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Unauthorised Tenants: The Mortgage Repossessions (Protection of Tenants etc) Act 2010 The Dwelling Houses (Execution of Possession Orders by Mortgagees) Regulations 2010

INTRODUCTION

The Act and Regulations came into effect in 2010 and are designed to offer limited protection to tenants of landlords who have been repossessed by their lenders principally by enabling them to obtain time to find alternative accommodation.

The Act applies where a mortgagee of land which consists of or includes a dwelling-house brings an action in which it claims possession of the property, and there is an unauthorised tenancy of all or part of the property.

WHAT IS AN UNAUTHORISED TENANCY?

An unauthorised tenancy means:

(1) an agreement which gives rise to an assured tenancy within the meaning of the Housing Act 1988 (which includes an Assured Shorthold Tenancy) or a protected or statutory tenancy within the meaning of the Rent Act 1977. In other words, a private sector residential tenancy; and

(2) That the mortgagee's interest is not subject to the tenancy. In other words it is not binding on the lender because for eg. it may have been entered into after the date of the mortgage anjd without the lender's permission.

See section 1(8)

It is important to note therefore that the Act does not offer any statutory protection to tenants whose tenancies are binding on the lender, presumably on the basis that they have or can assert their own separate proprietary rights as against the lender.

WHAT PROTECTION DOES THE ACT PROVIDE?

It enables an unauthorised tenant to apply to court to postpone the date for delivery of possession, or, if an order for possession has already been made, to stay or suspend execution of the order, for a period not exceeding two months. See section 1(2)-(4).

Note that the Act only enables an unauthorised tenant to obtain one postponement or stay/suspension. The court will not grant a stay/suspension if it has already exercised its powers to grant a postponement. See section 1(4).

When considering whether to exercise its powers under the Act, the court must have regard to:
(a) the circumstances of the tenant, and
(b) if there is any outstanding breach by the tenant of a term of the unauthorised tenancy-
  (i) the nature of that breach, and
  (ii) whether the tenant might reasonably be expected to have avoided that term or to have remedied the breach.
See section 1(5)  

The court may then make any postponement, stay or suspension conditional upon the making of payments to the mortgagee in respect of the continued occupation of the property during the period of the postponement, stay or suspension, and this will not have the effect of creating a tenancy or other right to occupy the property. See section 1(6)-(7).

WHEN AND HOW SHOULD AN UNAUTHORISED TENANT APPLY TO COURT?

An unauthorised tenant should be alerted to the risk of repossession in two ways:

(1) Upon receipt of a 'notice to occupiers' which the lender is required to send to the mortgaged property within 5 days of being notified of the first hearing date by the court in accordance with CPR 55.10(2) and

(2) Upon receipt of a prescribed form of notice of execution which the lender is also required to deliver to the mortgaged property at least 14 days before applying to court for a warrant of possession. See section 2 and the Regulations. The prescribed form of notice is set out in the Schedule to the Regulations.

Upon receipt of either of these notices, the tenant is advised to make immediate application to the court, using a Form N244 Application Notice

Part 55 of the Civil Procedure Rules now specifically allow for a an unauthorised tenant to make an application to the court for a postponement or stay/suspension. See CPR 55.10(4A).

In addition, when a lender requests the court to issue a warrant of possession using Form N325  it has to certifiy that notice has been given in accordance with the Regulations.