A tenant from New South Wales spoke of the stress of housing uncertainty and court intervention after their landlord defaulted on their mortgage.
In a post on Reddit, a tenant sought advice and feedback on the process he faced after receiving a letter warning of legal action from a home loan lender.
The editor of Reddit, SBTSSS, speculated how long the court, which secures ownership of the property, would give them to move out.
When a landlord defaults on a mortgage, the bank or lender can confiscate the home and sell it to recoup the damages. First, he must apply to the Supreme Court for an order to take possession, at which point the tenant is notified of what has happened.
This year’s data shows that the number of distressed property sales in Australia is up slightly.
However, Ray White’s long-term data from national real estate agency Ray White shows that mortgage sales are still much lower than volume at the height of the pandemic.
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The data obtained from the listings show that the number of mortgage sales in the country increased in the three months before July, when interest rates rose.
Ray White found that emergency listings peaked at over 250 in October 2021, but then steadily declined over the six months until around April of this year.
The extent of distressed sales in Australia has been controlled in part by a freeze on mortgage payments during the pandemic.
Redditor SBTSSS explained that there are few alternative rental options in their area, adding to their anxiety.
“Hi everyone, as the headline says, my landlord has not paid the required amount in full since the beginning of this year, although we, as tenants, paid the rent to the agent on time every time,” their post on the AusLegal Vetka page said.
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“I only found out last week when they sent me a copy of the land ownership claim, and apparently if the landlord doesn’t respond/object (sic) to the court within 28 days, the creditor will start taking actions that include evicting the occupiers and selling property.
“So my question is, if this unfortunate scenario does happen, how many days is the court going to give us notice? is the court also going to give us 90 days or will they make us move out immediately (sic)?
“I sincerely hope this doesn’t happen because there are virtually no rental listings in our area at the moment so my partner and I couldn’t find anything we liked.
“Thanks in advance!”
The laws of New South Wales governing the ownership of leased property are complex but must follow a series of steps with supporting documentation.
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Fair Trading NSW and Tenants’ Union of NSW have information pages about mortgagee ownership, how it affects the tenant and what to expect.
According to Fair Trading NSW, when a bank or lender seizes a property after a mortgage is not paid, the court can order the tenant evicted, no matter how much time is left until their lease.
The tenant is given 30 days’ notice of release and can be negotiated.
The Judicial Sheriff can forcibly evict a tenant if they refuse to leave.
“As compensation, the tenant must not pay rent for 30 days after receiving official notice of departure,” the Fair Trading NSW website says.
Other Reddit users have weighed in on the conundrum, offering their condolences to the tenant who was put in a difficult situation through no fault of his own.
One Redditor said: “The bank absolutely does not want to evict the tenant – it is disgusting, bad looking and expensive. They would rather you voluntarily leave to take over freehold.”
Another expressed an injustice towards a tenant who met his financial obligations while the mortgage remained unpaid.
“Wow, I’m sorry to hear that. What a nightmare for people who (sic) pay their rent on time. It’s just not fair.”
Some subscribers to the Reddit thread advised the tenant not to pay rent.
However, this goes against the advice of Fair Trading NSW, which explains that the tenant must follow the court’s instructions on who to pay rent during the process, not the landlord. This could be the bank or lender before the release notice is served and the rent payments stop as compensation.