A mortgage in possession arises when a lender exercises their right under a legal charge to take control of a property following a borrower’s default. The lender may manage, lease, or sell the property directly to recover outstanding amounts under the property development finance facility. This remedy is often used when the borrower has ceased cooperation or when appointing a receiver is unsuitable. While the lender assumes legal possession, they also accept certain responsibilities, including a duty to act with reasonable care in maximising sale proceeds. It is a common enforcement route in distressed UK property development finance situations.
In practice, a mortgage in possession forms part of the wider framework of Security Enforcement and Receivership, providing lenders with a direct method of controlling and realising secured property assets when a development loan has become distressed. Unlike enforcement routes that rely on third-party appointments, possession allows the lender to make operational and disposal decisions itself, subject to legal and fiduciary obligations. The process is often closely linked to Possession Proceedings, particularly where access to the property or borrower cooperation is disputed. Within development finance structures, it is most commonly associated with Senior Debt 1st Charge facilities, where lenders hold primary security over the site and project assets.
View glossary entry