Activism - Shopping A Landlord As Btl?

[padmorgan]

Am I wrong to think it's a good idea to shop amateur landlords to their mortgage companies as BTL?

[cartimandua51]

Am I wrong to think it's a good idea to shop amateur landlords to their mortgage companies as BTL?

Personally, I would only do so if they had upset me by their conduct as poor landlords - I don't feel that the mortgage companies are exactly whiter than white!

If they HAD upset me I'd be more likely to shop them to HMRC - much more painful!

[The Ayatollah Buggeri]

If you mean LLs who have fraudulently let their properties with an OO mortgage then you're absolutely right. The implications of the LL dropping into arrears while letting a property secured on an OO mortgage for tenants are serious: any AST entered into is legally invalid and tenants do not have any safeguards against immediate eviction.

An equally effective form of activism would be for anyone contemplating renting from a BTLer to demand a reference from their mortgage lender, or proof that they own the place outright and that there's no charge on it. Letting agents would resist at first, but if enough prospective tenants agreed on it they'd have no choice but to comply.

[agent46]

If you mean LLs who have fraudulently let their properties with an OO mortgage then you're absolutely right. The implications of the LL dropping into arrears while letting a property secured on an OO mortgage for tenants are serious: any AST entered into is legally invalid and tenants do not have any safeguards against immediate eviction.

It's not as simple as that by any means.

Firstly, whilst the tenancy would not bind the lender, the tenants would not face immediate eviction as the lender would have to seek an order for possession against the borrower and the tenants.

Secondly, as a matter of general principle, a lender will be restrained from obtaining possession except when it is sought bona fide for the purpose of enforcing the security; see Quennell v Maltby [1979] 1 All ER 568 at 571.

Thirdly, the court retains a discretion under the Administration of Justice Act 1970 s.36 and the Administration of Justice Act 1973 s.8 to adjourn proceedings for possession of a dwelling house subject to a mortgage if the breach is capable of remedy within a reasonable period.

There is a case (Brittania Building Society v. Earl [1990] 2 All ER 469) which held that breach of a covenant against sub-letting is incapable of remedy and thus the power of adjournment under AJA 1970/1973 does not apply. However, that case concerned a Rent Act tenancy, which gave the occupier security of tenure and the right to pass the tenancy to his heirs, whereas the result may well be very different where the occupier has an AST. In such a case, unless, unusually, the AST is for a long, fixed term, the borrower is capable of remedying the breach within a reasonable period by using s.21 proceedings against the tenant. Moreover, the mortgage may well be drafted in terms that allow for subletting by consent (as opposed to an outright prohibition) and the court may well order the lender to apply their usual decision making process, which comes back, full circle, to the underlying principle that a lender can only seek possession for the purposes of enforcing their security.

Edited April 9, 2008 by agent46

[roger196]

It's not as simple as that by any means.

Firstly, whilst the tenancy would not bind the lender, the tenants would not face immediate eviction as the lender would have to seek an order for possession against the borrower and the tenants.

What do you think of the following line of argument.

The tenant has property namely an AST although unlawfully granted.

Article 1 of the ECHR prohibits the arbitary seizure of property, Thus it could be argued that the AST is binding on the lender.

To what extent is the lender a part conspirator. Did they make any attempt to confirm that the landlord was living at the address which he claimed as buying for his own residential use. What address was used for correspondence. Did the purchaser own a number of properties.

I do not think the lender should be required to make extensive searches, but simple audit enquiries from readly available material eg voters lists, should be expected every couple of years. These are necessary for the protection of any asset which appears in a companies financial statements ie does the asset exist and at what value.

[agent46]

What do you think of the following line of argument.

The tenant has property namely an AST although unlawfully granted.

Article 1 of the ECHR prohibits the arbitary seizure of property, Thus it could be argued that the AST is binding on the lender.

To what extent is the lender a part conspirator. Did they make any attempt to confirm that the landlord was living at the address which he claimed as buying for his own residential use. What address was used for correspondence. Did the purchaser own a number of properties.

I do not think the lender should be required to make extensive searches, but simple audit enquiries from readly available material eg voters lists, should be expected every couple of years. These are necessary for the protection of any asset which appears in a companies financial statements ie does the asset exist and at what value.

Firstly, obviously, the mortgage lenders themselves, not being public authorities do not have to act in accordance with the ECHR.

Secondly, the rights granted by the ECHR are, IIRC, subject to a caveat that interference with convention rights may be allowed under the law of the signatory states so long as the interference is (I can't recall the exact words), reasonable, proportionate and necessary. In other words, when determining issues under the ECHR, the first question is (1) is there a law which allows for the intereference and then (2) is it reasonable etc?

The courts, being a public body are bound by the convention (under the Human Rights Act 1998) and must interpret the law, in so far as they are able, in a manner which is compatible with ECHR and the jurisprudence of the European Court of Human Rights. On that "interpretive" point, I think that it is reasonable, proportionate and necessary to allow mortgage lenders to lawfully regain possession against tenants where the borrower has not sought the lender's consent and in addition, for the reasons set out in my other post, the law as it stands can sufficiently protect the tenant against the oppressive use of the power by lenders. As such, the courts could readily find that the law is ECHR compliant.