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Mortgage Possession and Tenants

We have previously discussed the problems experienced by tenants when a mortgagee seeks to repossess the property to exercise its power of sale. In a recent alteration to the Civil Procedure Rules some of the issues were addressed by forcing mortgagees to give more notice to occupiers of properties. We reported on this here.

However, providing more notice does nothing to protect tenants whose landlord has not bothered to seek the consent of their mortgagee to the letting. Where the landlord has sought consent the mortgagee is obliged to see out the term of the letting. Non-authorised tenants are not so protected and get short shrift from mortgagees and the Courts. Of course, tenants should always insist on seeing consent to their letting from the mortgagee but this will not help those who find themselves under threat of eviction today.

The government has now produced a consultation on further changes to the process of mortgage eviction in order to help protect unauthorised tenants.

Apparently the government are working with lenders to remind them that they are obliged to see out tenancies which they have consented to and to encourage them to accept unauthorised tenants where possible. We have not seen a great deal of evidence that this engagement is actually working with the worst offenders being Northern Rock and other lenders taken into government control!

The other intended improvement is to make notification to tenants of problems more effective by requiring the letter that is currently addressed to “The Occupiers’ to make specific mention of tenants on its face. This is to come into force in October 2009.

Turning back to unauthorised tenants the consultation intends to achieve a balance between reasonable notice to the tenant and the right of the mortgagee to sell the property with vacant possession. The aim is to allow the tenant two months notice to vacate.

There are a series of different proposals for how this might be achieved ranging from no change through to radical legislative amendment.

There are some real problems with this consultation. For on the government appears to have absolutely no idea how many tenants are affected. They estimate that there are approximately 360,000 properties with unauthorised tenancies but this figure is plus or minus 120,000 which shows the level of uncertainty.

In fact, it is not clear precisely how the government will deal with the situation as a change to assist unauthorised tenants would, in practice, have to be applied in all circumstances where mortgage possession is considered, adding considerably to the cost of mortgage repossession for lenders at a time when they can ill-afford it.

Probably the most practical option is to imporve notification and allow the tenants to attend Court to seek a stay of possession before the judge. Obviously this has the same disadvantage as the current system in that many tenants do not have the knowledge or the desire to attend a Court hearing. Therefore any change is going to have to make the process as painless as possible for those who are, after all, innocent parties. The best option is probably a form sent to the tenant by the lender which permits them to make written representation to the Court.

The consultation is open for responses until 14 October 2009.

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