Letting Agent needs urgent advice – please help

Letting Agent needs urgent advice – please help

15:55 PM, 8th November 2012, About 9 years ago 30

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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.



Comments

by

11:45 AM, 10th November 2012, About 9 years ago

I am the agent who had asked the question in the first place - receivers have confirmed what one of your readers said that they are not bound by the terms of that agreement - they have also refused to accept a redemption figure for one of the properties which the lender had agreed to prior to their appointment. They have also sent a list of all the properties in the portfolio to all the tenants, surely there's breach of confidentiality here??

As far as the valuations goes, they were absolutely disgusting!! as an example, one of my friends sold an exactly the same property in the same street few doors down (with a council order for failure to comply with HMO regs!!) for £188,000 in May this year within a month of putting it on the market- and NRAM valued my clients property with tenants @ £115,000!!! The person dealing with this loan in NRAM has also refused to see my landlord to discuss offers that we are willing to put forward face to face. BTL income was the only source of income for this particular landlord and it will affect everything in his life which seems absolutely crazy,

by

13:08 PM, 10th November 2012, About 9 years ago

The landlord won't be able to discuss anything with NRAM now, he can only negotiate with the LPA receiver. As unpalatable as this may be, the fact is if he doesn't do a deal quickly they will sell his portfolio for peanuts ("justified" by their low valuation), leaving him with no equity and no income. Act fast. You will find me on Google/Linkedin if you need help.

by

13:19 PM, 10th November 2012, About 9 years ago

Thank you so much for the advice - Why won't the lender talk to us now? Everyone is telling us (financial adviser, solicitor, another person who has had similar thing with Lloydstsb) that landlord is still the owner and has a duty of care to the borrower and receivers are acting as agents on his behalf for the lender, is this not correct? Also if receivers sell the assets below the loan amount, would nram still chase the landlord for the difference? What's your background, do you work in this field or are you using your previous experience in your comments? Your advice is greatly appreciated as its very stressfull at the moment and seems that we no where to turn Sent using BlackBerry® from Orange

by Industry Observer

13:37 PM, 10th November 2012, About 9 years ago

I am going to write an article for Property 118 on this subject of lenders powers and especially appointing LPA Receivers as I fear, as Ian Ringrose posted, there could be a lot of surprises in store for many borrowers - and not just BTL ones either.
@LettersPM
There is no collusion here this type of issue is tough enough without getting into conspiracy theories!! Touchstone are simply one of a number of asset or facilities management companies that handle portfolios for major corporate clients, including acting as LPA Receivers. Otheres could be LSL, Countrywide, ARPM etc.
The power to appoint a LPA Receiver flows from section 109 Law of Property Act 1925 (LoP) and I suggest everyone reads this

http://www.legislation.gov.uk/ukpga/Geo5/15-16/20/section/109

and section 106 as well. Whilst at it read the mortgage deed in great detail, it will make reading a 40 page lease on a flat look a doddle!!
@bb43fea974fa5f1f6594d3c19ad7e33b:disqus
Lenders are not interested in the minutiae and that is why they appoint LPA Receivers. There is not a snowball's chance in hell that the Receiver will leave you in place as agent unless you are prepared to act for free and even then they won't. Why - because they'd have to pay you commission which comes out of their commission from the lender. So they use agents, usually large regional or preferably national ones who can of course act for them all over the country, and to whom they pay very low fees in exchange for volume of regular work (there is a lot of this LPA work about!!)
@Dave
No chance I have never known a LPA Receiver negotiate on anything
@Mike
I agree and my first thought after almost 25 years in Nationwide was that there must be some other reason why the lender picked on Woodland 11's client. Unless they are carrying out a review of all their BTL borrowers and their portfolios which is a distinct possibility.
I'd like to know how many properties your client has Woodland 11 and whether they are basically all at 85% LTV originally or even higher.
My guess is your client went to NR for another loan or refinance or whatever and that has triggered the revaluations and their response.
Lenders are incredibly nervous at the moment.

by

13:54 PM, 10th November 2012, About 9 years ago

A valuer has to be able to prove his valuation by use of genuine comparison of similar properties sold in the immediate vicinity within a reasonable time period. If he can`t he has acted negligently and can, therefore, be sued.

by

14:05 PM, 10th November 2012, About 9 years ago

I too am in a similar situation with a well know australian owned bank that has been throwing money
at me for the past 15 years for my buy to let portfolio. Now they decide that they no longer wish to be in the business of financing BTL portfolios( having already set you up or should I say "stitched you up" with maximum 85% LTV) they simply tell you to take your portfolio elsewhere.

I have never missed a loan payment, never been overdrawn and never breached any loan covenants, in fact they have had more than £1,500,000 from me over the years in interest.
Madness or what?

by

15:44 PM, 10th November 2012, About 9 years ago

There will be thousands of cases like this imminently. The Financial Services Authority have imposed new rules on bank lending in an attempt to prevent further bank failures. Since June, every UK bank is now obliged to review every property loan annually (not just new loans), giving it a risk rating, this is known as "slotting".

The fact is that every loan rated as "weak" or "default" (which they allow to remain on their books) will restrict them from lending further. So, in order to be able to lend, the banks have to get these high risk loans off their books. Don't be surprised if (coincidentally!) the loans they target have low margins, which they can replace with higher margins, this is also a commercial decision.

The banks have been selling off parts of their loan books for over a year now, allowing discounts to the buyers, but this is only the tip of the iceberg. A huge number of portfolio loans remain, and of course it is in the banks' interests to see their loan repaid in full, but allowing a discount so that the borrower can redeem may be better than having to repossess and sell for a figure that does not cover the debt. That is why you can negotiate.

I can see how some may have doubts, but I can assure you this is a commercial reality. We have dealt with several large cases in the past few months. The discounts have allowed the refinance to proceed and covered the cost of valuation and arrangement fees.

I have aimed my advice at those who want to take proactive steps to keep their portfolio. Others may decide to stick their heads in the sand or try to delay the repossession with legal means. The latter offers an uncertain outcome, and if the rent is your only source of income (as in this case), how does the landlord eat and pay the bills in the meantime?

by

20:24 PM, 10th November 2012, About 9 years ago

Northern Rock are part of NRAM, which also includes the former Mortgage Express. They have a number of panel LPA receivers, not just Touchstone.

by

20:49 PM, 10th November 2012, About 9 years ago

We are LPA Receivers but also act on a "Pre LPA" basis for landlords who are being put to LPA, but prefer to have the properties managed by ourselves. I can confirm that some commercial lenders, as discussed above, are reviewing Commercial Portfolio facilities to see if their is an LTV breach.

If values have dropped, they will write to you inviting you to make up the shortfall, or alternatively demand full payment of the loans. Even if payments are up to date, this is a breach which permits them to appoint an LPA Receiver.

Where you have a lender requesting up to date valuations, and you believe that there is no LTV breach, I would recommend that you pay for your own commercial (red book) valuations. This can then be used to challenge potentially inaccurate or overly cautious valuations.

Please note - this does not, on the whole, apply to standard buy to let mortgages. Only commercial portfolio facilities.

We have been involved in a recent portfolio where we managed to have the LPA overturned because the landlord wanted to use us, rather than an LPA (this is very rare I would add, because once an LPA is appointed, a lender will often not change their minds).

We've been very successful in working with various lenders and landlords in avoiding LPA and indeed restoring poorly performing back to health. Because of this we work closely and have excellent relationships with most major BTL and Commercial Lenders. We also have an ex-NRAM manager heading up our LPA and Asset Management team and work as Asset Managers for two NRAM appointed LPA Receivers.

If the original poster, or anybody would like any advice in complete confidence, please contact rex.kirk@lpareceivers.com or myself; glenn.ackroyd@nationalpropertygroup.co.uk

You can find out more here; http://www.LPAreceivers.co.uk

by

21:05 PM, 10th November 2012, About 9 years ago

The appointment of an LPA is one of law's weird concepts. The LPA Receiver is acting on behalf of the landlord and has a duty first and foremost to act in the best interests of the landlord.

This may same odd - given that they are appointed by the lender and most landlords take the view that they are working against their wishes. Their ability to work in the interests of the lender comes from their 'duty of care' not to act in a way to disadvantage the lender. Hense they can collect rent, sell houses, even if a landlord does not consent.

Of course lenders in reality pay the LPA their fees and if the property has arrears etc, the likelihood is that sale will be recommended.

To answer the point re mortgage shortfall. This is a debt arising from a deed and can be recovered for up to 12 years after a property has been sold. We are seeing massive shortfalls with banks writing off 40% of their mortgage. For most landlords, bankruptcy or IVA solutions are advisable. We've worked a number of such solutions for landlords to hive off toxic debt to preserve the remaining portfolio.


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