The Ministry of Justice (MOJ) amended the Pre-Action Protocol for possession claims based on mortgage arrears in respect of residential property (PAP) in April 2015 but did not update the PAP checklist to correspond with the amended PAP.

In October, the MOJ amended the PAP checklist (form N123). There is one change to the checklist: the introduction at section 7 of a new section in relation to tenants. This requires lenders to explain the steps that have been taken to check whether a tenant of the borrower is in occupation of the property, whether that tenant was authorised by the lender and what order the lender is seeking in light of the information obtained.

The MOJ has made a corresponding amendment to paragraph 10 of the particulars of claim (form N120). Whereas before, lenders were only required to state the date of any tenancy entered into between the lender and the borrower and the date of any notice given, paragraph 10 of the new form states:

“A tenancy was entered into between the mortgagor and the occupier named in paragraph 3 above with the authorisation of the mortgagee (delete if not applicable).

Or

without the authorisation of the mortgagee (delete if not applicable).

If a tenancy was entered into with the authorisation of the mortgagee explain what if any steps the mortgagee intends should be taken in respect of that tenancy.”

(Paragraph 3 requires the lender to state who is in possession of the property).

In view of these changes, it is imperative that before proceedings are commenced, all reasonable steps are taken by lenders to ascertain who is residing at the property. If the property is occupied by a tenant, it would be advisable to give standing instructions to field agents to obtain a copy of the written tenancy agreement. In the absence of a written tenancy, the field agent should enquire about the landlord’s name, the date the tenancy commenced, the term of the tenancy, the amount of rent payable and to whom the rent is paid.

Residential mortgages - no tenant in occupation

Where there is no tenant in occupation of the property, the checklist can state ‘A field agent’s report was obtained on [date] and this confirmed that the property was [occupied by the borrower / occupied by the borrower’s family / empty]’.

Residential mortgage - occupancy unknown

Where the field agent is unable to ascertain who is in occupation of the property, the checklist can state ‘A field agent’s report was obtained on [date] but the agent was unable to ascertain who was in occupation of the property.’ If you are able to add ‘There has been no contact from any occupiers’ to the checklist, this will hopefully persuade the court to grant the possession order.

Residential mortgage - tenant in occupation

If the field agent’s visit confirms that there is a tenant in occupation of the property, and the mortgage is residential, lenders will need to carry out a thorough check to ascertain whether, since the loan was granted, the borrower has been given consent to let the property. This is to ensure that the content of the particulars of claim and checklist is accurate before the statement of truth on either document is signed.

Where the tenancy is unauthorised section 7 could state ‘The property is believed to be occupied by a tenant of the borrower. The borrower’s mortgage is a residential mortgage, not a buy to let mortgage and no consent to let the property has been given to the borrower’. In these circumstances, paragraph 3 of the particulars of claim should include (where known) the tenant’s name and paragraph 10 of the particulars of claim should state ‘A tenancy was entered into between the mortgagor and the occupier named in paragraph 3 above without the authorisation of the mortgagee.’

Buy to let mortgages

In accordance with paragraph 4.3, the PAP does not apply to buy to let mortgages and therefore no checklist needs to be completed. However, there might be some unease from Judges if this approach is adopted, particularly where paragraph 10 of the particulars of claim contains details of a tenancy. To prevent the matter being adjourned, lenders may wish to complete the checklist.

If the field agent’s visit confirms that there is no tenant in occupation, lenders could state in the checklist ‘A field agent’s report was obtained on [date] and this confirmed that the property was [occupied by the borrower / occupied by the borrower’s family / empty]’.

If the field agent’s visit confirms that there is a tenant in occupation of the property, and the mortgage is buy to let, lenders will need to review the terms of the tenancy to determine whether they comply with the terms on which consent to let was given. If the borrower has let the property on different terms, there is then an argument that the tenancy is unauthorised and the Court might be persuaded to grant a possession order.  

If there is a good reason to continue with a possession claim despite there being an authorised tenant in occupation of the property and if a PAP checklist is to be provided (it is not a requirement for buy to let mortgages) section 7 of the checklist could state one of the following:

  • ‘The property is occupied by an authorised tenant. Notice to end the tenancy was served on [  ] and expired on [  ]’.
  • ‘The property is occupied by an authorised tenant. The Claimant seeks a possession order not to be enforced pending a determination of the tenancy’. The Court is unlikely to allow enforcement of a possession order against an unauthorised tenant before the tenancy is determined and might otherwise adjourn the claim.

Paragraph 10 of the Particulars of Claim will need to state:

  • ‘A tenancy was entered into between the mortgagor and the occupier named in paragraph 3 above with the authorisation of the mortgagee. Notice to end the tenancy was served on [  ] and expired on [  ].’
  • ‘A tenancy was entered into between the mortgagor and the occupier named in paragraph 3 above with the authorisation of the mortgagee. The Claimant seeks a possession order not to be enforced pending a determination of the tenancy.’

If there is no tenant in the property, paragraph 3 of the particulars of claim can confirm that the property is believed to be empty / or that the borrower is in possession and paragraph 10 of the particulars can be left blank.