Time orders in mortgage arrears possession cases

A time order allows the court to reduce contractual monthly mortgage payments or extend the term of the loan when a mortgage lender has started possession action.

This content applies to England & Wales

What is a time order?

A time order is a type of order the court can make to suspend possession following a possession claim by a mortgage lender.

Time orders are contained in the Consumer Credit Act 1974, but they apply to all mortgages that are Regulated Mortgage Contracts.

The court can make a time order to change the:

  • amount of the repayments

  • term of the loan

  • amount of interest payable

When a time order can help a borrower

The court can make a time order when a borrower cannot make an offer to pay the full contractual mortgage payment and an amount towards the arrears.

A time order could help the borrower to remain in their home where:

  • they cannot afford the repayments but their circumstances are likely to improve

  • the mortgage term is at an end and there is an outstanding balance

  • compound interest is being added to the balance and the amount owed is increasing

The court is less likely to agree to make a time order if the borrower does not make a proposal to pay off the outstanding balance in future.

Eligible mortgages for a time order

The court can only make a time order if the mortgage is a Regulated Mortgage Contract. This includes most first and second mortgages.

Regulated Mortgage Contracts (RMCs) are:

  • first mortgages taken out on or after 31 October 2004

  • second mortgages taken out before 21 March 2016 that were regulated by the Consumer Credit Act 1974

  • second mortgages taken out after 21 March 2016

The FCA Perimeter Guidance Manual provides a definition for an RMC. 

Before 1 April 2014, time orders were only an option for second mortgages regulated under the Consumer Credit Act. The Consumer Credit Act 1974 Part 9 (judicial control) is now amended to include Regulated Mortgage Contracts.[1]

Exempt mortgages

Time orders do not apply to mortgages that are not RMCs.

Some second mortgages taken out before 21 March 2016 were exempt from Consumer Credit Act regulation.[2] A time order is not available for a second mortgage that was exempt. A mortgage might have been exempt because it:

  • exceeded financial limits in place at the time

  • is primarily for business purposes

  • is repayable in four or fewer payments

  • is repayable in less than 12 months from the start of the loan

Mortgages that are repayable in four payments or within a period of 12 months are often bridging loans or shared equity loans used to pay a buyer's deposit on a new property.

How to ask the court for a time order

Before a possession order has been made, the borrower can ask for a time order in their defence. After a possession order, the borrower must apply to court for a time order.

The borrower cannot apply for a time order before the lender issues a claim for possession.

Complete the defence form before possession is granted

The borrower can complete the N11M defence form to request a time order.

Question 6 on form N11M asks ‘do you intend to apply to the court for an order changing the terms of your loan agreement (a time order)?’. This question is qualified by a statement that it should only be answered if the loan is regulated by the Consumer Credit Act 1974. Because the Consumer Credit Act was amended to say RMCs are to be treated as though they are Consumer Credit Act regulated agreements, the borrower can tick 'yes' to this question.[3]

In practice, the court is more likely to consider making a time order if the defendant has also submitted a pleaded defence that sets out the court's powers to make a time order.

The court can consider whether or not to make a time order even if the defendant does not make a specific request for one.[4]

There is no fee to complete a defence form asking for a time order.

Apply for a time order after possession is granted

The borrower can make an application for a time order on form N244 at any point after a possession order is made and before a warrant is executed.[5]

The borrower must pay a court fee to make an application for a time order, unless they are eligible for a fee remission.

Read more about court fees in civil claims and applications on Shelter Legal.

What to include in the defence or application

The borrower has a better chance of persuading the court to make a time order if they include:

  • their reason for asking for a time order

  • the court's powers to make a time order

  • a financial statement

  • evidence of any expected improvement in their financial situation

  • how long they need the time order to run for

The N11M defence and N244 application forms do not contain enough space to set out the court's powers in enough detail. The borrower can submit this on a separate sheet.

What to include in the witness statement

The borrower can set out their reasons for asking for a time order in their witness statement.

The witness statement should include all the relevant facts for the court to make a decision. The borrower should attach evidence to the witness statement. For example, a copy of a disability benefit award letter or evidence of professional training or a job offer.

The borrower should use their witness statement to explain:

  • why the mortgage was taken out

  • what financial or other difficulties the household has faced

  • health problems or other vulnerability in the household

  • what they have done to resolve the situation

  • any unfair or unreasonable conduct by their lender

  • the impact of homelessness on the borrower and their household

  • the lack of alternative housing options if they became homeless

  • any future improvements in their financial prospects

Read more about Witness statements on Shelter Legal, including a template witness statement.

Borrower's payment offer

The borrower should make an offer of a monthly payment based on what they can afford after essential living costs. There is no minimum payment level for a time order, but the court is not likely to make a long-term order that does not cover the capital repayment.

The borrower can ask for a stepped order. This could reduce payments significantly for a short period, then reschedule the remaining loan on the basis of higher payments. 

The borrower can ask the court to reduce the interest rate for the duration of the time order. If the borrower does not ask for an interest rate reduction they could be left with a much higher balance once the time order period expires.

The borrower can ask for help from a debt adviser to draw up a financial statement. Find out Where to get debt and money advice on Shelter Legal.

What the court must consider

The Court of Appeal has set out a test for judges to apply when they decide whether to make a time order.[6]

The court must consider:

  • whether it is just to make a time order

  • what instalments would be reasonable, having regard to the borrower's means

  • whether to amend the original agreement (rate of interest, amount of instalments etc)

  • the consequences for the mortgage term and the rate of interest

The Court of Appeal also held that a time order should normally be for a set period to deal with temporary financial difficulty. The court can take future improvements in prospects into account if they are reasonable, and not simply hope or speculation.[7]

A time order will not be granted if the borrower cannot show that they can make the repayments required by the court.

The whole of the outstanding amount owed is taken into account when the court makes a time order, not just the arrears.[8]

When is it just to make a time order

A court will only grant a time order if it considers it just to do so.[9]

When deciding if it is 'just', the court must have regard to the borrower's situation and the lender's interest.[10]

There is no definition of 'just' in the Consumer Credit Act. It is for the court to decide whether it is just to make a time order. The court could take into account:

  • the impact on the borrower and their household if the order is not made

  • whether the borrower is at fault

  • whether the borrower has taken steps to sort our their financial problems

  • any unfair or unreasonable treatment by the lender

Powers to vary the agreement

The court has the power to vary the agreement as a consequence of the time order.[11] The court can vary the term of the loan, the contractual repayments, the rate of interest, or any other terms of the mortgage agreement.

The court can order that no further interest or a reduced rate of interest is payable so the repayments stay within the borrower's means without increasing the term of the loan. In one case, the Court of Appeal reduced a high rate of interest to nil for the remaining term of the loan.[12]

Process and costs involved in time orders

Time orders can be tricky to deal with, especially for people who do not have legal representation.

Setting a hearing to deal with the time order

The court can make a time order on the day of the initial possession hearing. In practice, most judges adjourn the hearing for the borrower to complete a defence and a witness statement. The borrower must follow the instructions set out by the court, otherwise they could incur extra costs or have their defence struck out.

The judge might list the time order for a longer hearing. The amount of paperwork and complexity of the law means some borrowers could be unable to represent themselves.

Representation through legal aid

Time orders are in scope for legal aid, but many legal aid housing solicitors do not provide this service, and the borrower must meet financial eligibility criteria to qualify.

Read more about legal aid for housing problems on Shelter Legal.

Costs of the proceedings

Mortgage possession claims are subject to indemnity costs. The borrower will pay the lender’s costs unless the court orders otherwise. The court usually only prevents the lender from adding the costs to the balance of the loan if it was unreasonable for the lender to issue the claim.[13] 

If the amount of the costs is unreasonable, the borrower could ask the court for a summary assessment.[14]

Alternatives to a time order

The borrower could ask the lender or the court to allow them to repay their arrears without having to use the time order provisions.

Negotiate with the lender

The lender might be willing to accept reduced payments for a temporary period if the borrower is in financial difficulties. Lenders might be more willing to accept reduced payments if the borrower engages at an early stage, and if there is a long term plan to resume full contractual payments.

The lender is likely to ask for evidence of the borrower's financial situation and of any future improvements.

Ask the court to make a Norgan order

The courts usually use the powers contained in the Administration of Justice Acts to suspend possession in mortgage cases.[15] Suspended possession orders under these Acts are sometimes called Norgan orders when they contain terms that the borrower must pay the contractual monthly instalment plus an amount towards the arrears to clear the arrears in a 'reasonable period'.

Borrowers who can afford to make an offer to pay the full monthly instalment plus an amount towards the arrears do not need to ask for a time order.

Read more about types of orders in mortgage possession claims on Shelter Legal.

Get time to sell or pay off the mortgage

The Administration of Justice Acts allow the court to suspend possession on payment terms, or to allow a borrower an extended period to pay off the whole debt. A borrower could propose to:

  • sell the property

  • get a remortgage

  • use a lump sum they expect to receive, such as a pension

Borrowers who need a short period to sell, remortgage, or access a lump sum, do not need to ask for a time order.

Read more about getting time to sell before eviction on Shelter Legal.

After the court makes a time order

Possession is suspended on the same terms as the time order payment terms.[16] The lender can enforce the possession order by issuing a warrant if the borrower does not keep to the terms.

The time order could run for a set period of time. Once the period expires, the lender can enforce the possession order. The borrower can apply to court to extend the time order or apply to suspend the warrant.

The time order might contain instructions for a review of the time order, or for the borrower or lender to submit additional evidence. The borrower must follow the instructions carefully or the court could strike our their request for a time order.

A breathing space moratorium can prevent the lender issuing a warrant once the time order has lapsed. This could provide the borrower with an opportunity to get advice and make an application to extend the time order.

Last updated: 23 January 2023

Footnotes

  • [1]

    s.129(2) Consumer Credit Act 1974; FCA, PERG 4.4A.1B.

  • [2]

    see article 60B-60M Financial Services and Markets Regulated Activities Order 2001/544.

  • [3]

    s.126(1) Consumer Credit Act 1974 as amended by The Financial Services and Markets Act 2000 (Consumer Credit)(Miscellaneous Provisions)(No.2) Order 2014/506.

  • [4]

    s.129(1)(c) Consumer Credit Act 1974.

  • [5]

    para 7.1, CPR PD 55.

  • [6]

    Southern and District Finance Plc v Barnes and another: J & J Securities Ltd v Ewart and another: Equity Home Loans Ltd v Lewis 27 HLR 691, CA.

  • [7]

    First National Bank v Syed [1992] 2 All ER 250.

  • [8]

    Southern and District Finance Plc v Barnes and another : J & J Securities Ltd v Ewart and another: Equity Home Loans Ltd v Lewis 27 HLR 691, CA.

  • [9]

    s.129(2) Consumer Credit Act 1974.

  • [10]

    Southern and District Finance Plc v Barnes and another : J & J Securities Ltd v Ewart and another: Equity Home Loans Ltd v Lewis 27 HLR 691, CA.

  • [11]

    s.130(6) Consumer Credit Act 1974.

  • [12]

    Equity Home Loans Ltd v Lewis 27 HLR 691, CA.

  • [13]

    Co-operative Bank Plc v Phillips [2014] EWHC 2862 (Ch)

  • [14]

    r.44.3 Civil Procedure Rules.

  • [15]

    s.36 Administration of Justice Act 1970; s.8 Administration of Justice Act 1973.

  • [16]

    Southern and District Finance Plc v Barnes and another: J & J Securities Ltd v Ewart and another: Equity Home Loans Ltd v Lewis 27 HLR 691, CA.