Leasehold Reform, Housing and Urban Development Act 1993

58 Grant of new lease where interest of landlord or tenant is subject to a mortgage

(1) Subject to subsection (2), a qualifying tenant shall be entitled to be granted a new lease under section 56 despite the fact that the grant of the existing lease was subsequent to the creation of a mortgage on the landlord’s interest and not authorised as against the persons interested in the mortgage; and a lease granted under that section—

(a) shall be deemed to be authorised as against the persons interested in any mortgage on the landlord’s interest (however created or arising), and

(b) shall be binding on those persons.

(2) A lease granted under section 56 shall not, by virtue of subsection (1) above, be binding on the persons interested in any such mortgage if the existing lease—

(a) is granted after the commencement of this Chapter, and

(b) being granted subsequent to the creation of the mortgage, would not, apart from that subsection, be binding on the persons interested in the mortgage.

(3) Where—

(a) a lease is granted under section 56, and

(b) any person having a mortgage on the landlord’s interest is thereby entitled to possession of the documents of title relating to that interest,

the landlord shall, within one month of the execution of the lease, deliver to that person a counterpart of it duly executed by the tenant.

(4) Where the existing lease is, immediately before its surrender on the grant of a lease under section 56, subject to any mortgage, the new lease shall take effect subject to the mortgage in substitution for the existing lease; and the terms of the mortgage, as set out in the instrument creating or evidencing it, shall accordingly apply in relation to the new lease in like manner as they applied in relation to the existing lease.

(5) Where—

(a) a lease granted under section 56 takes effect subject to any such subsisting mortgage on the existing lease, and

(b) at the time of execution of the new lease the person having the mortgage is thereby entitled to possession of the documents of title relating to the existing lease,

he shall be similarly entitled to possession of the documents of title relating to the new lease; and the tenant shall deliver the new lease to him within one month of the date on which the lease is received from Her Majesty’s Land Registry following its registration.

(6) Where—

(a) the landlord fails to deliver a counterpart of the new lease in accordance with subsection (3), or

(b) the tenant fails to deliver the new lease in accordance with subsection (5),

the instrument creating or evidencing the mortgage in question shall apply as if the obligation to deliver a counterpart or (as the case may be) deliver the lease were included in the terms of the mortgage as set out in that instrument.

(7) A landlord granting a lease under section 56 shall be bound to take such steps as may be necessary to secure that the lease is not liable in accordance with subsection (2) to be defeated by persons interested in a mortgage on his interest; but a landlord is not obliged, in order to grant a lease for the purposes of that section, to acquire a better title than he has or could require to be vested in him.