Property Law Act notice: refinancing before a mortgagee sale

A Property Law Act notice is one of the most stressful letters a business owner can receive, especially if the property is the family home that’s been backing the business. It means the lender is preparing for the possibility of a mortgagee sale. But it also sets a clear window to fix the problem — and with equity in the property, that window is often enough to refinance and keep control.

How does the process work?

The Banking Ombudsman’s guide (updated November 2025) sets out the usual sequence:

1. Letter of demand if missed payments can’t be resolved by agreement.
2. Property Law Act 2007 notice setting out the default and the amount to be paid by a certain date — at least 20 working days after service.
3. Mortgagee sale if the amount isn’t paid by that date.

The Ombudsman also notes that the lender must take reasonable care to obtain the best price reasonably obtainable, and that the borrower remains personally liable for any shortfall.

What should I do in the first 24 hours?

• Note the service date and the deadline. Count working days carefully, and check them with your lawyer.
• Call your lender. Ask exactly what’s needed — arrears only, or the full balance.
• Get legal advice. Your lawyer can confirm the deadline and options.
• Get a realistic property value. Recent sales, a rating valuation, an agent’s view.
• Start a refinance enquiry. Don’t wait for the last week.

Can refinancing really happen in time?

Often, yes, if there’s equity. Property-secured business lending runs from $20,000 to $5,000,000; $20k to $250k is possible same day and up to $5m is possible within 24 to 48 hours when the file is ready. With a 20-working-day window, the realistic constraint is usually the valuation and lawyers, not the lender’s decision. See valuations and timing.

Refinance option	When it fits
Pay the arrears with a second mortgage	Existing lender will continue once arrears are cleared
Replace the whole mortgage	Existing lender wants to exit; enough equity for a new first mortgage
Short-term bridge to a sale	You’d rather sell on your own terms than at a mortgagee sale

What will a new lender need?

• The Property Law Act notice and your lender’s figures.
• Title details and a realistic value.
• Six months of statements and ID.
• A clear explanation of what caused the default and what has changed.
• An exit plan: trading recovery, sale or longer-term refinance.

Have these ready and enquire straight away.

What if selling is the best answer?

Sometimes it is. Selling on your own terms usually achieves a better outcome than a mortgagee sale. A short-term bridging loan can pay the arrears and buy time for a proper marketing campaign.

What should I avoid?

• Waiting for the lender to “probably” give more time.
• Overestimating the property’s value.
• Hiding other debts from a new lender — it delays everything.

How do I talk to my current lender during the refinance?

Keep the conversation open and factual. Tell your lender that a refinance is under way, who you’re working with and when you expect a decision. Ask for a payout or arrears figure in writing and how long it remains valid. If your new lender needs a few extra days for a valuation or legal work, ask your current lender whether it will agree to that — the earlier you ask, the more likely the answer is yes. Your lawyer can manage this communication if you’d rather not.

What if there isn’t enough equity to refinance?

Sometimes the numbers don’t allow a refinance — the property’s value has fallen, or the debt has grown with arrears and fees. That’s hard news, but it still leaves choices that are usually better than waiting for a mortgagee sale:

• Sell on your own terms. A properly marketed sale, with an agent and a realistic campaign, often achieves a better price than a forced sale. Ask your lender whether it will hold off enforcement while a sale is under way.
• Bring in other security. Equity in another property, owned by you or a supportive family member, may make a refinance possible.
• Reduce the debt first. Selling a vehicle, equipment or another asset to pay down arrears can shrink the gap to a level a new lender will consider.
• Get advice early. A lawyer, accountant or financial mentor can help you weigh the options.

A specialist will tell you honestly on the first call whether refinancing looks realistic. Even a “not yet” answer is useful, because it tells you to start a sale plan straight away rather than losing days hoping for a refinance that won’t come.

Illustrative example: arrears after a hard season

Illustrative only. A Gisborne horticulture business falls four months behind on the mortgage over the owners’ home after a poor season. On receiving a Property Law Act notice, the owners enquire on day two. The home has substantial equity. A second-mortgage loan to clear the arrears and fees settles on day nine, and the first lender confirms the default is remedied.

Received a notice? Start today.

The 20 working days go quickly once valuations and lawyers are involved. Send a short enquiry with the notice date — it takes about a minute and there’s no credit check when you first enquire. We won’t pass your details around a crowd of lenders; a real person reads your situation and calls you. Please be accurate about what’s owed and the property’s value so we can plan a refinance that works.

Start my refinance →