Mortgagees and tenants
Published by a LexisPSL Property expert

The following Property practice note provides comprehensive and up to date legal information covering:

  • Mortgagees and tenants
  • Mortgagee’s consent to grant of lease
  • When can the mortgagee withhold consent?
  • Who is responsible for proving consent?
  • Has the mortgagee recognised the tenant as a tenant?
  • Receipt of rent by receiver
  • Surrender and grant of new lease without consent
  • Protection of tenant
  • Position vis a vis landlord
  • Position vis a vis mortgagee

Mortgagees and tenants

Mortgagee’s consent to grant of lease

If a property is subject to a mortgage that prohibits leasing without the mortgagee’s consent, then written evidence of consent must be obtained prior to completion of the lease. On the grant of an underlease, mortgagee’s consent in respect of any mortgage over the freehold to the head lease must also be obtained. Check the office copy entries of all relevant titles for evidence of any registered mortgages. The mortgagee will often require sight of the agreed draft lease before granting consent.

If the requisite consent is not obtained, the mortgagee may be able to invalidate the grant of the lease and treat the tenant as a trespasser. However, they can, by mutual consent, create a landlord/tenant relationship between themselves by express words or by conduct. Whether or not such a relationship has been created will be determined on the facts.

When can the mortgagee withhold consent?

If the mortgage contains a term that the mortgagor cannot let the property without the mortgagee’s consent, in the context of a mortgage of residential property created by an owner-occupier, no obligation is implied that in exercising of its right to withhold consent to a letting of the mortgaged property, the mortgagee must act reasonably (City Bank International plc v. Kessler [1999]—not available in Lexis®Library).

However, in Commercial First, the court confirmed that in

Related documents:

Popular documents