Sunday, December 7, 2008

Long Overdue

Change due for buy-to-let tenants

The government is considering forcing mortgage lenders to give more notice to tenants who could be evicted when their buy-to-let landlord faces repossession. Currently lenders must send a letter to tenants at least two weeks in advance of a repossession hearing involving their landlord. If approved, lenders would have to inform tenants seven weeks before.

Posted by quiet guy @ 11:19 AM (1397 views)
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15 thoughts on “Long Overdue

  • At last, a murmur of the possibility of maybe something being done to help people who actually deserve it.

    Lenders should have to give tenants 1 years notice, and they should price this into the risks of BTL loans. Period.

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  • Inbreda

    See my post on previous article.

    But yes totally agree with you.

    A year or so ago a tenant was seen as some low life who had to stump up a deposit and prove they were worthy of paying a Landlords mortgage for them.

    It is now the case that the majority of tenants are in a financlially more astute position than most landlords.

    Landlords should have to prove their financial standing and yes tenants should get at least a years notice of being evicted through no fault of their own. Particularly in tough times such as these. But frankly anytime.

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  • Well, tenants have always been able to sue the landlord for breach of contract, and sue the bank for breach of Protection From Eviction Act 1977 when this happens.

    I would personally – I’d sue with a vengeance. In reality though, I doubt many tenants do.

    Whenever you bring this subject up at a letting agent, there’s an uncomfortable silence. You have to clearly state what would happen if the landlord defaulted – i.e. you will sue the agent (acting on the landlord’s behalf), then sue the landlord (if they can be traced), then the bank. They don’t like you saying that in front of all of the other “involutary landlords”.

    Most shorthold tenancy agreements don’t state a requirement that the landlord pays his mortgage. I got a clause inserted into my agreement because:

    a) I asked for a letter from the agent stating that they did not consider the landlord a credit risk (thereby indemnifying him), and naturally the agent did not want to do this.
    b) The agent inserted the clause under “other items” (the same place in the contract you would ask for the sofa to be taken away etc.!)

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  • Paul

    Are you saying you wouldn’t have the right to sue if you hadn’t had these clauses inserted?

    I suspect the majority of tenants haven’t and I suspect the majority of agents wouldn’t even in tough times.

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  • str, no you can still sue AFAIK, but suing for breach of contract (that the landlord has breached the agreement) might not be enforceable.

    The other laws are outside scope of the agreement – they apply whatever your contract says.

    The simplest thing is insist that a clause be entered that the landlord must pay their mortgage for the agreement to be binding. This also serves as a wakeup call for the letting industry – tenants have rights, and they are often more solvent, and know the law better than their landlords.

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  • I suppose that a landlord may default on another of his mortgages and not yours yet still get repo’d due to margin calls etc.

    It’s a tricky area where unfortunately you can’t help thinking the tenant will be worse off.

    I suspect we will see this being played out shortly.

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  • Paul,

    Thanks for very interesting comments. Unfortunately, I suspect that the majority of us do not have any special clauses in our rental agreements and will have to approach the matter differently if their landlord defaults.

    Personally, I’d be aiming to contact the bank and try to negotiate for more time in return for paying interest on the landlord’s mortgage debt for a few months. Suing the bank would be the last recourse and what is the point of suing a bankrupt landlord, except for a moral victory? If the landlord is but then they won’t have money to pay damages.

    Any better ideas anybody?

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  • There should be a 1st option to purchase offered to tenant by the banks.

    Preferably at 50% off leaving the landlord with an outstanding debt for supplying his ex tenant with a roof.

    Poetic justice I feel for stealing the house in the 1st place and forcing the tenant to rent.

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  • @str 2007

    “Preferably at 50% off ”

    But surely you’ll get that at the auction if you want it anyway 😀

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  • Surely it is not difficult for lenders to contact tenants ! They should be easily traceable unless the BTL landlord did not disclose to his lenders he was letting the property out.It shows the slopiness of lenders. Giving just two weeks notice to tenants they could be evicted is outrageous.
    Tenants should be informed at each stage of a reposession process as they stand to loose their home due to no fault of their own. As much as the lender has a charge on a property because it is mortgaged, the tenants interest should also be recorded otherwise it makes a mockery of having a tenancy contract. i guess having a clause that should the LL be in arrears or default on their mortgage the tenants has a right to sue for breach of contract is a start but not enough. If the LL is bankrupt and loose his property, the tenants ends up homeless as well.

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  • FJ.
    The terms of the housing act governing this aspect are clear, they were specifically drafted to allow the removal of tenants rights and allow landlords/mortgagors to obtain possession without fuss or delay, the tenancy agreement is of no help to the tenant. The DJ at the hearing will simply rubber stamp the application-believe me I know what I am talking about.

    The law in question is another one of Thatchers legacies.

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  • iguana, the tenant can still seek damages under the Protection From Eviction Act 1977. Basically, the bank is only allowed to repossess the property without notice if it is in “vacant possession”. Otherwise PFE1977 applies and the bank manager can be found guilty of a criminal offence!

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  • larry pickleman says:

    Squatters rights?

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  • Coincidentally, Moneybox briefly covered this topic on Radio 4 tonight. Basically Moneybox says that most letting agencies will inform the tenant as soon as possible if the owner is having problems with their mortgage but in practice, the owner rarely contacts the letting agency because they are ‘running away’ from the problem; that is one of the reasons that unexpected evictions may take place (sometimes in a matter of hours by bailiffs according to Moneybox!) which bring us back to Paul’s suggestion to sue. Not nice.

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  • Presumably all this assumes the property the landlord is living in is paid off, or do his “investments” go before his home?

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