Section 8 Ground 2 - Mortgage Lender Repossession (England Guide)

Ground 2 is a mandatory ground that allows mortgage lenders to recover possession of a property when the landlord has defaulted on their mortgage. This ground primarily affects tenants who find themselves living in a property that the lender is repossessing, but landlords should understand it to manage their obligations and protect their tenants.

What Is Ground 2?

Ground 2 is set out in Schedule 2, Part I of the Housing Act 1988. It applies where:

"The dwelling-house is subject to a mortgage granted before the beginning of the tenancy and— (a) the mortgagee is entitled to exercise a power of sale... and (b) the mortgagee requires possession of the dwelling-house for the purpose of disposing of it with vacant possession."

Key Elements

• Mortgage existed first: The mortgage was in place before the tenancy started
• Power of sale: The lender has the legal right to sell (usually after default)
• Vacant possession needed: The lender needs the property empty to sell it

Ground Details

• Type: Mandatory (court must grant possession if conditions met)
• Prior notice: Required before tenancy started (usually)
• Notice period: 2 months on Section 8 notice
• Who uses it: Mortgage lenders, not landlords

How Ground 2 Works

Here's the typical sequence of events:

1. Landlord Defaults on Mortgage

The landlord stops paying their mortgage. After a period of missed payments, the lender starts possession proceedings against the landlord.

2. Lender Obtains Possession

The lender gets a possession order against the landlord under the mortgage terms. However, this doesn't automatically give them rights against the tenant.

3. Lender Serves Section 8 Notice

To remove the tenant, the lender must serve a Section 8 notice specifying Ground 2. This requires 2 months' notice.

4. Court Proceedings

If the tenant doesn't leave, the lender issues possession proceedings. If Ground 2 conditions are met, the court must grant possession.

Prior Notice Requirement

Like Ground 1, Ground 2 requires prior notice to the tenant:

What Notice Is Required

Before the tenancy began, the tenant must have been given written notice that:

• The property is subject to a mortgage
• Possession might be recovered under Ground 2

Who Gives the Notice

This notice should come from the landlord at the start of the tenancy. It's part of good practice to include it in the tenancy agreement or as a separate document.

If No Prior Notice Was Given

The court has discretion to waive the prior notice requirement if it's "just and equitable" to do so. Factors considered include:

• Whether the tenant knew the property was mortgaged
• Whether the lender consented to the tenancy
• The circumstances of the landlord's default

Tenant Rights

Tenants caught in Ground 2 situations have some protections:

Right to 2 Months' Notice

Even when Ground 2 applies, the tenant is entitled to at least 2 months' notice on the Section 8 notice. They can't be immediately evicted.

Right to Court Process

The lender must go through proper court proceedings. The tenant has the right to:

• Receive the court claim
• Attend the hearing
• Challenge whether the conditions are met
• Request time to find alternative accommodation (usually 14-42 days)

Potential Defences

Tenants may be able to challenge Ground 2 if:

• The lender consented to the tenancy (making it binding)
• Prior notice wasn't given and it's not just and equitable to waive it
• The tenancy actually started before the mortgage
• Technical defects in the notice or proceedings

Deposit Protection

If the tenant paid a deposit, they should ensure they can recover it. If the landlord has disappeared, the deposit scheme should still have the funds protected.

Landlord Considerations

If you're a landlord, understanding Ground 2 helps you:

Protect Your Tenants

• Give prior notice: Always inform tenants that the property is mortgaged
• Get lender consent: If required by your mortgage, get written consent to let
• Communicate: If you're in financial difficulty, talk to your lender early

Buy-to-Let Mortgages

Most buy-to-let mortgages expect you to let the property. However, if you default, the lender can still use Ground 2 to remove tenants. The mortgage agreement usually covers this.

Consent to Let

If you have a residential mortgage and are letting the property (perhaps temporarily), you must get "consent to let" from your lender. Without this:

• You may be breaching your mortgage terms
• The lender may not be bound by the tenancy
• Ground 2 may more easily apply

Ground 2 FAQ