Change to Repossession Law Announced

Margaret Beckett, UK Housing Minister, has finally announced the long-awaited change to the law that guarantees that all UK tenants will receive a notice to leave the home in case the landlord has defaulted on his or her mortgage payments at least 2 months prior to repossession of the property. However, it is important to note that only tenants, whose tenancy is recognized – that is, known and approved by the lender – will be sent such a notice. All tenants, whose landlord has taken out a buy to let mortgage, are automatically recognized by the lender. This group of tenants will be recognized, honoured and protected by the lender as long as the tenant him or herself is not in breach with the tenancy agreement. However, tenants, whose landlord is on a residential mortgage and has not informed the lender about the fact that the property is being rented out (and thus is in breach with the mortgage terms), fall under the risk of being asked to move out immediately. Although lenders are generally sympathetic with tenants, who have been carefully paying their rents and acting responsibly, they have to admit that the legal side of the matter is very complicated. Lenders are in contractual obligation to the borrower, even if he or she breaks the mortgage terms. There are also legal constraints on the ability of the lender to collect rent from tenants. It is expected that the Government resolves the remaining problems by ensuring that all tenants receive a notice. The Government is expected to negotiate and legislate the issue by 2010.