Rented accommodation repossessed? What are your rights

You've avoided the gyrations of the housing market by renting. You can afford the rent, feel that there's no stigma attached to renting (after all, it's the norm in the USA and most of the countries in Europe) and derive a certain smug satisfaction that, as property prices fall, mortgage rates creep up and your property-owning chums are at their wits' end, youre immune from it all.

But you're blissfully unaware that your landlord is one of the clueless buy-to-let (BTL) brigade who over-extended on a fixed rate BTL deal that has come to an end, can't afford the mortgage (even though you pay the rent on time), is behind on the repayments and the lender has started proceedings to repossess.

Think this sounds a mite far fetched? Alas, it's becoming a worrying reality for many renters: arrears for both buy-to-let and conventional mortgages have been rising since base rates came off their 2003 low. However, buy-to-let arrears of three months or more have risen fastest, from 0.3% of all loans in 2003 to over 0.7% in 2007, according to figures from the Council of Mortgage Lenders (CML).

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In May 2008, Chartered Surveyors e.surv recorded a 26% year-on-year rise in the number of requests for valuations it carried out on repossessed property, commenting it had seen a sustained and steady growth in the volumes for the past two years, but there had been a "clear acceleration since January 2008". Allsop, the UK's largest property auctioneer, has reported a rise in repossessed properties in its February 2008 sales, a significant number of which have come from buy-to-let investors.

According to the CML, in the first quarter of 2008, of the 1,073,300 outstanding buy-to-let mortgages, 0.15% of the properties covered by those mortgages were repossessed. Now, that seems like a miniscule percentage, but it's a miniscule percentage of a very big number: it works out at 1,610 BTL properties repossessed in the first quarter or 2008, which if you extrapolate over the whole this year, is 6,440. And if you compare it to the first quarter of 2007, the rate of repossession has doubled (0.07% in Q1 2007).

And there are many property experts who say the "official" figures are merely the tip of the BTL repossession iceberg, with some pessimists believing around 30,000 BTL properties will be repossessed by lenders from failed landlords in 2008. So, although only a small fragment of the UK's huge mortgage market, BTL repossessions are on the rise. If you're living in rented accommodation, your landlord defaults on the mortgage and the property is repossessed by the lender, what rights do you have?

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This can be a complicated situation, and your rights, including any right to remain in the property, will depend on the circumstances and there are as many exceptions as there are rules. According to Shelter, the housing and homelessness charity, in most cases, the lender's right to repossess the property overrides the tenants' right to live there. However, most people who rent privately from a landlord who lives elsewhere are known as "assured shorthold tenants" and have certain rights, but these only stall the inevitable eviction rather than stop it. (If youre unsure of your tenancy status - assured shorthold, assured tenancy, et al - then Shelter's website has a Tenancy Checker that should answer this question).

If your landlord bought the property through a buy to let mortgage, you should have been given written notice explaining this at the start of your tenancy. If this is the case, you probably have no right to stay in the property after it is repossessed by the lender but, to get rid of you, the lender has to apply to the court to have you evicted under Ground 2 of the 1988 Housing Act.

This is probably the first inkling tenants have that something is amiss: the court sends a notice to the property, informing the tenants the lender has been given a possession order and the bailiffs will be coming to repossess the property. This notice (form N54) will be addressed to the landlord (in possession proceedings, the landlord is referred to as the defendant) and "any other occupiers" (i.e. you). It tells you when bailiffs will be coming and may only give a few days notice of an eviction.

If you open one of these court orders over your cornflakes, then you should act immediately. Shelter has an Advice Services Directory that offers free confidential advice and an adviser can explain your legal rights and where you stand in your rights as a tenant.

27 June 2008 © Moneyextra.com

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