Where a property is mortgaged to a bank or other financial institution, the relevant mortgage deed or legal charge will usually contain a covenant by the owner of the property not to let the property or any part thereof. Hence, if an owner lets a mortgaged property without the mortgagee's prior consent, the owner will be in breach of the mortgage deed or legal charge and the mortgagee may recover the property from the owner.
Where bank consent has been obtained, a tenant should inspect the same to see whether it is subject to any conditions.
If the landlord does not agree to seek the bank's consent, the tenant should understand the potential risks that he/she may face. If the property is let without consent, the mortgagee may take legal action against the landlord to enforce the relevant provision in the mortgage deed or legal charge to recover the property. Further, if the mortgagee exercises its right of sale under the mortgage deed or legal charge upon failure of the owner to repay any instalment of the mortgage loan, it may apply to the court for the eviction of the tenant and the tenant will have to yield up vacant possession to the mortgagee within a fairly short period of time if the mortgagee has not consented to the letting.