ABSTRACT
Abbey National v Cann does not deal with the situation in which the tenancy is created after the mortgage and in breach of its terms. This situation did arise, however, in Britannia Building Society v Earl [1990] 1 WLR 422, [1990] 2 All ER 469. In that case, the mortgage deed prohibited any letting of the premises without the consent of the mortgagee but the mortgagor nevertheless subsequently let the property to tenants without the mortgagee’s consent. Whilst this tenancy would be binding on the mortgagor as landlord, it would not necessarily be binding on the mortgagee, since the mortgagor’s title would be ‘defective’ in the sense that he had restricted his otherwise unencumbered title by contract with the mortgagee, and given up any power to grant leases. The mortgagor fell into arrears on the mortgage payments and the mortgagee sought vacant possession of the property. The tenants claimed, inter alia, to be statutory tenants under the Rent Act 1977, with the right to remain even as against the mortgagee. The Court of Appeal held that the tenants had not become statutory tenants as against the mortgagee, even though they were statutory tenants as against the mortgagor. The situation was considered to be no different in principle from that where a tenant is a contractual tenant, as in the case of Dudley and District Benefit Building Society v Emerson [1949] Ch 707, in which it had been held that a contractual tenancy granted after a mortgage and in breach of its terms was liable to be defeated by the title paramount of the mortgagee. The tenant therefore has no rights against the mortgagee. Of course, the tenant could always sue the landlord for breach of contract, but that will not provide him with a roof over his head and is unlikely in the circumstances to provide him with financial compensation either.
