Kensington Mortgage Company Limited v Mark Price & Ors

A mortgagee becomes the landlord under the Renting Homes (Wales) Act 2016 when it takes possession of mortgaged property subject to a tenancy binding on it. A possession order, without enforcement, does not itself amount to taking possession. The mortgagee must assume control and management of the property, ordinarily by receiving rent or directing the tenant to pay rent to it. Once in possession, the mortgagee is also the immediate landlord for the purposes of the Housing (Wales) Act 2014 and is subject to its registration and licensing requirements. The statutory regime does not unlawfully interfere with the mortgagee’s rights under Article 1 of Protocol No 1.

The claimant mortgage lender had obtained possession orders against the mortgagors after mortgage arrears, but later discovered that the property was occupied under a tenancy binding on the mortgagee. It had not taken physical possession, demanded rent from the occupiers, or otherwise assumed management of the property. The claimant sought declarations concerning its status under the Housing (Wales) Act 2014 and the Renting Homes (Wales) Act 2016, including whether it could serve a landlord’s notice without registration or licensing.

The central issues were when a mortgagee becomes a landlord under the 2016 Act, when it becomes a mortgagee in possession, whether it is then subject to the 2014 Act, and whether that result infringes Article 1 of Protocol No 1.

1. 2016 Act landlord status. Section 244(2) of the Renting Homes (Wales) Act 2016 identifies the person entitled, or purporting to be entitled, to confer the right to occupy the dwelling as a home. There is one landlord for the occupation contract. The mortgagor remains landlord while the mortgagee has not gone into possession. Once the mortgagee takes possession, it becomes the landlord and may serve notice under section 173.
2. Taking possession. A mortgagee’s right to possession is distinct from exercising that right. Commencing possession proceedings, or obtaining a possession order against the mortgagor, does not itself make the mortgagee a mortgagee in possession. In a property occupied by a tenancy binding on the mortgagee, possession is ordinarily taken by receiving rent or directing the tenant to pay rent to the mortgagee.
3. The relevant question is whether the mortgagee has assumed control and management of the estate. Receipt of money through the mortgagor or an agent may be insufficient if the mortgagee has not displaced the mortgagor’s management. Service of a notice under section 8 of the Housing Act 1988 was, on these facts, ambiguous and did not establish possession.
4. 2014 Act consequences. A mortgagee in possession of property subject to a domestic tenancy is the immediate landlord under section 2(1) of the Housing (Wales) Act 2014. It is therefore subject to the registration and licensing regime. The exceptions in sections 5(1)(b) and (c), 8(1)(b) and (c), and section 44(2), concerning assignment of the landlord’s interest, do not apply because the mortgagee’s interest arises under the mortgage rather than by assignment.
5. The broader question whether section 44(1) applies to landlords expressly exempted from registration and licensing was left unanswered, although the judge indicated that section 44(1) should probably be read subject to those exemptions to avoid absurdity.
6. Article 1 of Protocol No 1. The registration and licensing requirements regulate the use of property and do not prevent the mortgagee from realising its security. A mortgagee may sell with a sitting tenant without going into possession, while going into possession necessarily carries the ordinary rights and liabilities of a landlord. The regime therefore did not interfere unlawfully with the claimant’s A1P1 rights and, in any event, would be justified.
7. The claimant was not yet a mortgagee in possession because it had not demanded that the occupiers pay rent directly to it. The declarations sought were consequently not granted in the form advanced.

First-instance decision. No prior appellate decision is stated in the judgment.