Paragon Mortgages MD Calls for BTL Code of Practice

Reply to the comment left by "Adam Hosker" at "06/12/2013 - 14:04":

On the face of it that seems cut and dried.

But what is definition of NET investible assets that they use?

I take it would be taxable income of 100k

Sophisticated i.e. worldly, worldly-wise, experienced, enlightened, cosmopolitan, knowledgeable. Seems reasonable in a financial context alone.

Like the dot com boom preceding the millenium. People get sucked in, in the belief there's easy money to be made. Without considering there to ever be a downside risk. More so when they are "playing" with somebody elses money not their own.

I think that most people did consider the downside risk ( WB scenario for instance ) but as unsophisticated investors , could not possibly have allowed for the deep deep new problems of the finanacial crisis or indeed financial institutions ( WB < BOI < SKIPTON and then ? ? ? ) changing their mind and moving the goalposts on contracts that on the face of it to all concerned ( inc professionals in the finance industry ) seemed clear cut in their meaning and therefore allowing risk calculations to take place which in hindsight were flawed . ie NOT sucked into easy money as you suggest although there is always a small minority i agree . I have a dozen properties somehow ( not all 100% in my name ) and am not making a living from them as they were supposed to give me a pension through a mix of capital growth ( where did that go as i am not in London ??? ) and small but steady rental income . I am not a full fledged professional Landlord in the suggested sense of the word but always act professionally in all of my dealings with tenants and all associated legislation and obligations.
I personally feel that i am a relatively small, slightly financially naive and minor consumer who popped his head above the murky pond water in an attempt to create a life beyond the workaday toil as otherwise i will probably be working until the day that they bury me !

A lot of this stuff is over my head but started with John Herons's opinion that BTL borrowers don't need/don't deserve/shouldn't have same level of protection as consumers. Not sure if he's saying less or none? Since with the WBBS nightmare we amateurs with just 3 BTL properties or more, are deemed to have sweet FA protection by the WB it seems like he's got his wish.
Opinions are sought and mine is that because we now know that many financial institutions simply cannot be trusted to stick by contracts even now post recession EVERYBODY regardless of the product sadly requires protection from some regulator or other. Should not be necessary but it is. If we WBBS BTL borrowers had the protection we deserve WB would not have tried it on. End of story.

Reply to the comment left by "Richard Adams" at "07/12/2013 - 12:45":

Here, Here Richard

In theory we do have protection though in the form of the FCA business principles of Treating Customers Fairly and their rules regarding Financial Promotions being "clear, fair and not misleading".

Sadly, as landlords are only too aware, we often get our complaints swept aside by regulators whose chose not to enforce their powers.

Whilst the FCA doesn't regulate BTL mortgages their business principles described above do apply to all mortgage lenders, whether they are dealing with consumer or commercial products. The FCA have stepped in on many none consumer disputes including the mis-selling of interest rate hedging products to businesses. It is this which makes it even more gauling that the FCA are currently refusing to use the powers bestowed upon them in respect of regulating mortgage lenders which are clearly in breach of the FCA's core business principles.
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Reply to the comment left by "Mark Alexander" at "07/12/2013 - 12:58":

To take the sadly necessary across the board regulation for ALL financial products a step forward perhaps the terms of the contract (offer letter in case of mortgages) should clearly state what protection is or is not provided and by whom. This should encompass everything from a humble small personal loan/bank overdraft upwards. Sad state of affairs it should be necessary.

When banks etc sometime hopefully in the future can be seen to be behaving with proper integrity again maybe this can be removed?

Quite how we tackle FCA and/or others not taking their regulatory responsibilities and duties seriously is another matter. A regulator for the regulators!!?? Scream!!!

Reply to the comment left by "Richard Adams" at "07/12/2013 - 13:11":

Sadly the lack of enforcement of existing regulation often leads to calls for more regulation Richard. That's the problem.

Another example is over-crowding and dangerous properties. For instance; landlord lets his property in good faith but tenants then sublet and over-crowd the property. Property gets damaged, becomes dangerous and tenants become a nuisance to neighbours. Landlord reports the problem to the authorities who say to Mr Landlord "Civil matter, sort it out yourself". Meanwhile, neighbours complain about the nuisance issue to the authorities and the tenants complain about the property being dangerous. The authorities then blame the problems on the landlord. Why don't the authorities just use their powers to close down the property? Well if they did that they wouldn't be able to justify their landlord licensing schemes would they! Further, the authorities claim not to have the funds to take the enforcement action in the first place.

What a world we live in hey?
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As a small "nest egg" investor/landlord I would expect to be treated as a "consumer" when it comes to the small print of lender clauses- you can guess what small print I have recently become a victim of!!. i think this is reasonable for anyone who is of working age and receives property income as a non-essential addition to their main income. A definition could be provided for legislation purposes, eg what level of income is deemed sufficient to support an individual based on locality, dependents, etc. If their property income provides this then they are imho a professional landlord.
However, I am with Adam Hosker on standards, and I am if necessary prepared to conform to additional legal controls as a Landlord. As a "consumer" landlord I have the option of paying my percentage to a managing agent to discharge this duty so, even if I retire, I have no excuse for not complying. If I mess up by managing directly then that is my fault.

Reply to the comment left by "Philip Aston" at "07/12/2013 - 14:21":

It is important to distinguish the difference responsibility and accountability. You can outsource responsibilities to an agent BUT you remain accountable for the actions of your agent. Therefore, in the most extreme example I can think of, if your agent forgets to do the annual gas checks and your tenant and his neighbours were to be killed in a gas explosion the agent may well be responsible but you are accountable. You may well have a claim against your agent for negligence but if that agent has no money and no professional indemnity insurance the default position is you you assume both accountability and responsibility. That is why it remains so important to ensure that any advice or service providers you outsource to are properly qualified, experienced and insured.

That is also why we can't really lose in the issue we have with West Brom, provided of course that we took professional advice from people who were properly qualified, experienced and insured. I am entirely convinced we will win our case against West Brom at Court and the FCA will then also step in and fine the West Brom. However, for those of us who paid for professional advice it is quite reassuring to know that if the judge doesn't see the case the same way as I do, recourse to my professional advisers becomes an option. It is even more reassuring to know we have a barrister lined up who is prepared to take on any negligence cases on a "no win no fee" basis for those who signed up to the representative action isn't it? 🙂
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Referring to your second point first, I don't know whether even the best FA's spotted the differential rate hike clause, so I would hope that we arrive at a commonsense solution to the effect that any attempt by a lender (or indeed anyone providing a business to business service) has a duty to make their terms reasonably clear. Or, at the very least, not to obscure them. I can only speak about BoI but this thread isn't directly about that, so I'll hold fire.

On the first point, would it be a defence to show that your agent was contractually and specifically responsible for safety checks? Personally I feel that the only way to be sure is to do it yourself, thinking about the welfare of the tenants rather than the legal side. But it does take us back to the question, whether it is possible to be a landlord without the specific skills that would make you "sophisticated." My opinion (as above) is that an owner with basic knowledge and overview of L & T law and relevant statutory provision should be able to contract out the detail of compliance to someone suitable qualified, and I would agree that an owner who doesn't understand the importance of using qualified agents could be liable for any consequences.