Mortgagor Default – The Procedure

Mortgagor default is the first step in a number of steps towards a mortgagee obtaining possession over a property.

Once a default occurs, what needs to be considered by the mortgagee is whether the loan is regulated by the National Consumer Credit Code (“the Code”). The Code will apply in circumstances where the borrower is an individual and the purpose of the loan is for residential reasons. The Code also applies in circumstances where the loan is entered into to purchase, renovate or improve a residential property for investment purposes.

Should the Code apply, the mortgagee is required to issue a Section 88 Notice. A Section 88 Notice is governed by the Code and needs to state what the default is and allow the borrower at least 30 days to remedy the default.

The next step is to issue a s57(2)(b) Notice. This is required before a mortgagee can exercise a power of sale. It is best to issue this notice as soon as possible so it can be said that the mortgagee is acting in good faith.

Should the notices not be complied with, that being, the default is not remedied, proceedings are usually commenced. These proceedings are commenced in the Supreme Court in the Possession List.

Once proceedings are commenced and the Statement of Claim is served on the borrowers, the mortgagee needs to find out whether there are any other occupiers of the property. In the event there are, a Notice to Occupier along with the Statement of Claim needs to be served on the occupiers.

Once a Statement of Claim is served on the mortgagor, the mortgagor has 28 days in order to file a Defence.

Should no Defence be forthcoming on the expiration of the 28 days, a Notice of Motion is filed seeking default judgment. Once this is obtained a further Motion can be put on seeking an Order for a Writ of Possession. If granted, the Writ is provided to the Office of the Sheriff who then provides an eviction date.

In circumstances such as this there can be a belated stay application. It is the approach of the Supreme Court that if an urgent application is made to the duty judge for a stay, it will grant a stay on an ex parte basis (without notifying the mortgagee) for a short period and bring the matter back for argument in a few days time. If an interim stay is ordered, there can be extensions of the stay.

The process of a mortgagee attempting to obtain possession of a property can take some time and involves a number of steps. If you are in a position where you have defaulted on your loan and require assistance during this process, please call us on 1300 727 813 or email us.