If the inspection reveals someone (and/or the mortgagee is told of someone) then the lender seems expected to ask that person of any interest. If they don’t disclose their right, then the lender is in the clear.

This is much more than many lenders do (you are right there) but the scheme of the act suggests that they are intended to do so at their own risk.

The key thing is that the inquiry to discover the interest does not appear to require any legal advice to be given to the occupier. Sure, if you want to defeat the interest (through a waiver for instance) then you would have to be quite careful about what you were doing, but that’s not unreasonable as you are asking someone to give up a legal right in your favour.

It would alert tenants to the mortgaging of the property though. I’m not sure that’s all that bad a thing (after all you have to tell them you are selling, if you do).

The first case we were made to read in Land Law was Kingsnorth v Tizard. Although it is an unregistered land case, it is a salutary warning to mortgage lenders.

You are, of course, quite right – investigation of title would have shown that the “tenant” was, in fact, the previous owner. As you say, that ought to raise eyebrows. So, on these facts, the decision is, perhaps, entirely unsurprising.

However, as a general proposition, where such a connection is not apparent and is undiscoverable without making more extensive enquiries, the starting point must be that the “tenancy agreement” (whatever kind of tenancy agreement it is) reflects the extent of the rights vested in the tenant. Therefore, those rights ought to be capable of ascertainment, even if further enquiries have to follow such as “how long has this particular tenant been in occupation?”, etc.

What I am more unsure about is whether this decision effectively suggests that all mortgage lenders are to be expected, when presented with a tenancy agreement, to ask whether there is any familial or other close or undisclosed relationship between the parties concerned, what the implications of that are and so on. Of course, inquiries made of Mr Collelldevall in this case would have alerted him to the fact that his daughter was attempting to mortgage the property without any right to do so. However, where a tenancy agreement is genuine and not a disguise for some underlying agreement or arrangement, it seems that a mortgage lender will have to go to alot of extra trouble and expense to ascertain that the facts are as they have been presented to them (I accept that lenders ought to be astute to attempt to detect fraud, etc, anyway).

It may indeed be that this approach is what is required in every case in order to avoid circumstances such as this arising, albeit, probably, in a very small minority of cases when having regard to the whole picture. I agree that mortgage companies should make sufficient enquiries (and be expected to do so) before they can exempt themselves from the consequences of not doing so (Boland type cases). It offers protection for both themselves and the party who might otherwise lose out by monies being advanced against the security of the property concerned without their knowledge and in contravention of their interests.

It does seem, however, that if mortgage companies are expected to never accept the provision of copies of tenancies at face value the costs of the parties concerned are going to increase to cover the additional inquiries and the legal advice which should then be offered to those parties to explain the significance of those inquiries and any waivers or consents which they are then asked to sign. Moreover, this would mean that tenants would need to be availed of some information about the financing of the property in respect of which they hold a tenancy (even if only to the extent that it is mortgaged and to whom).

I wonder where the line ought to be drawn…

Surely the investigation of title would have shown (quite clearly) that the Dyche’s held after a conveyance from the Collelldevalls? That in itself ought to raise eyebrows (former owner still in occupation should be worrying).

I think you underestimate the dangers that exist for mortgage lenders in lending secured on properties in which there are already tenants. It is extremely common to see assured shorthold tenancy agreements when the underlying tenancy is anything but.

The lender takes subject to the tenancy. If the tenancy is in fact an assured tenancy or one protected under the rent acts, they may find regaining possession difficult. Such a tenant, if they had been in occupation for a long time, may well have been given an AST to sign which signature would be entirely ineffective.

Taking the landlord’s word for this sounds dangerous to me.