Re North East Property Buyers  EWHC 2991 (Ch)
This was a test case brought by lenders who were seeking possession of various residential properties. In each case the borrower was North East Property Buyers. It was accepted that the borrowers were in substantial arrears and had no defence to the claims for possession. However, the properties were occupied not by the borrower but by residential tenants. The tenants had previously been the owners of the properties, but had sold them to the borrower and taken an immediate leaseback pursuant to an equity release scheme operated by the borrower.
The residential tenants resisted the claims for possession on the ground that their occupation at the time of completion amounted to an overriding interest which took priority over the lenders’ interests.
The court found in favour of the lenders. The tenants did not obtain any legal interest in the properties until completion of the sale and leaseback transactions, which occurred simultaneously with completion of the mortgages. Insofar as the tenants had any interest between exchange and completion, that interest was at best personal and could not give rise to an overriding interest against the lenders.