CML news & views

We would like to see greater protection for the small number of tenants who unexpectedly and through no fault of their own suddenly face the prospect of losing their home because their landlord has fallen behind with his mortgage payments. 

However, we would like to see a bill currently being rushed through Parliament modified because it could delay possession in all cases and add unnecessary complexity to the process.

Most landlords have buy-to-let mortgages, and their tenants are already adequately protected by tenancy agreements that mean they do not have to move out at short notice if the mortgage falls into arrears and the lender seeks possession of the property.

The bill is intended to help tenants in a much smaller number of cases where a borrower falls into arrears with a residential mortgage and is letting the property without the lender’s knowledge or consent. When this happens, it is often only when an action for possession is started that the lender and tenant become aware of each other’s interest in the property.

Lenders are sympathetic to the plight of tenants in these cases. But the lender is also in a difficult position because of a potential conflict between the interests of the borrower/landlord, to whom the lender has contractual obligations, and the tenant. 

Depending on the individual circumstances, it may be in the borrower’s interests for the lender to seek immediate vacant possession of the property and sell it as soon as possible to minimise arrears. But lenders accept that this may not be in the best interests of the tenant, who may have been paying his rent in full and on time every month, even though his landlord has not been using the funds to pay his mortgage.

We therefore support key proposals in the Protection of Tenants (Mortgage Repossessions) Bill, due to have its second reading later this month. 

We accept that tenants should be able to take part in possession proceedings brought by a lender against a borrower/landlord. And we would like the court to be able to consider the tenant’s position and – subject to safeguards, including the continuing payment of rent – delay possession for two months to give the tenant a reasonable period to find somewhere else to live.

We are, however, concerned that some of the provisions in the bill, introduced by the Labour MP for south east Bolton, Dr Brian Iddon, are inappropriate to the scale of the problem and could add significantly to costs and complexity. 

In particular, we are concerned that the bill could apply to every case of possession – not just the small number involving an unauthorised tenant. Additionally, clause two of the bill appears to prevent lenders from executing a warrant for possession unless they have served a notice at the property and waited for a period of time. The actual period of notice required of lenders is not specified in the bill and would be left to regulation. If it is longer than the two weeks we believe is appropriate to protect unauthorised tenants, the cost to borrowers would rise further.

Delays that add unnecessarily to arrears reduce the scope for lenders to continue negotiating to avoid possession, thereby creating further detriment for borrowers. 

The government is doing all it can to ensure that the bill is enacted before the general election. But we are concerned that, as drafted, the bill could be used as a ‘rogue’s charter’ to delay possession, and that there is a lack of safeguards to prevent this happening.

We are continuing to have useful discussions about the bill and hope that it can be modified to address lenders’ concerns, while still providing the intended protection for unauthorised tenants. We support the overall aspiration of the bill, but want to make sure that it is proportionate to the scale of problem and does not have expensive and problematic unintended consequences.