Reposession and can a deposit clear arrears if agreed upon?

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Hello all,

 

I've been renting a flat on an assured shorthold tenancy since 2006. On moving in I paid a deposit and 1 month rent in advance. The deposit was not put into a deposit scheme as it was not mandatory at the time.

 

3 years into the tenancy my landlady sold the property and the purchaser agreed to continue the tenancy under the same terms. The deposit and advance were never written about but I was told verbally they had been transferred to the new landlord (the deposit was still not held under a deposit scheme). Also, a new tenancy agreement was never written, I just continued to live here on a rolling tenancy agreement.

 

I am now set to leave but this is due to reposession and eviction. I was informed of the reposession a few months ago and decided to withold rent until I knew what was going on (so that I didn't pay it to the landlord and then find the mortgage company trying to claim it off me).

 

I've recently been informed that up until reposession the landlord is still owed rent as even though he has defaulted he still 'owns' the flat. Is this correct?

 

Also, as I'm in arrears could I used my deposit and rent to pay towards the arrears if the landlord agrees? Would I need a formal signed document from my landlord to show that he has accepted my deposit and advance as payment towards arrears, or would an email do?

 

Thanks for any advice on this matter.

[Snorkerz]

Yes, you do still owe rent until you are evicted.

 

I presume the deposit is equal to one months rent? In view of the landlords uncertain financial position, and doubts over your ability to reclaim a legitimately unprotected deposit, I would keep your rent account underpaid by an amount equal to your deposit. This is not a 'legal' action, but one based on protecting yourself.

 

So long as this amount is less than 2 months rent, neither your landlord, nor the mortgage company will be able to evict you any quicker on account of the arrears.

 

When you leave the property, you will owe the landlord one months rent. He will owe you the same amount due to the deposit. There will be nothing to argue about. Your landlord would still be able to pursue you through the courts if you had caused any damage to the property above fair wear and tear - even if he no longer owned the property.

[Ed999]

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 normally 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 mentioned 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 current tenancy was granted, the mortgage lender obtained a court order for possession or appointed a Receiver under its Law of Property Act powers, then the landlord had no legal power to let the premises. In that case, any tenants who were 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. As 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, it's difficult to see how you can have any claim for breach of contract.

 

 

Note: 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 previously.

 

 

Mortgage Repossession: Ground 2

 

Is the Letting Authorised by the Mortgagee? -

 

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.

 

All residential mortgages in England (without exception, in my experience) require the lender's prior written consent to any letting, and give the lender a right to possession against any unauthorised occupier.

 

If the letting is unauthorised, you 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, it binds the mortgage lender to the same extent that it binds the landlord. This means:

 

(a) If the letting is authorised, the tenant can be evicted by the mortgage lender, subject only to 2 months notice under section 21, if it's a periodic tenancy; and

 

(b) If the letting is authorised, the tenant can be evicted by the mortgage lender, subject only to 2 weeks notice in some cases, under section 8, in the event of any breach of the tenancy agreement, whether it's a periodic or a fixed term tenancy; and

 

© If the letting is authorised, the tenant can be evicted by the mortgage lender, subject only to 2 months notice, under Ground 2 of the section 8 grounds, whether it's a periodic or a fixed term tenancy.

 

 

Ground 2 -

 

Grounds 1 and 2 in Schedule 2 of the Housing Act 1988 say:

 

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.

 

 

Note that Ground 2 depends on a Ground 1 notice having been given; and that a Ground 1 notice can only be given where the landlord has occupied the property as his home at some earlier time; and that the Court has power to waive the requirement to give a Ground 1 notice.

 

If the landlord bought the property as an investment and has never occupied it, Ground 1 and Ground 2 can't apply (unless the Court waives the notice requirement).

 

Where a Ground 1 notice has been given (or the Court waives the notice requirement) the landlord is still bound by any fixed term unless he has reserved a right to break, hence the lender is equally bound (if the letting is authorised).

 

In practice, the lender will usually make its consent to the letting conditional upon the landlord reserving a right to break.

 

 

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

 

The notice refered to in Ground 2 of the schedule is fictional. A clause in the tenancy agreement is the "notice" in question. It is a notification, rather 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.