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Can a tenant breach a mortgagee's obligations?

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Can a tenant breach a mortgagee's obligations?

Postby caffiene » Fri May 01, 2015 8:46 pm

mortgage special conditions: - consent to let.

The consent to let is conditional that the property must not be let to anyone on benefits.

L grants a tenancy to T who is not on benefits at the time the tenancy is granted. T is working and agrees not to claim benefits.

What if half way through the tenancy, T loses job and makes a claim for benefits?

T is in breach of the AST term that he must not claim benefits. ( I think such a term could be held to be unfair to T?).

Is L now in breach of his obligation to the mortgagor not to let to a person on benefits?

It looks so. Does L have a defence? HE SIGNED the clause promising something he could never have any control over - any tenant can have a change of circumstances mid tenancy. Any tenant can break his agreed obligations despite L telling him not to.

Does the law say L has broken the condition or can he be let off and why? Can they call the loan in over the breach?

(I have no issue with people on benefits. I do have an issue with small print designed to trip up the unwary).
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Re: Can a tenant breach a mortgagee's obligations?

Postby Millbrook2 » Sat May 02, 2015 11:46 am

Have you checked the exact wording. For instance if it said 'currently' it could make all the difference.
Also if the lender anticipated someone not being on benefits then later claiming them one might expect them to make specific provision for that.

Not my field but I would imaging that a term in an AST to cover this eventuality would have to say they would give up the tenancy if they claimed benefits rather than say they 'must not claim benefits'.
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Re: Can a tenant breach a mortgagee's obligations?

Postby caffiene » Sat May 02, 2015 12:14 pm

The wording is consent to let is on 'condition' "the property must not be let to anyone receiving benefits". This is part of a list of requirements e.g single AST, etc.

There is another part which says the total debt must be repaid immediately if the borrower "breaks any 'condition' of the agreement".

"Must not be let" is the key phrase. When L signs the AST, if at that time, T is employed then he has not 'let' the property to a claimant. The act of granting the tenancy being the verb 'let'. However, if at a later date, T has a change of circumstances and claims benefits, one would describe the property during that instance as 'let to someone receiving benefits".-giving rise to a possible breach.

Given that it is impossible for L to control the circumstances of the tenant, taken literally, the consent to let is not worth the paper it is written on because any normal working tenant could end up unemployed. Inevitable over 25 years.

I feel it seems unfair if L is held to have broken the condition because of an act of the tenant L has no control over.

What is the legal view? Has L legally broken the condition if this happens? Does contract law excuse such a breach as if it never occurred because it is an unforeseen event L has no power to influence?

Also, in order to be considered to "break" a condition, is a minor breach like this sufficient to trigger the total debt being repaid as specified in the clause above?
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Re: Can a tenant breach a mortgagee's obligations?

Postby dls » Mon May 04, 2015 8:33 pm

The act of letting is the grant of the tenancy. It commits the landlord. I doubt very much that a later transition to benefits can put the landlord in breach. That may not apply to a renewable tenancy when the tenancy becomes cancellable.

However, the issue is very much dependent upon the exact words both in the the mortgage deed, the loan agreement and in the tenancy. It really is not sfae to give or take advice in such a situation without proper access to teh documents.

A breach of condition can be fundamental.
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Re: Can a tenant breach a mortgagee's obligations?

Postby atticus » Tue May 05, 2015 2:55 pm

I agree that it is the granting of the tenancy that is important. If at that moment there is no breach of the mortgage terms, I do not see how there can be a breach if the tenant's circumstances should change.

There may be a breach if the tenancy is then renewed or extended.

Oh, and a "minor" breach is nevertheless a breach.
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