My Landlord has not been making mortgage repayments
In today’s economic climate, it can be a huge struggle to make sure you pay the bills at the end of the month. It can therefore be extremely stressful if you find that the landlord hasn’t actually been paying the mortgage and is in mortgage arrears.
Unfortunately this is becoming increasingly common, as buy-to-let property owners are among those struggling the most to keep up with their outgoings. The first thing you should do is speak with your letting agent to confirm that the property owner is in difficulty. This is having a profound knock-on effect on the huge numbers of tenants up and down the country, so it’s best to be as prepared as you can if you’re a tenant yourself.
If you’re in the unfortunate position as a tenant whose landlord has got into this financial state, the sad reality is that the law offers you very little protection.
When a landlord goes into arrears with their mortgage lender, the lender is naturally entitled to begin the process of repossession, as is the case in a normal mortgage. Tenants do not actually have any right to be notified that the lender is intending to start this process, so the news can come as a nasty shock.
What the lender is obliged to do, is issue a ‘Notice to Occupier’, letting the tenant know that a repossession hearing has been scheduled, together with the details of this hearing. This must be sent to tenants at least 2 weeks before the hearing is due to take place.
Unfortunately for the tenants, they are not legally in a position to influence what happens at the repossession hearing, as the mortgage agreement has been made between the landlord and the lender. Sometimes however, tenants are admitted into the hearing, so that they can hear what happens, but they will typically have no input into it. What happens at the hearing will depend on the landlord and what the judge decides based on this.
If the property is indeed going to be repossessed, as dictated by the outcome of the hearing, typically the mortgage lender will appoint a receiver to whom you pay your rent. At this point it’s up to the lender what will happen in terms of your tenancy. You have no right to expect to continue the tenancy indefinitely, and if the lender decides to terminate your stay, they can evict you from the property with only 2 months notice.
In some cases, your circumstances may be even more awkward, as often landlords will be letting out parts of their properties with only a normal mortgage, rather than a buy-to-let mortgage, which they really should have. With a buy-to-let mortgage, normally the landlord will have gained authorisation from the mortgage lender for each tenant staying in their property, and it is this that grants you the rights outlined above. If the lender has not given clear permission to your tenancy, you unfortunately have very few legal rights, and they can evict you with very little notice, so in this case you may need to make alternative arrangements pretty quickly.
The only time that the above rules may not apply, is where the tenant has had the let since before the landlord’s mortgage began. In this case you may have additional rights as a tenant, but it can be a troublesome process to assert these.
Buy the property?
You might expect that as a tenant in the property, you may have access to buying it when the landlord’s mortgage runs into trouble, but this is not the case. If the lender has repossessed the property, they then have no choice but to put it on the housing market and take the best price they can get for it. Of course there’s nothing to stop you from buying it at this stage, but you will have to compete with other buyers, as with a normal sale, therefore nothing is guaranteed.
What to do
The best approach if you find that your landlord is in arrears, is to find alternative accommodation where possible. One of the most frustrating aspects of this type of situation, is the fact that it’s not always easy to get information about what’s going on. However, even if you manage to stay in the property a little longer, the further down the repossession route the property goes, the more likely you are to be evicted at short notice, and to have to find somewhere else that suits you (and is within your budget) quickly. At least if you’ve secured somewhere else to live, you have the security of knowing you have a roof over your head.