Our son has just returned from abroad and will be living at home and paying a small rent to us. Do I need to tell my mortgage company about this?
It is a condition of all mortgages that if you have anyone living at the property, other than the Borrowers, who is over the age of 17 and who resides at the property as his or her main residence, you are obliged to notify your mortgage company immediately as they will require that individual to sign a form effectively postponing that individual’s right to occupy the property in favour of the mortgage company’s rights under the mortgage.
The reason for this is that the Borrowers will have entered into a binding legal contract with the Lender whereby, in return for the money borrowed, the Borrowers charge the property in favour of the mortgage company. This contract is personal to the mortgage company and Borrowers.
In a case 20 years ago it was established that any person other than the Borrowers over the age of 17 who occupy the property as their main residence have the right to occupy that property – a right that ranks in priority to any other interest which a third party may have in the property, such as a mortgage company.
This decision was far reaching and resulted in all mortgage companies addressing the problem by requiring a formal Deed from the occupier whereby the occupier postpones his or her interest in the property.
Failure to obtain such a form would result in your son being entitled to remain living in the property in the event of you falling into arrears on your mortgage and being re-possessed.
You would, however, be liable for any loss suffered by the mortgage company due to your breach of your mortgage conditions.
* Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email firstname.lastname@example.org