Plz Help! Ground 2 Part 1 Schedule 2 for the Housing Act 1988

[pearlg]

As per my other thread, I am considering entering into an assured shorthold tenancy agreement.

 

Unfortunately, I have just also noticed another clause within the contract that concerns me. When I was viewing the property initially, it was also listed as For Sale. However, the estate agent assured me that if we rented the property for a tenancy of 12 months, the landlord would be unable to sell it until the end of the tenancy.

 

However, within the agreement that the agent gave me to sign, it states the following:

 

The landlord gives notice to the tenant that possession of the Demised Premises may be recovered under Ground 2 Part 1 Schedule 2 of the Housing Act 1988 namely that the property may be subject to a mortgage granted before or after the tenancy and the mortgage [sic?] may become entitled to exercise a power of sale and will require possession of the property for the purpose of disposing of it with vacant possession in the exercise of that power.

 

Does this mean that if the landlord decides that they want to sell the property midway through our tenancy, they have the right to evict us and gain possession of the property?

 

Apologies for the multiple threads, but I thought this one warranted a separate one.

[MrShed]

I think this is more to do with mortgage arrears. In the situation that they wanted to sell, they still cant evict any quicker than they could anyway. They are morelikely to just sell with you remaining resident.

[pearlg]

Thx for the reply. If they wish to evict because they want to sell, do they then have to go through a section 21 notice? Or can they use this clause to speed it up?

[MrShed]

The clause, in any event, cannot override your statutory rights. You can be evicted with an S21 with 2 months notice, after the fixed term ends, or using a discretionary ground of Section 8. The clause doesnt make a blind bit of difference to those rights.

[pearlg]

Ok, so basically, if the LL decides they want to sell after 4 months in a 12 mth contract, then they have no right to evict us/take possession even though this clause is in the tenancy, because the tenancy can only be ended at the end of the 12 month contract OR if we go into 2 months arrears?

 

Are you 100% sure?

[MrShed]

Thats the short answer, yes. The long answer that there are other grounds for taking possession under Section 8, none of which are particularly likely to affect you.

[MrShed]

The important thing to note here is that the inclusion or otherwise of that clause doesnt affect a thing.

[Ed999]

My comments only apply if the premises are entirely within England and Wales, and you are granted a shorthold tenancy (under which you - and your spouse/partner/children, if any - have exclusive use of a seperate dwelling, which is not shared with another tenant nor with the landlord), and you are over 18 years of age when the tenancy is granted, and the rent is less than £2,083 per month.

 

This posting is supplemental to the information in this forum's "sticky" threads and is NOT to be read in isolation.

 

 

Mortgage Repossession: Tenant

 

Regardless of whether the letting to you is authorised by the mortgage lender, you will normally have no right to remain in the property if the lender is granted a possession order by the court.

 

An authorised letting, signed by the landlord and approved in advance by the mortgage lender, is granted subject to an express provision in the tenancy agreement to the effect that the tenant agrees to move out on the lender's request. An unauthorised letting, i.e. one which the lender is not aware of, is simply not binding on the lender, provided the tenancy was granted AFTER the mortgage was.

 

The landlord is not in breach of contract to the tenant if the letting is authorised by the mortgage lender, and the tenancy agreement includes the express provision I mention above.

 

Otherwise, the landlord might be in breach of contract; but if he's in such financial trouble that he's being repossessed, then realistically there seems little chance of recovering any compensation that the tenant might be awarded.

 

For example, if, before the tenancy is granted, the mortgage lender obtains a court order for possession or appoints a Receiver under its Law of Property Act powers, then the landlord has no legal power to let the premises. In that case, any tenants who are let into occupation would be trespassers, and a court order could be granted to the mortgage lender to evict them as trespassers.

 

If you have a rolling monthly tenancy, you have agreed to the landlord evicting you on 2 months notice under section 21 of the 1988 Act. The mortgage lender nowadays has to give you that much notice too, under section 2(4) of the Mortgage Repossesion (Protection of Tenants) Act 2010.

 

The purpose of the Mortgage Repossessions (Tenant Protection) Act 2010 is to provide protection to a tenant where the tenancy has been granted without the consent of the mortgage lender. Such tenants had few rights before.

 

 

If this is an authorised letting - agreed beforehand by the mortgage lender, subject merely to the usual conditions - then presumably the landlord had the tenancy agreement professionally prepared by his Solicitor; in which case, if the tenancy agreement contains the necessary clauses required by section 8 of the 1988 Act, notifying the tenant of the lender's right to evict him/her in the event of mortgage arrears, the landlord would not be in breach of contract if the tenant is evicted by the mortgage lender.

[Aequitas]

There are two quite separate things.

 

1. The first is whether, from the lenders's point of view, the letting is "authorised". A letting is authorised if (a) the terms of the mortgage do not require the lender's consent for the type of letting contemplated or (b) the lender's consent is given. If the letting is authorised it binds the lender to the same extent that it binds the landlord.

 

2. The second is Ground 2. I think it will be helpful to set out both Grounds 1 and 2:

 

Ground 1

 

Not later than the beginning of the tenancy the landlord gave notice in writing to the tenant that possession might be recovered on this ground or the court is of the opinion that it is just and equitable to dispense with the requirement of notice and (in either case)—

 

(a) at some time before the beginning of the tenancy, the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them occupied the dwelling-house as his only or principal home; or

 

(b) the landlord who is seeking possession or, in the case of joint landlords seeking possession, at least one of them requires the dwelling-house as his, his spouse’s or his civil partner's only or principal home and neither the landlord (or, in the case of joint landlords, any one of them) nor any other person who, as landlord, derived title under the landlord who gave the notice mentioned above acquired the reversion on the tenancy for money or money’s worth.

 

Ground 2

 

The dwelling-house is subject to a mortgage granted before the beginning of the tenancy and—

 

(a) the mortgagee is entitled to exercise a power of sale conferred on him by the mortgage or by section 101 of the Law of Property Act 1925; and

 

(b) the mortgagee requires possession of the dwelling-house for the purpose of disposing of it with vacant possession in exercise of that power; and

 

© either notice was given as mentioned in Ground 1 above or the court is satisfied that it is just and equitable to dispense with the requirement of notice;

 

and for the purposes of this ground “mortgage” includes a charge and “mortgagee” shall be construed accordingly.

 

Ignoring the point that the court has the discretion to waive the requirement to serve notice, it will be seen that Ground 2 depends on a Ground 1 notice having been served and that a Ground 1 notice can only be served where the landlord occupied the property as his main home before the letting was granted. If the landlord bought the property as an investment and never occupied it neither Ground 1 nor Ground 2 can apply. Further, contrary to popular belief, where a Ground 1 notice has been served the landlord is still bound to honour any fixed term unless he has reserved a right to break. Applying paragraph 1, the lender is equally bound unless the letting is not authorised.

[Ed999]

If the letting is unauthorised, you as tenant can be evicted by the mortgage lender in ALL circumstances, subject only to 2 months notice under the Mortgage Repossessions (Tenant Protection) Act 2010.

 

If the letting is authorised, you as tenant can be evicted by the mortgage lender, subject only to 2 months notice under section 21 if you have a periodic tenancy.

 

If the letting is authorised, you as tenant can be evicted by the mortgage lender, subject only to 2 weeks notice in some cases, under section 8in the event of any breach of the tenancy agreement, even if you have a fixed term tenancy.

 

 

ALL residential mortgages granted by mortgage lenders in England and Wales - without exception, in my experience - require the lender's prior consent to any letting and give the lender the right to possession as against any unauthorised tenant.

 

The court has power under that Ground to dispense with the Ground 1 notice, and will do so - unhesitatingly, in my experience - if the landlord is in arrears under the mortgage, even if the tenant has a fixed term tenancy.

 

The notice refered to in Ground 2 of the schedule is fictional. That clause you are describing in the tenancy agreement is the 'notice' in question. It is a 'notification' more than a 'notice'.

 

Grounds 1 and 2 are both mandatory grounds for possession, i.e. there is no discretion to take into account any hardship to the tenant.

Edited July 24, 2011 by Ed999