Tenant's rights when a landlord is repossessed

Landlords often take out mortgages on properties that they rent. Where a landlord fails to make the payments on their mortgage, the mortgage lender can take court action to repossess the property. Alternatively, the lender can appoint a receiver to manage the property for the mortgage lender without needing to take court action.

A tenant is liable to pay rent to a receiver if the mortgage lender appoints one.

A tenant is not automatically liable to pay rent to the mortgage lender when the lender obtains a possession order against the landlord, but offering to pay rent to the lender could encourage them to accept the tenancy and allow the tenant to remain in the property.

If the mortgage lender repossesses the property, this will cause the landlord's identity to change.

When a new landlord takes over the property, the tenancy does not automatically just disappear. Depending on the circumstances the tenancy might be binding on the mortgage lender, and they will become the new landlord.

How secure a tenant is in the property, and what the lender must do if they want to evict them, depends on:

• how the lender took control of the property

• whether the tenancy is authorised by the lender

How the lender can take control of the property

A mortgage lender can take possession of rented property in three main ways. It could:

• start possession proceedings against the borrower for mortgage arrears

• appoint a receiver under the Law of Property Act 1925 to manage the property

• exercise its rights under the mortgage to sell the property

The court deals with a mortgage lender's claim for possession in the same way as any other possession claim for mortgage arrears. The court's powers to suspend possession are the same as if the borrower was occupying the property.[1]

Read more about the process for mortgage possession claims on Shelter Legal.

How the lender gets possession through the courts

The Pre-action protocol for possession claims based on mortgage arrears does not apply to buy-to-let mortgages.[2]

The mortgage lender issues a claim in the County Court nearest to the property. The case is listed for a hearing, and the judge decides the outcome by making an order to do one of the following:

• dismiss the claim

• adjourn the case to a fixed date

• adjourn the case on terms

• suspend possession on terms

• grant possession to the lender

These proceedings are against the landlord. The tenant is not a defendant in the possession proceedings, but they can apply to be joined to proceedings.

If they have an assured tenancy which has not been authorised by the lender, the tenant can apply to the court to delay possession by up to two months. [3] They do not need to be joined to proceedings to do this.

Read more about the eviction of tenants of mortgage borrowers on Shelter Legal.

Sometimes, a lender can evict the tenants when it repossessed the property from the landlord without needing to take separate court action. Whether the lender needs to issue separate proceedings against the tenant depends if the tenancy was authorised by the lender or not.

A tenancy is considered to have been authorised by the lender where one or more of the following applies:

• the tenancy was granted before the mortgage agreement

• the lender consented to the tenancy

• the lender accepted the tenancy as its own

Tenancy granted before mortgage

Whether the tenancy is authorised depends on the date the tenancy started and the date the mortgage was taken out.

A tenancy is binding on the lender if it began before the mortgage agreement. This applies even if the lender has not agreed to the tenancy. This is called an overriding interest.

Tenants can search HM Land Registry for details of when the mortgage lender registered its charge on the property.

A tenancy is more likely to pre-date the mortgage where the landlord:

• remortgaged the property with a different lender after the start of the tenancy

• took out a second mortgage, and the lender of this loan recovered possession from the borrower

• changed during the tenancy, and the new landlord took out a mortgage to purchase the property

A tenancy which began after the date of the transfer of ownership to the landlord but before the mortgage's registration on the Land Registry does not create an overriding interest.[4] The mortgage is considered to have begun when the property was bought with the loan, even if there was a gap of time between the sale and the registration.

Lender consents to tenancy

If the lender consented to the tenancy, it is binding. This applies even if the tenancy began after the mortgage. Buy-to-let mortgages often grant consent to a tenancy. Most other mortgages do not.

A lender who has not given express written consent is likely to argue that consent has not been granted, even if consent could be implied. In one case, a lender granted a standard mortgage to a borrower on a property that consisted of several bedsits already let to tenants. The mortgage contained terms banning the granting of tenancies without the prior written consent of the lender. The court held that the lender was not bound by the tenancies even if the bank must have known that the bedsits in the property would be let out.[5]

Lender accepts the tenancy

The lender accepts a tenancy if it behaves in a way that would create a landlord-tenant relationship. The facts must show that the lender's actions amount to the creation of a new tenancy. Knowledge by the lender of the existence of a tenancy is not enough to create a new tenancy.[6]

A lender that wrote to the tenants to pay rent directly to it instead of the landlord had created a new tenancy.[7] In a different case, acceptance of rent payments from an occupier who did not identify herself as a tenant did not create a new tenancy.[8]

How the tenant can find out if the tenancy is authorised

To find out whether the lender is bound by the tenancy or not, tenants can:

• carry out a Land Registry search

• ask the landlord when the mortgage was granted

• ask the court to confirm the date the mortgage was granted (this information is included in the particulars of claim submitted to the court by the lender)

• contact the lender or lender's solicitor and ask when the mortgage was granted

A tenancy is unauthorised when it is granted after the mortgage, and the lender has not given consent for it. An unauthorised tenancy is not binding on the landlord's mortgage lender.

A borrower has a general power to grant tenancies.[9] This means that even an unauthorised tenancy is still binding on the landlord. This applies whether the lender grants permission for the tenancy or not.

How the lender can evict the tenants

The lender can bring possession proceedings against the landlord for a breach of the mortgage. It can enforce any court order against all the occupants of the property, including unauthorised tenants. The lender does not need to take the tenants to court separately to evict them.

A tenant in this situation can ask the court to court to delay the date of possession for up to two months.[10] They can ask the court to do this at the possession hearing. If this was not raised at the hearing they may ask the lender for an undertaking not to enforce the possession order for a further two months. If the lender refuses, the tenant may apply to have the possession order postponed.

The court will consider the tenant's circumstances when deciding whether to postpone. The court may consider whether they have complied with their tenancy agreement, for example by keeping up with rent payments.[11] The court can order the tenant to pay their rent to the mortgage lender for the period of the extension.

Read more about how an unauthorised tenant can request a delay to the date for eviction in Eviction of tenants of mortgage borrowers on Shelter Legal.

An authorised tenancy means it is binding on the mortgage lender.

If the tenancy is binding on the lender, the lender must manage the tenancy as the landlord.

To end the tenancy, the lender must serve the required notice and bring a possession claim in the courts in the same way as any other landlord.[12]

When a lender gains possession from a landlord, the lender becomes the new landlord of any authorised tenancy. It can bring possession proceedings in the same way as the original landlord.

Ground 2 notices on or after 1 May 2026

A landlord of an assured tenant can serve a section 8 notice to seek possession if they have grounds. Ground 2 is a specific ground for possession that a mortgage lender can rely upon when they wish to sell the property.

Ground 2 is a mandatory ground. This means the court must order outright possession if the conditions are met.

The court must order possession on ground 2 where both:[13]

• the property is subject to a mortgage or charge

• the lender is entitled to exercise a power of sale and requires vacant possession

The notice period for ground 2 is four months.[14]

Find out more about ground 2 and assured tenancy mandatory grounds from 1 May 2026.

Ground 2 notices served before 1 May 2026

Before 1 May 2026, a different version of ground 2 applied for assured and assured shorthold tenancies. Ground 2 could only be used against tenants where the mortgage started before the tenancy.

The landlord should have informed the tenant in writing before the start of the tenancy that they might use ground 2. The court has the discretion to waive this requirement.

The notice period for ground 2 before 1 May 2026 was two months.[15]

A lender can continue possession proceedings after 1 May 2026 on a valid section 8 notice served before 1 May 2026 using the old version of ground 2.

Find out more about assured mandatory grounds for private tenancies before 1 May 2026 and social tenancies.

Ending the tenancy on other grounds

The lender could issue a possession claim on grounds by serving a section 8 notice on other grounds.

The lender can rely on the same grounds for possession as any other private landlord. Common reasons include rent arrears and antisocial behaviour.

Find out more about section 8 notices.

Ending the tenancy using section 21

Where the tenancy is an assured shorthold tenancy, the landlord can serve notice to end the tenancy without grounds under section 21 Housing Act 1988.[16]

Assured shorthold tenancies and section 21 notice have been abolished in the private rented sector from 1 May 2026.

A lender can continue possession proceedings on a valid section 21 notice served before 1 May 2026. They must start possession proceedings before the deadline.

Find out more about the section 21 possession process.

The lender cannot issue a valid section 21 notice if the original landlord would have been unable to serve a valid notice. For example, if the landlord did not protect a tenancy deposit, or failed to serve prescribed information on the tenant.

Find out more about what makes a section 21 notice invalid.

The mortgage lender could appoint a receiver under the Law of Property Act 1925. The lender does not need to get a court order to appoint a receiver.[17]

Most mortgage agreements contain an express power to enable the lender to appoint a receiver to collect rent from the tenants, although this power is also implied in any mortgage agreement by law.[18]

When the receiver can demand rent

A receiver can demand rent from a borrower's tenant when a power of sale has become exercisable. A power of sale is exercisable when interest under the mortgage is in arrears of at least two months or another term of the mortgage has been breached.[19]

The lender or the appointed receiver can exercise a power of sale without obtaining a possession order against the borrower. The power of sale allows the lender to sell the property to someone else.

When the power of sale is exercised, the buyer of the property becomes the new landlord and is bound by the tenancy. This does not happen often, as most buyers normally require vacant possession on completion of the sale.

Read more about the tenant's rights when a property is sold on Shelter Legal.

A freeholder can gain possession of a lease if the leaseholder does not fulfil their obligations under it. For example, the leaseholder has failed to pay ground rent or service charges.

If the leaseholder has rented the property out, the possession action could put the tenant's home at risk. This follows different rules compared to when a mortgage lender repossesses the property. The leaseholder is a mesne tenant, and the person who lives in the property is the subtenant.

The process for a freeholder to gain possession begins with a notice of forfeiture against the leaseholder, or mesne tenant.

The subtenant can apply to court for relief from forfeiture.

Find out more about possession action by freeholders.

Find out more about when a subtenancy it binding on the freeholder.