Renting a home your landlord's lender is repossessing

If your landlord falls behind on their buy-to-let mortgage, the lender can take court action to repossess the home you rent. Repossession is a legal process where a mortgage lender or secured loan provider takes ownership of a property¹. Your landlord's lender will usually apply to court².

Most lenders do not start repossession action until at least three payments have been missed³. Under the Mortgage Charter, there is a minimum 12-month period from the first missed payment before there is a repossession without consent⁴. Lenders could previously start repossession orders after three months of arrears, but that changed in June 2023⁵.

If your landlord bought the property through a buy-to-let mortgage, you probably have no right to stay in the property after it is repossessed by the lender⁶. However, if you have a binding tenancy, you become a tenant of the lender if your landlord's property is repossessed⁷.

What repossession means when your landlord is behind on the mortgage

Repossession is when a mortgage company takes your home because you have not paid⁹. It is a legal process where a mortgage lender or secured loan provider takes ownership of a property¹. If you have a mortgage or secured loan on your home and you fall behind on payments, the lender could take court action to repossess your home, and it could be sold to repay what you owe¹⁰.

For tenants, the situation is different. Your landlord's lender has the right to repossess the property if the landlord falls behind on payments. The most common reason for repossession is missed mortgage payments or a loan secured on the home¹¹.

If your landlord bought the property through a buy-to-let mortgage, written notice explaining that there is probably no right to stay in the property after it is repossessed by the lender is a standard part of the arrangement⁶. However, with a binding tenancy, the tenant becomes a tenant of the lender if the landlord's property is repossessed⁷.

The trigger conditions for repossession by a landlord's lender are that the landlord misses mortgage payments or rents the property out without their permission².

Buy to let mortgages: why your landlord's lender can take the home

A buy-to-let mortgage is a mortgage taken out specifically to buy a property that will be rented out. The lender's security is the property itself, not the tenant's rent payments.

If your landlord bought the property through a buy-to-let mortgage, you probably have no right to stay in the property after it is repossessed by the lender⁶. The Law of Property Act 1925 gives the lender the right to repossess the property or land without a court order by appointing LPA receivers for most business mortgages, for example buy-to-let or commercial mortgages¹².

A buy-to-let mortgage contract is regarded as entered into for business purposes where the borrower owns other land occupied on a rental basis and not by the borrower or a related person, or secured by a buy-to-let mortgage contract¹³.

If you rent out your home, you may need permission from your mortgage lender and your mortgage interest may increase⁸. Terms in mortgage agreements or insurance which prevent landlords renting to people who get benefits are no longer permitted¹⁴.

Missed payments to court action: how the lender moves

The process from missed payments to court action follows a set pattern. If you miss your mortgage repayments and cannot agree a repayment plan, your mortgage lender might start court action to repossess your home¹⁵. Most lenders do not start repossession action until you have missed at least 3 payments³.

If you do not contact your lender or you miss up to three payments, your lender may start legal action against you¹⁶. The mortgage provider will contact you to find out why your payment has not come through. At this point, they should give you the chance to get payments back on track¹⁷.

Before they go to court, they must give you a list of all missed payments, details of the total amount of your arrears, and information about how much you still owe on your mortgage¹⁸.

Your landlord's lender will usually apply to court². In most cases, the landlord cannot repossess the home without a court order, except where abandonment is believed¹⁹.

Is repossession always a last resort for lenders?

Repossession is always a last resort¹⁷. Lenders must be fair and reasonable. Repossession should be the last option they consider²⁰. They have to follow a mortgage pre-action protocol⁸.

Lenders will only start court action to repossess your house as a last resort¹. They only repossess homes as a last resort²¹. Repossession is very much a last resort for lenders²².

The Mortgage Charter introduced a minimum 12-month period from the first missed payment before there is a repossession without consent⁴. Lenders could previously start repossession orders after three months of arrears⁵.

If you are struggling with rent arrears, there is help available. MoneyHelper provides guidance on rent arrears and problems paying your rent²³.

After repossession: the lender sells the property

Once the lender has possession, the property will usually be sold. Your home will then usually be sold as quickly as possible, often for less than the market value, meaning you would owe the bank even more than you would have if you had sold the property yourself²⁴.

Your lender is entitled to use the money from the sale to recover what you owe²⁵. Your lender must use the money from the sale to pay off the court costs, estate agent's and solicitor's bills, the mortgage and any second or third mortgages²⁶.

When the sale goes through, your lender and any other secured creditors get their money back. You get any money left over¹⁸.

If you voluntarily surrender the property, your lender sells the property for you and you get back any money made from the sale²⁷.

In some circumstances, you can use Palk v Mortgage Services, which is a case where the lender was ordered to sell the property after repossession rather than rent it out indefinitely²⁸. The lender was ordered to sell the property after repossession rather than rent it out indefinitely because the rent would not have covered the interest being added to the mortgage²⁹.

Where your landlord's debt does not follow you

Your landlord's mortgage debt is their responsibility, not yours. If the mortgage or secured loan is in someone's sole name, this will also continue to be the sole liability of that person, even if they have left the property³⁰.

If the sale does not cover the mortgage, the landlord remains liable for the shortfall. This will include any arrears, ongoing mortgage and interest payments, buildings insurance and penalty charges for missed payments²⁵.

If you owe rent to an old landlord that you no longer have a tenancy with, it is no longer a priority debt. You can treat it like a credit card or unsecured loan debt³¹.

Even if you include rent arrears in a Debt Relief Order, your landlord can still take court action to evict you. However, they cannot recover rent arrears built up before your DRO³².

If you have a mortgage or secured loan on your home and you fall behind on payments, the lender could take court action to repossess your home and it could be sold to repay what you owe. You would get any money left over³³.

Does it matter if my landlord's mortgage is in a limited company name?

If your landlord's mortgage is in the name of a limited company, the company must not have any insolvency proceedings³⁴. A buy-to-let mortgage contract is regarded as entered into for business purposes where the borrower owns other land occupied on a rental basis and not by the borrower or a related person, or secured by a buy-to-let mortgage contract¹³.

The Law of Property Act 1925 gives the lender the right to repossess the property or land without a court order by appointing LPA receivers for most business mortgages, for example buy-to-let or commercial mortgages¹².

This means that if your landlord holds the property through a limited company, the lender may be able to act more quickly than if the mortgage were in the landlord's personal name.

Does repossession work differently in Northern Ireland?

Repossession rules differ across the UK. Housing Rights provides information for homeowners in Northern Ireland³⁵. There is a different scheme in Northern Ireland for rent to own³⁶.

If you do not pay, the items you bought can be repossessed. The creditor can also apply for a Money judgment¹⁹.

For tenants in Northern Ireland facing their landlord's repossession, the same principles apply: the lender must follow due process, and repossession should be a last resort.

Where to get help

If you are facing eviction because your landlord's lender is repossessing the property, there are free and impartial services that can help.

MoneyHelper provides guidance on rent arrears and problems paying your rent²³. StepChange offers help with cost of living pressures²¹. National Debtline provides guides on mortgage arrears²⁶.

If you are a homeowner in Northern Ireland, Housing Rights provides guidance on mortgage problems³⁵.

For tenants in England, Shelter provides advice on repossession by a landlord's lender². For tenants in Wales, Shelter Cymru provides similar guidance⁶.