12:39 PM, 13th January 2012, About 10 years ago 9
By Guest Columnist Ben Reeve-Lewis
We live at a time when mortgage repossessions are running at an all time high, last year saw 45,000 with a huge impending increase in 2012 and even more restrictions being placed on lenders by the FSA when offering alternatives to repossession.
And all this without a rise in interest payments. Imagine what will happen when they go up?
Much is written about buy to let mortgages but most of the cases I see on a daily basis are where the landlord has a straight residential mortgage deal and is letting the property out without the lender’s knowledge. This is very common practice, the lenders know that too but these types of letting are the embarrassing relative that nobody talks about at Xmas dinner. Like my uncle Alan in fact who once got so drunk he climbed into the wardrobe thinking it was the toilet, my Aunty Audrey was fuming…….and so were her shoes!
Anyway, I digress.
By 2010, 2 years into this recession, a huge social problem began to emerge, not a new problem but the scale of it was ‘Trending’ as they say on Twitter. People renting out properties without the lender’s knowledge, getting repossessed for mortgage arrears but not telling their tenants.
We began to see loads of people turning up in our homelessness reception area having been up to date with their rent but just that morning turfed out by court bailiff’s acting for the bank without so much as a by your leave, and I still see a couple of these cases every week.
Recently, I came across a family who paid £2,500 in rent up front and deposit to the husband’s best friend and moved in on the Sunday only to find the bailiffs turning up to change the lock on Tuesday while his best mate had relocated to Nigeria. With friends like that etc etc…..
The government recognised this growing problem and introduced a whole new law just to deal with it. The law is called the Mortgage Repossession (protection of tenants) Act 2010. It requires the lender in non buy to let mortgages to send out a letter called a “Notification of execution of warrant” addressed to “Any occupiers” so that any tenants in residence should in theory open the letter and see what’s coming their way.
The new law also states that if it comes to light that there are tenants in place, the lenders should exercise a reasonable approach and allow the tenants up to 2 months in which to find somewhere else to live. You can imagine how popular this law is with us lot based in the homelessness unit and how equally unpopular it is with the lenders.
I can never keep the glee out of my voice when I make the call to the bank and tell them there are tenants in a property, just as they can never keep the groan out of theirs when I drop the bombshell just 2 days shy of a repo when they thought all their work was done.
We have had a year with this new law in operation and now everyone is getting tactical.
What a lot of landlords are doing is getting friends to pretend they are tenants and asking the lender for the requisite 2 months, which buys them enough extra time to cobble a solution together and prevent repossession.
Bailiffs now will not supervise the lock change if, when they turn up with the locksmith, they meet anyone else at the property. They usually just go back to the court and leave the lender’s representative to sort it out and re-apply.
My lot happily use the 2 month rule so we don’t have to re-house the tenants.
At the bottom of this enthusiastic pile-in are the lenders, who are getting equally tactical in response.
At first they would simply accept the word of the council that the property had been rented out. Then after a few months they started saying they wouldn’t grant the 2 months unless the tenants could produce a written tenancy agreement, but as you know, you don’t need a written agreement to hold a tenancy and many people occupy without one.
Some banks insist that housing benefit must be paid to them for the 2 months. The new law allows them to do this but most housing benefit units wont pay someone who isn’t the landlord, and even if they agreed, by the time the necessary adjustments have been made the 2 months will be up anyway. We’re nothing if not swift dahn the cahncil.
The latest get-round for the banks I am finding is to insist on proof of payment of rent. Now that makes more sense. Anyone can buy a tenancy agreement from WH Smiths and fill it in, it’s more laborious to fake a rent book, although not for the seriously dedicated.
One bank recently insisted that the tenant provide utility bills with their names on for the same reason but in her case the landlord charged money inclusive of bills, so that didn’t work for them either.
I can understand the lender’s caution about these things. The Act simply refers to tenants of defaulting mortgagors; it doesn’t give guidance on proof of their authenticity, so they rely on spurious evidence being supplied. I sometimes doubt the genuineness of some of the people who come to me for help myself.
But most of them are real tenants who have been ripped off by their landlords.
If negotiating alternatives to repossession are going to continue to be reduced then mortgage repossessions will rise considerably in 2012, even without a rise in mortgage interest rates. This will obviously see an increase in cases of tenants of defaulting mortgagors too.
Many tenants still don’t open letters addressed to “Any occupiers” so last minute scrambles to block possession for me are commonplace. Also, a tactic used by landlords who want to keep legal action under their hat, is to turn up regularly asking to collect their post, thus intercepting any warning letters and keep the rent coming in. You would be surprised at how many tenants are happy for this to go on. You would worry why the landlord hasn’t redirected his post wouldn’t you?
Negotiating around mortgage repossessions has always been a tactical game, like housing chess. Lenders have always done it, people in my jobs always do it and since the introduction of the new Act borrowers and tenants, both real and imaginary are also doing it.
It’s a bit of a game really, the only losers being the banks. Altogether now……do we really care???????
Ben Reeve-Lewis has worked in Landlord-Tenant law since 1987. He operates variously as a Tenancy Relations Officer, a housing blogger, particularly on Tessa Shepperson’s Landlord Law Blog, a housing law trainer for the Chartered Institute of Housing and a broadcaster. In his time he has been a landlord, a tenant, a letting agent and a defender of mortgage repossession cases. There isn’t much left in housing for him to have had experience of.
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