Letting Agent needs urgent advice – please help

by Readers Question

15:55 PM, 8th November 2012
About 8 years ago

Letting Agent needs urgent advice – please help

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Letting Agent needs urgent advice – please help

Readers QuestionsHello, I am a regular reader of Property118 and very much enjoy the information provided. I have come across a situation and was wondering if any of your experts would be willing to offer some advice please?

One of my landlords has a portfolio BTL with a major buy-to-let mortgage lender based in Newcastle and publically owned (you know which one I mean!). They carried out a valuation of the properties earlier this year and down valued them by about 35%. They are now claiming that the loan is in default because the LTV is not sufficient for security purposes (there are no mortgage arrears at present) and have appointed LPA receivers to manage the portfolio as of 30th October.

There are lots of issues that are bothering me and the landlord but my question at the moment is about the management contract between myself and the landlord; is this legally binding on the LPA receivers? obviously they have to honor the leases / licenses / AST’s for the properties and therefore I would assume that the management contract should also remain valid and I should be allowed to manage the portfolio on behalf of the receivers?

On the strength of the management contract, I have arranged building insurances, broadband contracts and payments of landlord’s supply for communal parts of the properties and would be significantly out of pocket if I didn’t have the rental income to offset these costs against!

Mark Alexander, Property118 Founder

Message from Mark Alexander

I have not included the agents name or details for obvious reasons, however, this is a genuine request for help. Thanks in advance for any guidance you can offer as frankly, I really don’t know what advice to offer.


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Comments

8:09 AM, 9th November 2012
About 8 years ago

If yiu havent already, how about:

1. Seeing if the client can get an independent valuation to see if that offers a different figure to challenge the LTV assertion?

2. Offering to continue to be the managing agent , even as a sub instruction from the receivers (clarify no conflict of interest), as this should be the better option for all, client and receivers, as you know the properties etc and would probably have to hand over your info anyway. Many receivers aren't interested in the minutiae of property management...

Good luck.

10:12 AM, 9th November 2012
About 8 years ago

This has set alarm bells going…..

Can a BTL lender recall a mortgage just because the value of a property has reduced? (Or is something else going on…)

Mark Alexander

11:33 AM, 9th November 2012
About 8 years ago

Very few buy to let lenders can do this, these conditions are found more often in commercial facilities. Northern Rock did have a commercial department so this is theoretically possible. I'm surprised to of a lending calling in LPA receivers for breach of a gearing covenant alone though, it could well backfire on them big time in the current climate.

18:27 PM, 9th November 2012
About 8 years ago

Northern Rock appoint Touchstone to look after there "stock" who are in the property management game, a bit of back scratching perhaps

20:35 PM, 9th November 2012
About 8 years ago

Makes me wonder whether lenders will scour their wordings ... does the credit check and LTV calculation just relate to the 'initial offer' then your home and dry ... or more trickily, words such as 'a valuation will be made ...if the valuation exceeds xxx then a loan will be valid' but the word valuation may be 2 different instances etc. etc. etc. all lenders and lanlords to check their wording please - seems a bit of a rum doo to me - but could prove interesting.

mike wilson

21:35 PM, 9th November 2012
About 8 years ago

I suspect we are only getting part of the story here. I guess if receivers are involved there must have been a clear breach of t&Cs.
However the aspect of the valuation part of the story is interesting. Are valuers biased? Are they competent?

I had a recent experience where Nationwide claimed to have done a 'drive by' valuation on one of my properties. The value was £165000, exactly the same as the valuation at purchase in 2005. Now in certain parts of the country i can understand that would be possible. But in this town it is not. Indeed I have sold another property nearby at £215000. It was bought in 2005 and it was then valued at £125000. So at the very least I would have expected a valuation around £250000+. Zoopla, which uses the local indexation calculated £278000.

So I made a formal request for details of the valuation, basis, name of valuer. The initial response was no its confidential. A telephone call however established that it was an internet based valuer. The valuer had compared the 3 story mid terrace house, listed cat B in a conservation area with 2 bed flats over a mile away, not listed and no in the conservation area.

My question was are valuers biased. And are they competent?

Don Holmes

22:37 PM, 9th November 2012
About 8 years ago

Hi I sympathise with both, but more your client who in the long run it seems has more to lose, I am looking into the same abyss and with 3 different lenders and BofS has done exactly that to me just done a drive by val as I refused to cooperate and assessed, that due to proven market conditions my valuations have fallen so my LTV is out of covenant and believe me, they do have the authority to force a valuation and so that is what LVA is, Law of Property ACT it is of course worth your clients solicitors looking into the terms of the original loan,is a commercial or otherwise deal, but again by now now probably has just had enough? if it is NR or actually NRAM they are a purpose vehicle developed by the government to clear the NR book as" Your "Man Richard from Virgin money didn't want the toxic assets, so they are simply getting shot, and when they have they will go, what I have found kept them thinking, is write to as many people as you can including the Chancellor, your MP RB anyone who will listen, "fight back dont sit back" blame the bank for getting you in the mess causing the economy to crash and valuations with it, it's not your fault why should you be blamed they dont want the bad press, In the end your only option is look for re-funding I know, easy said than done!! Good Luck O' by the way as far as agency contracts go the bank has the final say again! as once they go into receivership your client landlord WITH whom your contract is, I am afraid to say, has no say, so in effect is no longer the owner and therefore no longer your client that simple, but I do agree with one of the comments above if you can show No conflict you may be able to do a deal with the receiver if they are not in fact an estate agency which many of them are.Finally depending on the deal give these people a call Kevin 07889526979 kevinwright@thinkpositive.co.uk property people not brain training! again good luck Don Holmes Liverpool

23:40 PM, 9th November 2012
About 8 years ago

This is not only happening with NR, we've had a case today with another high street bank (owned by us taxpayers).

If the landlord wants to keep the portfolio, and the LTV based on the lender's valuation is under 85% they could try this:

1. Speak to a specialist finance broker to see if they could refinance at 70% LTV
2. Speak to the lender to negotiate a discount "haircut" if you repay the loan (10-20% is usual)
3. Speak to the LPA receiver to negotiate some time to refinance - they will usually give you 30 days to obtain an offer.

Good luck.

Mark Alexander

0:42 AM, 10th November 2012
About 8 years ago

WHOA!!! That's a very dangerous strategy, especially if your loan does have LTV covenants - talk about inviting trouble! I've seen NO evidence of mortgage lenders taking "haircuts" since Edeus and that was three years ago in the depths of the credit crunch.
Fortunately, none of the true buy to let mortgages I am aware of have LTV covenants.

1:45 AM, 10th November 2012
About 8 years ago

Lenders I know for a fact that have offered discounts where they have invited their loans to be repaid: RBS, Bank of Scotland, Bank of Ireland, Anglo Irish Bank and Allied Irish Bank. Not for BTL mortgages, but for commercial mortgages (which may include residential investment property).

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