing is subject to any third party charges there may be against the property or I(/We) becoming bankrupt or entering into a formal agreement with creditors prior to the completion of the sale of the property and application of the proceeds of sale."

“If your account is in arrears or arrears accrue and the forms are not returned in 7 days we will proceed with appropriate action to take possession of the property.”

The rest of the form seems fairly standard. It states that we agree to the voluntary surrender and sale of the property, on return of the completed declaration they will arrange to take possession, that we should leave any internal keys in the property and that we agree that any personal possessions or household items we leave behind may be removed.

Should I add anything about the secured loan? Am I correct in assuming that, on sale of the property, money is paid towards the secured part of the mortgage first, then the secured loan before the unsecured loan (funds permitting)?

Thanks in advance

fermi

Craig961 wrote: »

Should I add anything about the secured loan? Am I correct in assuming that, on sale of the property, money is paid towards the secured part of the mortgage first, then the secured loan before the unsecured loan (funds permitting)?

Thanks in advance

That is the way it reads to me.

i.e

I understand that the foregoing is subject to any third party charges there may be against the property

Craig961

That was how I'd read that section too. Should I include that full section in the revised deceleration? Should include the other statements also?

jamesd

If you agree to a voluntary surrender, they will just sell the property at auction. Sure it's not better for you to do that yourself, perhaps with a reserve to prevent sale at a silly price?

Being taken to court is not necessarily something to avoid. Provided new things are being done to try to secure a sale the court may either not grant possession or may delay it to give time for a sale to happen. Given five years of trying I assume that a court would require auction sale or at least some clearly time-limited plan so it doesn't continue for an indefinite further time.

You're normally expected to pay off unsecured creditors pro-rata. The term in that agreement appears to be trying to grant them priority and that may harm your chances of getting an agreement with other creditors later.

Caution: I'm not familiar with Scottish law and practice.

Craig961

Yeah, that makes sense. Seems that, if we proceed, it would be best to omit these sections completely. Basically state we agree to the voluntary surrender/subsequent sale and that we agree that any possessions left behind may be removed. Would it be worthwhile stating something like:

"The proceeds of the sale will be applied to the account to pay off in whole or in part the balance outstanding. Any surplus will be used to pay off in whole or in part any third party charges."

I can see your point, about this not necessarily being the best option. My plan (as it stands) was to leave voluntarily surrendering the property until the last minute - perhaps send the paperwork maybe one week before the hearing. In the mean time, I intend to contact our estate agent and insist they reduce the price further - knock another £10k off the price. This will leave us with about £10k shortfall, but that looks inevitable at this stage anyway.

If we were to try and ask the court for more time to allow for the sale, is this something we could do ourselves? We couldn't afford to involve a solicitor. What are the ramifications if the court refuses the request and grants repossession - would that become a ccj (decree)?

Thanks again.

jamesd

Read what Shelter (Scotland) has to say. You can expect that if possession is granted a warrant of ejection ordering you to leave by a certain date will also be granted.

You'd also add that "Any remainder after secured debts are repaid will be allocated as seems best in our judgement or after advice to maximise the chance of a settlement involving all creditors". That is, refuse to give them priority.

Keep telling the lender in writing what you are doing to try to get the property sold. Lowering prices, logs of all viewings and such. It's all evidence to the court that you're trying to resolve the situation.

If it does go to court, ask the court to allow you to do an auction sale because you're likely to get a better price for an occupied place than one that has been repossessed and possibly not cared for well by the lender between acquisition and sale. But better still would be already having an auction sale arranged as a fallback in case it can't be sold. That way you can prove that there is no need to grant immediate possession because the auction sale will resolve it. So a suspended possession order is more likely then.

What you're trying to do with this sort of thing is to demonstrate that it's the mortgage lender that is acting unreasonably and you're trying to sell for the best available price to try to meet as many of your commitments as possible, not just a single lender serving their own interests to the possible detriment of other creditors.

Craig961

That all sounds reasonable. I think the next step now should be to contact Shelter and seek advice regarding repossession and our options. At this stage I have been trying to limit any permanent damage to my wife credit file and, from what has been said here, I have probably excluded possibile solutions which may actually be better. I hadn't considered the possibility of auctioning the property ourselves, it sounds like an option which should definitely be considered first.

I'll go ahead with lowering the price tomorrow, we might get lucky! Then I can start seeking advice, look into auctioning the place ourselves and preparing a case for having the action continued.

If a suspended decree (or any other decree) is granted against us for repossession, is this recorded on my wife's credit file? Or would such a decree only affect her credit file if they were seeking repayment of debt (if that makes sense)?

jamesd

Assuming she's on the mortgage the arrears would already have harmed her credit record. Even if not, I assume she's a financial associate of yours and your record would be shown in conjunction with hers.

A voluntary possession is still possession. Auction sale before that would be far better because that isn't any form of possession. Also useful to ask the lender what sort of schedule they are willing to accept for possible auction sale timeline, asking them to remember that you are obliged to try to maximise the result to help all creditors, so more non-auction price reduction first is likely to be a better plan overall. They should be happy that you're talking with them about auction sale at all, since that means eventual closure for them without the costs and hassle of possession.