Time orders in mortgage arrears possession cases

Borrowers can ask the court to make a time order to reschedule the amount due over a longer period if the lender has taken court action.

This content applies to England & Wales

Cases where the court may grant a time order

Borrowers facing a claim for possession can ask the court to make a time order to reschedule the amount due under a Regulated Mortgage Contract (RMC) over a longer period. The court can alter the term of the loan and reduce the amount of interest payable if it is just to do so.

Time orders do not apply to mortgages that are not RMCs. Second mortgages entered into before 21 March 2016 and all mortgages entered into before 31 October 2004 should be carefully checked as they may not meet the criteria for an RMC. The FCA Perimeter Guidance Manual provides a definition for an RMC. 

A court will only grant a time order if it considers it just to do so.[1] In determining if it is 'just', the court must have regard not only to the borrower's situation, but also to the lender's interest.[2] If the court considers it just to grant a time order, it will specify the new terms of repayment. A time order will not be granted if the borrower cannot show that they can meet the repayments required by the court.

Court's powers to vary the agreement

When the court considers whether to grant a time order in possession proceedings, the whole of the outstanding amount owed is taken into account.[3] The court also has the power to vary the agreement as a consequence of the time order.[4]

The court can order that no further interest or a reduced rate of interest be payable, so that the repayments stay within the borrower's means without increasing the term of the loan for an unacceptable length of time. In one case, the Court of Appeal reduced a high rate of interest to nil for the remaining term of the loan.[5] The court can extend the term of the loan where necessary.

Reasons for requesting a time order

A time order may be an appropriate remedy where:

  • current circumstances make payment impossible but an improvement in circumstances is likely

  • the borrower's mortgage term is at an end and there is an outstanding balance to be paid

  • compound interest being added to the balance means the amount owed is increasing and will never be paid off

Conditions and process for making a time order

The court can make a time order in a possession claim brought by a lender to enforce an RMC.[6] A time order can be requested by the borrower if the borrower files a defence in possession proceedings. Alternatively the borrower can make an application in proceedings that have been commenced by the lender at a later stage, for example after a possession order has been made.[7]

The borrower cannot make an application for a time order before the lender has taken court action.

Time orders were formerly an option for second mortgages regulated under the Consumer Credit Act regime only. The Consumer Credit Act 1974 Part 9 (judicial control) was amended on 1 April 2014 to include Regulated Mortgage Contracts in that part.[8] This applies to Regulated Mortgage Contracts whenever made.[9]

The Court of Appeal considered the court’s powers in making a time order and set out a six point test:[10]

  • the court must first consider whether it is just to make a time order

  • a time order should normally be for a set period to deal with temporary financial difficulty

  • the court should consider what instalments would be reasonable, having regard to the borrower’s means

  • the court may amend the original agreement as a consequence of the order

  • when dealing with the ‘sums due’ under the agreement, the court should consider the consequences for the term of the loan and the rate of interest

  • the court should suspend possession as long as the terms of the time order are maintained by the borrower.

Future improvements in prospects can be taken into account if these are reasonable and not simply hope or speculation.[11]

Requesting a time order

The borrower may complete the N11M defence form along with an additional defence to request a time order. If this is no longer possible, for example because a possession order has already been made, the borrower can make an application on form N244.[12]

Even if no specific request for a time order is made, the court may still consider whether or not to grant one.[13] If the court decides to make a time order, possession will be suspended on the same terms.[14]

There is no fee payable where the borrower indicates on the defence form that they wish to apply for a time order. If an application is made the normal application on notice fee applies unless the applicant is entitled to full or part fee remission. Applying for a time order is complex and it may be necessary to have representation from an experienced lay advocate or a solicitor.

Where the borrower has indicated their intention to apply for a time order on the defence form, an adjournment should be requested at the hearing in order to file a full defence. As time orders are a specialist area of money advice, borrowers may benefit from the support of a money advice agency.

Last updated: 22 March 2021

Footnotes

  • [1]

    s.129(2) Consumer Credit Act 1974.

  • [2]

    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.

  • [3]

    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.

  • [4]

    s.130(6) Consumer Credit Act 1974.

  • [5]

    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.

  • [6]

    s.126(2) Consumer Credit Act 1974.

  • [7]

    para 7.1, CPR PD 55.

  • [8]

    s.129(2) Consumer Credit Act 1974.

  • [9]

    FCA, PERG 4.4A.1B.

  • [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]

    First National Bank v Syed [1991] 2 All ER 250.

  • [12]

    para 7.1, CPR PD 55.

  • [13]

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

  • [14]

    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.