Is this legal? Bank wants to amend tenancies

Is this legal? Bank wants to amend tenancies

16:33 PM, 12th September 2022, About 2 years ago 17

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Hi, We are in the process of remortgaging a block of 9 flats and have had a mortgage offer.

But prior to completion, the bank are insisting that we write an amendment to the existing tenants that if I don’t pay the mortgage they will vacate the flat if instructed by the bank.

Is this an unreasonable? Or even a legal request?

Many thanks.

Chris


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Comments

steve watt

8:40 AM, 17th September 2022, About 2 years ago

Had this recently where Integrar were the law firm acting. They were asking for a local firm of solicitors to sign together with the tenant, to certify that they had explained to the tenant the implications of mortgage repossession.
My mortgage broker spent a long time arguing this on the phone, and eventually it was agreed to drop this requirement as they jointly concluded this was only designed to apply to a partner living with the borrower.

David Judd

9:26 AM, 17th September 2022, About 2 years ago

Ive had to do this, its not been an issue. Places more responsibility on the owner, so make sure you have the £££ each month to pay your mortgage

Jessie Jones

14:34 PM, 17th September 2022, About 2 years ago

Surely, if such an amendment is worth the paper it is written on, then we as landlords could simply add a similar paragraph to our tenancy agreements, along the lines of "if we don’t pay the rent then we will vacate the flat if instructed by the landlord".
This would carry no weight in any tenancy hearing, over and above the current Section 8 or Section 21 procedures. So why the bank thinks that they can circumnavigate Section 8 or Section 21, is not at all obvious.

SCP

15:47 PM, 17th September 2022, About 2 years ago

You are right. The Landlord cannot write such a clause. It would not be effective. It would avoid specific legislation and the laid down procedure.
Solicitors among our members can explain the modern view.
I think that such a clause strikes at the heart of a tenancy agreement.
The Landlord should guarantee his Tenant quiet and peaceful enjoyment (nothing to do with noise abatement, but would include interference from the Landlord's Lender/mortgagee).
I think the best explanation of such a clause being demanded by the Lender is where there is a spouse or an adult family member living in the property who is not a party to the mortgage.
I think it is lack of proper legal knowledge: with conveyancers and legal executives who are afraid of any action in negligence.
I remember a case where a commercial lease was involved. There is a normal clause that the Lessee will be responsible for all taxes properly charged on the property in his capacity as a Tenant/Occupier. One of the word used was "assessment."
The Solicitor acting for the Lessee argued that the word assessment could refer to an inheritance tax assessment of the Landlord.
This is absurd, but he kept on arguing, and the time-honoured clause was altered to please him.

CMS

7:37 AM, 18th September 2022, About 2 years ago

I don't actually think that this helps the Lender to be honest. I am pretty sure that Ground 2 can only be used where the charge predates the tenancy and the relevant notice is served on the tenants prior to their tenancy.

If you are repossessed the mortgage company would likely, if your legal charge is pretty standard, step into your shoes and therefore be the tenants landlord but I don't think that they would be able to end the tenancy using Ground 2. They would have to use section 21 or one of the other Grounds under section 8 if they are applicable.

I suppose from the lenders point of view, if the tenants sign a waiver stating that any rights they have to remain in the property are postponed behind the lenders, then it gives them something to 'hang their hat on' but this is a statutory protection and I cannot see how a tenant can opt out of it.

That being said, if your tenants are happy to sign the letters then I wouldnt worry - just get them signed. In the unlikely event that you are repossessed I dont think you will be too worried whether the lender manages to get vacant possession or not! Best, Charles

GP

16:45 PM, 5th October 2022, About 2 years ago

Reply to the comment left by CMS at 18/09/2022 - 07:37
CMS I am suspicious sorry to say my trust in banking is less than yours.

What would happen if you missed a rental payment for one month due to messed up tenants for a period.

The banker sees your weakness and directs your tenants to vacate "as they might need to cash out some property to pay the arrears), then it takes a long, long time to get, if at all, the property let to anyone. All the time you have now allowed the bank to deprive you of income by evicting your tenants and killing your income.

The set of 9 flats progressively become empty and your finances get worse AND the valuation of the flats go down because they are empty.

They offer 30% of what it was worth today full let (because of their fear that you will default which they are actively causing!!) Then as this is commercial lending, you are an expert professional investor and thus with the inept FCA you have no chance of redress.

See HBOS READING who copied GRG Global Restructuring Group from R B of S who then with a variety of legal yet unethical untrustworthy tactics the GRG then put in their favoured administrators to increase costs, then prepack buy the property asset to their in-house favoured fund, at a fire sale valuation, then put the property onto their books at a "sale over 5 years" valuation using their own in-house valuers.

Then following up by dancing on your grave celebrating over this gross breach of trust.

CMS

18:09 PM, 6th October 2022, About 2 years ago

Reply to the comment left by GP at 05/10/2022 - 16:45
Hi GP, please do not think I am suggesting anyone trusts the 'money men' I just don't think that what they are doing will give them the power to do what you think.

Taking your example here, if you took a mortgage from 'XBank' and missed a mortgage payment they would only be able to take any action in respect of the tenants once they become landlord and that would only happen once they repossess the property. Furthermore, XBank would be bound by the Housing Act 1988 (as amended) so would have to comply with section 21/8 in order to end those tenancies. This is on the basis that the letter signed by the tenants (for XBank) is as set out by the OP, namely signed after the tenancy's have started.

If we take the more standard approach (namely the mortgage is taken out prior to the tenancies) the tenants would need to have notice of the mortgage in order to have their rights impacted by the mortgage. XBank would still have to repossess the property in order to impact the tenancies but, in this example, they would also have open to them the possibility of serving a section 8 notice on the basis that they are a mortgagee in possession that the tenants had prior notice of. I hope this helps but let me know if it's not clear. Best, Charles

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