Landlord repossession: the impact on tenants

We've had lots of calls from private tenants whose landlords are facing court action due to mortgage arrears. Understandably, these tenants are very worried about this.

A tenant’s rights in this situation depend on

• the terms of the landlord’s mortgage
• the lender’s knowledge of the tenancy
• whether there is a current fixed-term tenancy in place

Tenants can be in a vulnerable position if their landlord  

• doesn't have permission to rent out the property, or
• breached the terms of the mortgage when creating their tenancy 

Permission to rent out a property

Before renting a mortgaged property out, the landlord needs either  

• a buy-to-let mortgage, or
• permission from the mortgage lender to rent out the property

The landlord must follow the lender's terms and conditions for renting out the property. The lender might have rules about the length of a tenancy, or about the amount of rent the landlord has to charge.

Authorised and unauthorised tenants

A tenant is authorised if

• the lender gave the landlord permission to rent out the property and
• the tenancy agreement does not break any of the lender’s terms or conditions

Authorised tenants are in a stronger position if their landlord defaults on their mortgage. The lender has to honour any agreement an authorised tenant had with the landlord.

A tenant is unauthorised if

• the lender did not give the landlord permission to rent the property out or
• the tenancy breaches the mortgage's terms and conditions

Lenders do not have to honour any agreement given to an unauthorised tenant. The lender can ignore any existing agreement if the property is repossessed.

Finding out a landlord is being taken to court over the mortgage

Tenants need as much information as possible about their landlord’s situation and how this might affect them. Tenants should

• open any letters sent to the property and addressed to “the occupier” - these may be from the court or the lender’s solicitor
• ask the lender’s solicitor if the tenancy is authorised or unauthorised

Data protection laws limit the type of information the court or solicitor can share.

Going to landlord’s court hearing as a tenant

The court will send a letter to the property when it schedules a repossession hearing. This will be addressed to “the occupiers”.

Tenants can ask the court office to let them attend the landlord’s hearing as an interested party. At court the tenant can

• let the judge know they are living in the property
• find out if their tenancy is authorised or not
• find out if a possession order has been granted
• explain their personal circumstances
• ask for more time to move out if they are authorised tenants but don’t have a tenancy agreement

The fact that there is a tenant in the property won't influence the judge’s decision to make a possession order.  But, the judge may give the tenant more time to move out.

Eviction after a landlord has been repossessed

A tenant may get an eviction notice or notice to quit if

• they are a periodic tenant and the landlord wants to hand the property back to the lender, or
• the property is repossessed and the tenancy is not authorised, or
• the property is repossessed and there is no tenancy agreement in place

Companies outside Northern Ireland may not know the rules for notice periods here. All tenants, including unauthorised tenants, must get at least 12 weeks' notice of any eviction. This notice must be in writing.

Paying rent during landlord repossession

It can be difficult for tenants to know who to pay rent to if their landlord is facing legal action over the tenancy.

The landlord is not allowed to collect rent from the tenant once a possession order has been made.  The tenant will pay rent

• directly to the lender, or
• to a receiver appointment by the lender

Tenants who are facing demands for rent from both the landlord and a receiver should get advice urgently.