An Exert from Fair Trading NSW
Landlords who default on their loans
When a landlord is unable to pay back a loan taken out to purchase an investment property, the mortgagee (the lender – normally a bank or other financial institution) usually wants to take possession of the property in order to sell it and recover their money.
The mortgagee can apply to the Supreme Court for an Order to do this. If the Order is granted, the residential tenancy agreement is terminated, and the mortgagee becomes entitled to possession of the property to the exclusion of the tenant. This can happen at any time throughout the tenancy, even during a fixed-term.
The tenant may try to negotiate with the mortgagee directly to allow them to remain in the property or give them more time to move out.
The tenant may also apply directly to the Supreme Court for Orders and can seek financial compensation from the former landlord. However, the landlord’s ability to pay may be limited given the circumstances, unless they have other assets.