Ground 2 — the statutory conditions and when it applies
Ground 2 of Schedule 2 HA 1988 applies where the property is subject to a mortgage created before the beginning of the tenancy AND the lender requires possession in order to exercise the power of sale or its power to appoint a receiver. Alternatively, Ground 2 applies where the mortgagee consented to the grant of the tenancy. The ground is mandatory — if the conditions are met and the lender proves them, the court must grant possession.
- Condition 1 — mortgage pre-dates the tenancy: the most common Ground 2 situation; if the landlord buys with a BTL mortgage and then lets, Condition 1 is met.
- Condition 2 — lender consented to the tenancy: Ground 2 applies if the mortgagee consented to the tenancy, whether expressly or via BTL mortgage terms that permit AST lettings.
- The notice requirement: before the tenancy was granted, the landlord must have given the tenant written notice that the tenancy might be ended under Ground 2, or the court must dispense with this requirement.
- The ground is mandatory: if conditions are met, the court must grant possession — there is no judicial discretion to refuse or suspend on hardship grounds.
The LPA receiver — an alternative to Ground 2 possession for lenders
Instead of taking possession, a lender may appoint a Law of Property Act (LPA) receiver under LPA 1925 s.109. The receiver collects rents, manages the property, and protects the lender's security without disturbing the tenancy. When an LPA receiver is appointed, the tenant must pay rent to the receiver rather than the defaulting landlord.
What happens to the tenant when the lender takes possession under Ground 2
Under RRA 2025, the Ground 2 notice period is 2 months. Because Ground 2 is mandatory, the court cannot suspend or delay the possession order on hardship grounds. Tenants should immediately check their deposit protection registration where the landlord is in mortgage default.
Preventing Ground 2 issues — landlord obligations regarding BTL mortgage conditions
Landlords should comply with consent-to-let conditions in their BTL mortgage, include Ground 2 notices in tenancy pre-commencement packs, and engage their lender early if experiencing payment difficulties. BTL lenders typically offer restructuring options to avoid the cost of formal enforcement.