The Council of Mortgage Lenders (CML) has welcomed the Government’s moves to support and strengthen the quality of the private rented sector.
In particular, the CML believes it is important to recognise that the legal position of tenants whose landlords default on their mortgage will vary, depending on whether their tenancy is recognised (and their landlord has a buy-to-let mortgage), or whether it is unrecognised and potentially the lender is not even aware of it (because the borrower has an owner-occupier mortgage and is in breach of its terms, because they have not gained consent from their lender to let the property).
The vast majority of tenants will have landlords with buy-to-let mortgages, and will have tenancies recognised by the lender. These tenants already have significant protection and their tenancies will be honoured by lenders - providing that they are not in breach of their tenancy agreement.
Lenders are also sympathetic to the position of tenants of landlords who have failed to gain consent to let their property, but the legal position is more complicated. Lenders have contractual obligations to the borrower, despite their breach of the mortgage terms, and there are also potential legal constraints on their ability to collect rent from tenants in this position.
The CML intends to work with the Government to resolve these complexities and ensure that the notice period for these tenants is consistent with the lender’s other legal obligations.
CML director general Michael Coogan said: “Everyone sympathises with the position of good tenants who were unaware their landlord was not paying the mortgage. In most cases, tenants have a recognised tenancy because their landlord has a buy-to-let mortgage, and these tenants are protected.
“For the minority of tenants whose landlords should never have been renting out the property at all, we look forward to working with Government towards a resolution that appropriately balances the outcomes for lender, borrower and tenant.”