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A mortgage lender is exercising its power of sale and requires vacant possession of the property.
Ground 2 of Schedule 2 to the Housing Act 1988 provides a mandatory ground for possession where the property is subject to a mortgage that was granted before the tenancy began, and the mortgage lender is entitled to exercise a power of sale and requires possession to do so.
This ground exists to protect the interests of mortgage lenders. When a landlord defaults on their mortgage, the lender may need to repossess and sell the property to recover the outstanding debt. Ground 2 ensures that the existence of a tenancy does not prevent the lender from enforcing its security. In practice, it is the mortgage lender (or a receiver appointed by the lender) that brings the possession claim, not the landlord.
The key requirements for Ground 2 are that the mortgage must have been granted before the tenancy was created, and the lender must be entitled to exercise a power of sale under the mortgage terms and the Law of Property Act 1925. If the mortgage was granted after the tenancy started, Ground 2 cannot be used because the lender took their security knowing the tenancy existed.
The notice period for Ground 2 is 2 months. However, the court has power to dispense with the notice requirement in certain circumstances, particularly where the lender has already obtained a possession order against the borrower and is now seeking to enforce it against the tenant.
Ground 2 is not subject to the 12-month restriction introduced by the Renters' Rights Act 2025. This makes sense because the tenant's occupation is being affected by the landlord's default, not by a voluntary decision of the landlord to recover possession.
As a mandatory ground, the court must make a possession order if the lender proves the conditions are met. The court has no discretion to refuse on grounds of reasonableness. This can be a difficult outcome for tenants, who may have done nothing wrong but find themselves losing their home because of the landlord's financial difficulties. Tenants in this situation should seek legal advice promptly, as they may be able to negotiate directly with the lender or apply for a postponement of the possession date.
A properly drafted tenancy agreement makes it far easier to rely on Section 8 grounds if things go wrong. Generate your complete RRA-compliant document pack in minutes.
This guide is for general information only and does not constitute legal advice. While we make every effort to ensure accuracy, the law may change and individual circumstances vary. You should always seek independent legal advice before taking action to recover possession. TenancyPack is not regulated by the Solicitors Regulation Authority.