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Prior to the coming into force of the on 1 December 2009, which applies to mortgages created after that date, the law on the power of a mortgagor to grant a lease of mortgaged lands was governed by section 18 of the .

Section 18 of the 1881 act provided a statutory power for a mortgagor of land while in possession of same to grant a lease of the mortgaged land. This power was subject to same not having been excluded by the terms of the mortgage. A lease created by a mortgagor without the consent in writing of a mortgagee, where the requirement for such consent is expressly stipulated in the mortgage deed, is void as against the mortgagee and the mortgagee is not bound by it.

Section 112 of the 2009 act changed the law in respect of mortgages created after 1 December 2009 and provides in section 112(1) that: “A mortgagor of land, while in possession, may, as against every other incumbrancer, lease the land with the consent in writing of the mortgagee, which consent shall not be unreasonably withheld.”

Section 112(2) provides that: “A lease made without such consent is voidable by a mortgagee who establishes that (a) the lessee had actual knowledge of the mortgage at the time of the granting of the lease, and (b) the granting had prejudiced the mortgagee.”

Practitioners should note that, in the case of registered land, the Land Registry is now seeking, since the end of September 2013, the consent of the owner of the registered charge to the creation of the lease or, in the alternative, a deed of postponement or partial discharge.