EAA Publications
|
| |
| The Freshman |
Content
Page |
| |
| Bank consent should be obtained
in renting a mortgaged flat |
| |
Through the introduction of
an estate agent, Mr Chan inspected a flat in a quiet but convenient
neighbourhood and was quite satisfied with it. Mr Chan asked
the landlord to lower the rent and the landlord promptly agreed.
Mr Chan then asked the landlord if the flat was mortgaged to
a bank and whether bank consent should be obtained first. The
landlord admitted that the bank would only increase the interest
rate which would in turn make him raise the rent. The landlord
thought that as it was his own property, he could either live
in it himself or rent it out, and the bank would not intervene
in most cases. Mr Chan thought the landlord's explanation reasonable.
As he wanted to move in quickly, he did not insist on the bank's
written consent and immediately signed a lease with the landlord
and paid the rent and a deposit at the same time.
Six months after he moved in, Mr Chan suddenly received a notice
from the bailiff requiring him to move out of the flat within
a specified time limit. It turned out that, as the landlord
had been in arrears with the repayments of the mortgage loan
to the bank for a long time, the bank had taken actions to possess
the flat. Later, Mr Chan took up the matter with the bank but
as the landlord had not obtained the bank's written consent
before renting out the flat, the bank would not take possession
of the flat together with the lease, nor would it make any compensation
to Mr Chan.
In fact, most mortgage deeds contain a covenant that the mortgagor
must obtain the bank's written consent before renting out the
property. However, to prevent the bank from raising the interest
rate, some owners will not notify the bank and obtain its written
consent before renting out their properties. Under the circumstances,
in order to safeguard his own interests, the tenant, on discovering
that the flat is a mortgaged property, should ensure that the
owner has obtained the bank's written consent before signing
the lease. In this way, even if the bank takes possession of
the property, it will do so subject to the lease. Provided that
the tenant continues to pay the rent, he may still enjoy the
right to occupy the flat.
|
| |
