When a landlord is unable to make loan repayments, the mortgagee might take possession of the property in order to sell it and recover their loss. This is referred to as mortgagee repossession.
Legal process of repossession
To take back possession of the premises, the mortgagee needs to obtain an order from the Supreme Court. If the court makes an order for possession you should be notified. The court can make an order even if you are unaware of the proceedings.
The mortgagee might send you a written notice asking you pay the rent to them instead of the landlord or agent. You should follow the mortgagee’s instructions.
Notice to vacate
Supreme Court orders for possession are enforced by the NSW Sheriff's Office. A Sheriff's Officer will serve you with a notice giving you at least 30 days to vacate the property.
If you do not move out the Sheriff can remove you from the premises. Extensions can be negotiated.
Regardless of how much time (if any) remains on your fixed term agreement, the court order will end your tenancy.
As a form of compensation you don’t have to pay any rent for 30 days after you’re given the official notice to leave.
If you have paid rent in advance, you are entitled to a refund. You can apply to the Tribunal if the landlord or agent does not pay the money back.
Access to show buyers
The mortgagee can show people around the premises but only if you’ve been given reasonable notice and agreed on the time and date of the inspection.
Refund of rental bond
The mortgagee can authorise Fair Trading to release the bond to you once they take over the premises. You can ask for this to happen while you are still living at the property.
Staying in the property
If the mortgagee had previously been notified of your tenancy agreement, they need to honour your lease agreement.
In most cases, the landlord would have taken out the mortgage before finding you as the tenant which means the mortgagee would have no prior notice and not have to honour your agreement.
This does not stop you from approaching the mortgagee, or somebody acting on their behalf, and requesting to stay on in the premises, at least until it is sold.
Court or Tribunal ordered tenancies
If you can prove that you need to remain in the property, you can apply to either the Supreme Court, if the proceedings have not been finalised, or to the Tribunal if the possession order has already been made.
If you are considering this option, it may be best to seek legal advice.
Disclosure by landlord
Before you sign a tenancy agreement, the landlord or agent is required to tell you if a court action has been made. If this information was not disclosed you can apply to the Tribunal for compensation. You can also end the lease early without penalty.