Rental Issues: Tenants Protected against defaulting Borrowers

By Mike Edwards

Tenants will no longer be at the same risk of losing their home with little warning if their landlord defaults on their mortgage, because new rules have come into force giving judges the power to delay repossessions in order to give tenants time to find a new home.

Prior to the change           

People could previously be evicted from rental properties relatively quickly if their landlord defaulted on the mortgage and had failed to inform their lender that they were renting out the property. In most cases tenants were totally unaware of the situation until a Court Summons was received or bailiffs arrived to enforce the Court

New Legislation

Under new rules tenants with a valid tenancy will be able to attend Court possession hearings for the first time. Judges will be able to take their situation into account and delay repossession by up to two months though but even now if a lender is seeking possession under Ground 2 it is 2 months notice and only then can proceedings commence. However the tenant may be unaware that proceedings have commenced.       

Lenders must also ensure tenants know that their home is going to be repossessed by sending a letter to the property giving them notice of a court hearing date. Again however having said that lenders have been under such an obligation since the Civil Procedure Rules were changed many years ago requiring lenders to write to the property addressing the letter to The Occupier.

This letter should be sent at the earliest possible opportunity when it becomes apparent that a lender is likely to institute proceedings against a borrower but most lenders have consistently failed to do so only advising of the proceedings very shortly before they were listed or even after the event thus adding to the problems.

The end Result

Once a repossession order has been granted, the lender must without fail send a second letter to the property telling tenants they have a warrant for its possession.
The tenant can then request a delay of up to two months if they have not previously had the opportunity to do so and this is the big change introduced by the new rules.