Does my residential lease need a mortgagee protection clause?

The question of whether a residential lease should include a mortgagee protection clause is increasingly relevant, but far from settled. While this clause is standard in commercial leases, its use in residential property is more recent and varies depending on the lender and the nature of the lease.

A mortgagee protection clause is designed to safeguard the interests of a lender (the mortgagee) by ensuring that the lease cannot be varied, surrendered, or terminated without the lender’s consent. It may also require the tenant to notify the lender of any breaches or claims, giving the lender an opportunity to intervene and protect their security.

Historically, many existing residential leases do not contain this clause, and until recently, most lenders did not require it. However, a small number of lenders have recently begun to insist on its inclusion, particularly for longer leases or leasehold properties being mortgaged. This shift has led to delays, extra costs and complications in transactions, especially where a deed of variation is needed to amend the lease and satisfy lender requirements. Landlords are not under an obligation to agree to an amendment.

That said, not all lenders request this clause, and many continue to rely on existing legal safeguards. Under the Civil Procedure Rules, the repossession process includes other protections for lenders. These procedures offer a structured and reliable route for lenders to protect their interests, even in the absence of a mortgagee protection clause.

As a result, there is ongoing debate within the conveyancing community about whether the clause is truly necessary in residential leases. Some argue that the existing legal framework provides sufficient protection, while others see the clause as a prudent addition, particularly where future financing or remortgaging is anticipated. Unfortunately the decision on this may rest upon a buyer or a lender insisting upon this and a seller having to agree despite the above in order to facilitate a sale.

At Anthony Gold, we regularly advise on lease drafting, lender requirements, and deeds of variation. If you are unsure whether your lease should include a mortgagee protection clause, or if you are dealing with an older lease that may need updating, our property team is here to help.

Contact us on 020 7940 4060 or send us an email at mail@anthonygold.co.uk.