CML supports measures to protect ‘unauthorised tenants’

In a submission earlier this month to consultation by the Department for Communities and Local Government (DCLG), we supported measures under which tenants in these circumstances would get up to two months to vacate the property after the lender takes possession of it.

The DCLG is considering action to fill a gap in protection for “unauthorised tenants” – so-called because they do not know they are renting from a landlord who is letting the property without the knowledge or consent of the lender and in breach of his mortgage agreement.

Of the options being considered by the DCLG, we favour one that would give unauthorised tenants the right to be heard at a court hearing, and permit courts to postpone possession giving them a decent period to move. They would continue to pay their rent during this time, which would contribute to mortgage payments.

We support this option because, with appropriate safeguards and limitations, it gives the court an opportunity to balance fairly the interests of the lender, the borrower/landlord and the tenant.

We believe, however, that moves to improve tenants’ rights should be combined with a requirement for the court to serve notice to the tenants and a government-funded publicity campaign to alert tenants to the importance of such notices. Tenants must also act responsibly when they receive a notice and continue to pay their rent.

It is important to understand that the government’s action is not linked to the expansion of the buy-to-let market. Where the lender has advanced a buy-to-let mortgage, it will, of course, expect a tenant occupying the property to have a tenancy agreement, which affords protection as long as the tenant fulfils their obligations.

We accept the government’s case for action directed primarily at tenants in the owner-occupier sector where the borrower is in breach of their mortgage terms. But cases are few and far between, and the government’s measures should be proportionate to the nature and extent of the problem.

There is encouraging evidence in the DCLG’s consultation paper that this is indeed the approach the government wants to take.

“The numbers affected are small,” the paper says. “We want to find a solution that is effective in improving the security of these tenants and is also practical, proportionate and fair for all those involved. Our objective is to enable unauthorised tenants in this position to receive two months’ notice that they need to vacate the property, while causing the minimum of delay to lenders and borrowers.”