Ground 2: Mortgage Lender Possession

What is Ground 2?

Ground 2 allows a mortgage lender to gain possession of a property from tenants when the landlord has defaulted on their mortgage. It's a mandatory ground, meaning the court must grant possession if the requirements are met.

This ground exists because mortgage lenders need a way to recover properties when borrowers stop paying. Without it, tenants could block lenders from taking possession, making buy-to-let lending much riskier.

Who uses Ground 2?

Ground 2 is used by mortgage lenders, not landlords. Key points:

• Lenders use it: Banks, building societies, and other mortgage providers
• Landlords don't use it: If you're a landlord wanting possession, use other grounds
• Triggered by default: Only used when the landlord has stopped paying their mortgage
• Affects tenants: Tenants may lose their home through no fault of their own

What are the requirements?

For Ground 2 to succeed:

• Prior notice: The tenant must have been told at the start of the tenancy that the property was mortgaged
• Mortgage before tenancy: The mortgage must have been granted before the tenancy started
• Lender seeking possession: The lender must need to sell with vacant possession
• Notice period: 2 weeks' notice to the tenant

What if no prior notice was given?

If the tenant wasn't told about the mortgage at the start of the tenancy, the court can still grant possession if it considers it "just and equitable" to do so. Courts often waive this requirement for lenders, but it's not guaranteed.

This is why many tenancy agreements include a clause stating the property is subject to a mortgage.

What happens to tenants?

When a lender uses Ground 2:

• Tenants receive 2 weeks' notice of possession proceedings
• If the court grants possession, tenants must leave
• Tenants may be able to claim housing benefit or apply for social housing
• The landlord's default is not the tenant's fault, but they still lose their home
• Tenants may have difficulty recovering their deposit from the landlord

As a landlord, what should I know?

If you're a landlord:

• Keep paying your mortgage: Default leads to lender possession and harms your tenants
• Include mortgage notice: Your tenancy agreement should mention the property is mortgaged
• Communicate with lender: If you're struggling, talk to your lender before defaulting
• Tenant rights: Even if your lender repossesses, you may still owe your tenant their deposit

Renters' Rights Act changes

The Renters' Rights Act doesn't significantly change Ground 2. It remains a mandatory ground for lenders to use when landlords default. The prior notice requirement continues to apply, though courts maintain discretion to waive it.