One of the questions I am asked frequently by landlords, tenants and even letting agents, is what happens when a mortgage company repossesses a rented property.
Being evicted through no fault of your own is a frightening prospect for tenants, which is why The Mortgage Repossessions (Protection of Tenants etc) Act 2010 was introduced.
The rights of a tenant living in a mortgaged property depend on when the tenancy was created. In general terms, the lender is bound by any agreement that was in place when the loan was granted or was issued later with its consent. This includes buy-to-let mortgages.
Unfortunately, large numbers of landlords don’t gain the approval of their lenders when renting out a property and in these circumstances, the tenancy is not enforceable should it be repossessed. Once a mortgage company has obtained a possession order against the landlord, it can take steps to evict any occupants, even if payments are up-to-date and they are model tenants.
Before a lender can repossess a rented property, a Notice of Execution of Possession Order must be sent, which provides the date of the possession hearing. There are specific rules governing how this notice should be served and what it should contain. Failure to use the correct form or supply the prescribed information means the court will not grant possession.
Tenants now have a right to attend the hearing and have their say. They should bring with them evidence of their rental agreement so they may ask the judge to delay the date of the possession while alternative accommodation is found. The Act gives the court power to postpone an eviction for up to two months.
If the lender has applied for a warrant at the same point at which the notice is sent, tenants have little time in which to respond and request a delay. However, this is the legislation’s way of giving those who missed the opportunity to attend the initial possession hearing a second chance to put forward their case.
Tenants can also contact the lender directly to ask for extra time to find a new property. There is no obligation on the mortgage company to grant the request, but if the rental agreement was made in good faith, the mortgage company would need to be very cautious about refusing to delay the possession, given an application can then be made to the court.
If an agreement is reached, the tenant should request written confirmation from the lender. This is vital, as it will be the only evidence that a temporary right to remain in the property has been granted.