Here is the wording in the schedule:
“The dwelling-house is subject to a mortgage granted before the beginning of the tenancy and—
(a) the mortgagee is entitled to exercise a power of sale conferred on him by the mortgage or by section 101 of the Law of Property Act 1925; and
(b) the mortgagee requires possession of the dwelling-house for the purpose of disposing of it with vacant possession in exercise of that power; and
(c) either notice was given as mentioned in Ground 1 above or the court is satisfied that it is just and equitable to dispense with the requirement of notice;
and for the purposes of this ground “mortgage” includes a charge and “mortgagee” shall be construed accordingly.
Now lets pick it apart.
Prior notice that this ground may be used must be given to the tenant at the start or this ground cannot be used but again, as with all prior notice requirements the judge can dispense with it if they find it just and equitable to do so.
Note that this ground is used where the Mortgagee needs to sell, as stated in the legislation “For the purpose of disposing of it with vacant possession”, so its very narrowly defined in terms of the reason for needing to repossess and also this ground cant be used where the landlord wants to sell. The landlord is known as the ‘Mortgagor’.
It is a requirement of this ground that the mortgage on the property was taken out before the tenancy began.
The most common reason for a Mortgagee seeking sale would be where the landlord has defaulted on the mortgage payments and the mortgagee knows of the letting.
The wording of Ground 2 specifically references section 101 of the Law of Property Act 1925 which whilst providing handy information about the manner of sale being ‘together or in lots’ and also at auction if necessary but perhaps more mysteriously it allows for the mortgagee to cut and sell timber “And other trees ripe for cutting and not planted or left standing for shelter or ornament”, a factor I doubt will cause many sleepless nights for landlord or tenant.
This ground is not often used but would be more commonly utilised if tenants were Assured rather than AST because it would be more difficult to get vacant possession where the tenant isn’t at fault. But as most tenants subject to the Schedule 2 grounds for eviction in the private rented sector will be AST and therefore easy to evict you don’t see many Ground 2 cases.
To be honest I haven’t seen a single one in all the time the legislation has been in place, however if government does end up ushering in 3 year minimum ASTs as some are lobbying for then you may see more of them if the mortgagee needs vacant possession but the tenant has say 2 years left on contract.
Defending this ground.
As stated above there is a very precise reason for seeking possession under this ground and anyone working a defence on this would need to be satisfied that the purpose of the action would be solely to exercise power of sale with vacant possession, nothing else.
Also you need to check that prior notice was given, often contained in the tenancy agreement and that the mortgage was taken out before the tenancy began.