A quick guide to the Mortgage Repossessions Act

 

The Mortgage Repossessions (Protection of Tenants) Act 2010 is one of those bits of legislation that was vastly overdue by the time it came into force. It’s a relatively simple act that gives innocent tenants some degree of protection from circumstances beyond their control.

What was the original problem?

It’s an unfortunate truth that landlords sometimes don’t make their mortgage payments. There are all kinds of reasons this can happen, and while some less scrupulous landlords are working an angle, in most cases it’s simple bad luck. Recessions, market fluctuations and all kinds of other factors can conspire to get a landlord into financial difficulty, and if they go too long without making their payments, the mortgage lender will initiate proceedings to repossess the property.

While this is pretty rough on the landlord, there can be an added complication if there are tenants currently in residence. Mortgage lenders have no interest in becoming landlords, and their objective in repossessing the property will be to sell it on to someone else as quickly as possible and recover their money. Obviously, the tenants need to be evicted before the lender can take possession of the property, and apart from the stress and expense this can cause for the tenant, they also run the risk of homelessness if they aren’t given enough time to find a new place.

In these situations, the Protection from Eviction Act gives most tenants a fighting chance, but an unfortunate loophole means that ‘unauthorised’ tenants are more exposed.   

What is an ‘unauthorised’ tenant?

An unauthorised tenancy is when the landlord hasn’t notified their mortgage company that they’re renting the property out. Chances are this will have been a simple oversight rather than anything devious, but it will almost certainly be a condition of the mortgage to agree this in advance.

The snag, of course, is that the tenant might not realise they’re unauthorised. As far as they’re concerned, they may well have done everything by the book, with proper tenancy agreements, deposits and the like. Suddenly, they find that their landlord is no longer a person but a hard-hearted financial institution. Before the Mortgage Repossessions Act, tenants in this position could try negotiating for time directly, but beyond that their options were pretty limited.

What rights do unauthorised tenants now have?

An unauthorised tenant can now present their own case at the repossession hearing and ask a court to delay repossession for up to two months. There’s a duty to notify the tenant that the hearing is taking place, but if they don’t attend this then there’s another opportunity to get a stay of execution.

Once they’ve got permission to repossess the property, the lender needs to give any tenants 14 days’ notice that they have to move out. At this stage, the tenant can ask the lender for more time, and if they don’t get it, they can go to court and ask for a delay of up to two months. For this to happen, the mortgage lender needs to have refused or ignored a direct request, and the tenant can’t have already clocked up other extensions through different avenues.

The court can also arrange for the tenant to pay their rent directly to the mortgage lender during this period, without having to go through the rigmarole of creating an official tenancy agreement between them.

It’s worth knowing that the mortgage lender can still shunt a tenant out quicker if they can find a way in which the tenant has violated the tenancy agreement, or if they can argue that the tenancy is not official. With this in mind, tenants should make sure they assemble all relevant proof of their tenancy, such as tenancy agreements or deposit statements.

Courts will tend to give the tenant the extra time unless there’s a very compelling reason not to, and in fact the act is really set up to try and prompt lenders to be merciful from the start rather than spending time going to court over it.