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When everyone has a home

028 9024 5640: Housing & Debt Helpline for Northern Ireland

Rural dwellings and occupancy clauses - possible defence to possession?

Advisers and solicitors working with rural clients affected by repossession may not be aware of the impact that certain planning clauses may have on their clients’ options.  Permission to build certain rural dwellings may have been granted subject to a clause requiring that the property be occupied by a farmer or farm worker.   This type of clause can help you negotiate with a lender who is threatening legal action to repossess the property.

Rural dwellings and occupancy clauses

A common condition attached to planning permission in rural areas is that the property must be occupied by a farmer or a farm worker. The occupant must be genuinely engaged in farming, that is, he/she must spend the majority of their time farming.

Such a condition would have been disclosed to the lender at the time of taking out a mortgage on the property.

The condition would continue to apply in the event of the sale of the property.  So, if a lender were to repossess the property, it would only be able to sell the property on to another farmer.

This limits the audience to whom the lender can market and potentially sell the property, which would, in turn, likely impact on the amount that the property will realise on the open market.

Could the existence of such a clause provide a defence to possession proceedings?

Previously, courts have refused to grant a possession order if the repossessed property cannot be sold. The courts have felt that the loss borne by the borrower, in losing the home, is disproportionate as there is no benefit to the lender.

It seems unlikely that the existence of an occupancy clause would be grounds for defence in possession proceedings. It would arise only if the borrower can show that it is not possible to sell the property to another farmer.

A lender finding itself in this position would need to respect the occupancy clause.  It may take longer to sell the property on, but it would not necessarily follow that the lender will not be able to find a purchaser.  In a rural area, it is highly unlikely that a borrower could successfully argue that no suitable purchaser could be found for the property.

If, on the other hand, the lender was seeking possession due to default on a second charge loan, the borrower may be able to defend the case.  The borrower would have to show that the property is in negative equity and the second charge lender will not gain anything by repossessing the property as all value from the sale will be eaten up by the debt owed on the mortgage.

How can this type of clause be used to protect homeowners?

We’ve seen that this type of occupancy clause is unlikely to provide a defence to proceedings. However, it could prove a useful bargaining tool in an adviser’s arsenal.

An adviser could lend weight to his or her negotiations with a lender by pointing out that this type of clause restricts the market of potential purchasers.  The property may not realise much on the open market and this could make the lender more open to hearing repayment proposals, which it would not otherwise entertain. 

Professional guidance for repossession and debt advisers

Professionals who regularly work with families at risk of repossession may wish to sharpen up their skills by attending one of our upcoming seminars on this issue.  These will look at possesssion of private landlord properties and how negative equity impacts on possession proceedings.  As with all Housing Rights Service courses, discounts are available to members of the organisation. 

Tagged In

Repossession, Legal

This article was written on 18 November 2014. It should not be relied on as a statement of the current law or policy position. For help with housing issues please contact our helpline on 028 9024 5640 or use our online chat service at www.housingadviceNI.org.