Even a lease that is willingly entered into and signed by an owner and his tenant can be deemed invalid if the owner’s bank or lender were never informed about and never gave their consent to the proposed letting. You also have to register it with the Residential Tenancies Board.

If you mortgage your property to a bank the lender has a legitimate interest in who exactly, apart from the borrower, is occupying the property. All mortgage deeds would contain an agreement by the borrower that he or his family will not sublet the property or allow any third party into possession without the consent of the bank.

This principle was underlined in a July 2022 High Court case where the plaintiff secured an injunction effectively ordering the tenants to vacate the property despite the plaintiff agreeing to buy the property some time earlier “subject to occupancy”. The plaintiff had agreed to buy a vacant apartment from vendors, acting through their receiver, but before signing the purchase contracts it appeared the vendors then allowed several parties into the premises on a yearly tenancy agreement signed by all parties.

The plaintiff maintained that the parties living in the premises were engaged in anti-social behaviour and were installed there deliberately by the vendors.

The plaintiff obtained an order for possession of the premises in  the Circuit Court but the defendant occupiers appealed this to the High Court.  The occupiers relied on their signed tenancy agreement and argued that since the plaintiff was on full notice of their occupancy they could therefore claim they qualified for a continuing Part 4 tenancy under the Residential Tenancies Board Acts. (RTB)

However, the plaintiff exhibited the mortgage deed previously executed by the vendors and their bank PTSB. It contained a covenant forbidding any lease or tenancy of the property without the prior written consent of PTSB. It was established no such previous consent was ever obtained. The plaintiff, relying on case law, argued the tenancy was therefore invalid and the occupiers were unlawfully trespassing on the property.

The court found the plaintiff was the lawful owner of the property and the lack of any consent by PTSB to the tenancy invalidated any such letting. It held that the plaintiff owner cannot be bound by a lease that was not lawfully entered into without the required consent of PTSB.  As no tenancy existed, the court did not have to address any issues the defendants might have  had as to redress under the RTB regulations.

The defendants also argued they were likely to be made homeless if an order was made against them. However the court found the occupiers were trespassers on private – not public property and under established case law,  the plaintiff was under no duty to provide for their accommodation. The court therefore granted the injunction sought by the plaintiff owner.

There is some truth in the old saying that “possession is nine-tenths of the law.”  However clients should be advised that if they allow third parties in to possession of their property, whether with a signed agreement or not, any such arrangements can be struck down if they failed to obtain, where necessary, the prior written consent of their lender.

Shay Murtagh Ltd v Cooke and Persons Unknown [ 2022] IEHC  436.