Rights of Tenants in Possession Proceedings

Carmel Ferguson, solicitor at Housing Rights Service, explains what tenants can do if their home is being repossessed because the landlord cannot keep up mortgage payements.

Housing repossessions in Northern Ireland have increased considerably over the past year. This worrying trend not only affects owner occupiers, but also tenants of properties where the landlord has fallen behind with mortgage payments, leading to the lender initiating possession proceedings. Often the tenant in this situation is unaware of any difficulties until the possession proceedings are well under way.

What can tenants do if their home is in danger of being repossessed?

The legal position of the tenant generally depends on:

• whether or not the lender was aware of the tenancy’s existence, prior to possession proceedings; and
• whether or not the tenancy was in existence prior to the mortgage.

Some landlords rent out a property without the knowledge or consent of their lender. The lender in this situation has no responsibility towards the tenant, as the tenancy would be in breach of the terms of the mortgage.

If the tenant refuses to leave the property when asked, the lender may apply for a court order. When this happens, the tenant can be held liable for the costs of the legal proceedings.

In such a case, the tenant is best advised to attempt to negotiate with the lender or the lender’s solicitor. It may be that the lender will agree to allow the tenant to remain in the property for the duration of the tenancy. This may be due to perceived difficulties in selling the property within the current economic climate. The lender may feel that it is better to have the property occupied and rent coming in than for it to be vacant, with no rent coming in. It should be emphasised, however, that this would not be an entitlement but a negotiable settlement.

If the tenancy agreement existed prior to the mortgage, tenants would be in a stronger position legally to assert their rights under the agreement. If the ten-ancy was an ‘authorised’ tenancy, the lender will have approved the mortgage with the knowledge of the existence of the tenancy. In such a case, the lender is obliged to allow the tenancy to continue, for the full duration of the tenancy agreement, as long as the rent continues to be paid by the tenant.

In the event that the tenancy agreement had not been previously an authorised tenancy, but the lender accepts rent directly from the tenant, the tenant may be able to argue that the lender has recognised the tenancy. The tenant should then be entitled to remain in the property for the duration of the tenancy agreement provided that the rent continues to be paid.

Receivers

If a landlord fails to keep up mortgage payments, the lender can appoint a receiver to collect rent from the tenant. The tenant should be made aware of this change in a letter from the receiver. The letter should advise the tenant of the receiver’s appointment. It should give details of how further rental payments should be paid directly to the receiver for the duration of the tenancy. Some ‘receivers’ letters in Northern Ireland incorrectly refer to the Law of Property Act 1925

This Act does not in fact apply in Northern Ireland. However, a receiver can be appointed in Northern Ireland under the Conveyancing Act 1881.

Court proceedings

The lender should serve a notice to any occupiers in the property prior to court proceedings for its possession, at least four days prior to the court hearing.

This notice (form 10c) advises the tenant that the lender is seeking possession of the property and gives the date of the court hearing. The notice also explains that the tenant may apply to be a party to the proceedings, either by lodging an application and affidavit or by giving oral evidence at the hearing.

The tenant should attend the hearing, presenting a copy of the tenancy agree-ment. If there is no tenancy agreement, the tenant should bring proof of rental payments as well as any other doc-umentary proof of the arrangement with the landlord. It is important to note that under the Private Tenancies Order, a tenant is legally entitled to a rent book and a statement of tenancy terms.

At the court hearing, the Master may allow the tenant further time to remain in the property. The tenant may also be permitted to negotiate with the lender’s solicitor to be allowed to stay in the property until the tenancy ends, or for further time to find somewhere else to live.

Enforcement of Judgements Office

A lender who has obtained a possession order must apply to the Enforcement of Judgements Office to have the order enforced.

A form (Form 5) must be completed by the lender’s representative following a visit to the property to determine who is living there. Form 5 sets out the names, dates of birth and occupations of those living in the property. Alternatively it could specify that no-one lives in the property.

All occupants of the property should be made aware of the possession order. A tenant who believes that the order has been wrongfully made should seek legal advice as it may be possible to have the order set aside.

Presenting to the Housing Executive

Tenants who find that they will be made homeless by the possession of their home should present as homeless to the Housing Executive. They should bring a copy of the notice to quit and / or of the possession order. The Housing Executive is obliged to assess their application for homelessness, awarding points as deemed appropriate.

Sale of property

The lender or the landlord may agree to the sale of the property with the tenant still in occupation as a ‘sitting tenant’. At the end of the tenancy term, the tenant and the new owner may agree a new tenancy on mutually agreed terms. However, neither party is obliged to do so.

Deposits

In most cases, the tenant will have paid a deposit to the landlord. The tenant is legally entitled to have this refunded in full provided there is no damage to the property etc. The tenant should normally seek reimbursement from the landlord. If the landlord does not pay, the tenant may pursue the matter in the Small Claims Court. However if the landlord is in financial difficulty, it is possible that the tenant will not receive a refund of the deposit, even if an order is made by the court.

Summary

• On receipt of a letter from the lenders’ solicitors, the tenant should respond as soon as possible.
• On receipt of notice of court hearing, the tenant should attend the hearing.
• On receipt of notice of receiver, the tenant should contact the receiver.
• On receipt of notification from the enforcement of judgments office that the property is due to be repossessed, the tenant should contact the enforcement of judgments office directly.
• The tenant should contact the Housing Executive if threatened with homelessness.

For further advice in any of these matters please contact Housing Rights Service on 028 9024 5640.