Background
Kensington Mortgage Company Limited provided a buy-to-let mortgage to Mark Price and Karen Lynne Cooper for a leasehold property in Llanelli, Wales, secured by a registered charge dated 29 June 2007. When the owners fell into arrears in 2022, the lender obtained a possession order against them. However, the lender discovered that the owners had sub-let the property to two occupiers, creating a standard occupation contract under the Renting Homes (Wales) Act 2016. Although the mortgage terms prohibited sub-letting, the lender accepted that it had advanced the loan with the understanding this was a buy-to-let transaction and that the occupation contract was binding upon it.
The lender initially served a section 8 notice seeking possession from the occupiers, but discontinued those proceedings when the occupiers challenged the notice’s validity under the 2016 Act. The case was brought as a claim seeking declarations about the lender’s status as a “landlord” under Welsh housing legislation—specifically, whether it qualified as a landlord under the Renting Homes (Wales) Act 2016 (and thus could give notice to occupiers) while simultaneously not qualifying as a landlord under the Housing (Wales) Act 2014 (and thus avoiding registration and licensing requirements).
Shelter Cymru intervened to oppose the lender’s position, arguing that the two statutory definitions of “landlord” could not be applied inconsistently, and that the lender’s failure to register and be licensed under the 2014 Act prevented it from lawfully giving notice under the 2016 Act.
The Court’s Holding
His Honour Judge Keyser KC held that a mortgagee becomes a “landlord” under the Renting Homes (Wales) Act 2016 only upon actually taking possession of the property, not merely by holding the mortgage. The statutory definition of “landlord” in section 244(2) of the 2016 Act refers to “the person that is (or purports to be) entitled to confer on an individual a right to occupy the dwelling as a home.” The court rejected the lender’s argument that it could be a landlord without going into possession, finding this position attempted “to eat one’s cake and have it.” The mortgagee’s legal right to go into possession—which arises automatically upon execution of the mortgage—is distinct from actually exercising that right by going into possession. Until the mortgagee takes actual possession, the mortgagor (the property owners) remain the landlords.
The court noted that this interpretation aligns with Welsh Government guidance stating: “If the mortgage lender repossesses the property and becomes the landlord, they would then be able to issue a six-month Landlord’s Notice under a periodic standard contract.” The judgment emphasizes that the 2016 Act, while creating a self-contained statutory scheme, does not answer who is entitled to confer the right of occupation—that answer comes from general property law: normally the freeholder or leaseholder owner, or the mortgagee once it goes into possession.
The court also addressed implications for the Housing (Wales) Act 2014, noting that the definition of “landlord” in section 2 of that Act refers to “the immediate landlord,” which would mean a mortgagee in possession would be classified as the immediate landlord for purposes of that Act’s registration and licensing requirements. However, the judgment does not fully resolve whether the lender falls within exceptions to those requirements based on section 5(1)(c) or section 8(1)(c) of the 2014 Act, as the court indicated those issues could be determined separately if needed.
Key Takeaways
- A mortgagee does not automatically become a “landlord” merely by holding a mortgage; it must actually take possession of the property.
- The distinction between having a legal right to possession and exercising that right is critical—a mortgagee’s power to go into possession exists from the moment the mortgage is executed, but possession must be taken to activate that status.
- Until a mortgagee goes into possession, the mortgagor (the property owner) remains the landlord for all purposes under both the 2016 Act and the 2014 Act, including for registration and licensing obligations.
- Courts will not permit parties to apply different definitions of “landlord” inconsistently across related statutes to avoid regulatory obligations.
Why It Matters
This judgment clarifies a critical gap in English and Welsh housing law where property law (mortgages) intersects with residential tenancy regulation. The ruling prevents mortgage lenders from circumventing registration and licensing requirements under the Housing (Wales) Act 2014 by claiming they are “landlords” for the purpose of giving notice under the Renting Homes (Wales) Act 2016 without actually going into possession. This protects occupiers by ensuring that entities seeking to end their occupation contracts have complied with statutory registration and licensing frameworks designed to protect residential tenants.
The decision has significant practical consequences for mortgage lenders with buy-to-let portfolios in Wales. It means that a mortgage lender seeking to take possession and end an occupier’s standard occupation contract must not only obtain a possession order against the mortgagor, but must actually take possession of the property—at which point it will be required to register and obtain a license under the 2014 Act before it can lawfully issue termination notices. The judgment thus reinforces the protective purpose of Welsh housing legislation by preventing a technical or doctrinal loophole from allowing secured creditors to bypass tenant protections.