Shams, Scams and Blocking Tactics

by Ben Reeve-Lewis

12:39 PM, 13th January 2012
About 9 years ago

Shams, Scams and Blocking Tactics

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Shams, Scams and Blocking Tactics

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.

Growing pains

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…..

Welcome the New Law

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.

Looking for the get-round

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

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.
Ben’s Articles




Comments

14:19 PM, 13th January 2012
About 9 years ago

So many tenants have to provide references and guarantees. Looks like landlords should be made to do the same.

21:07 PM, 13th January 2012
About 9 years ago

So Ben as an extension of the game it I had tenants who paid me inclusive and then just before the 2 months is up and they left but new tenants were sourced would the 2 months  start again and so on and so on.
Having different tenants real or imaginary could buy time for the houseowner to come up with the resources to prevent repossession.
This process could occur for many many months
Whadya think?
Also would this process work with a BTL mortgage or a let to buy mortgage?

Ben Reeve-Lewis

23:25 PM, 13th January 2012
About 9 years ago

Thanks for clearing that up Paul. The Mortgage Repossession (Protection of Tenants) Act 2010 doesnt apply to BTL mortgages. BTLs would have contacted the tenant in more detail, the Act was brought in because so many tenants of people with straight residential mortgages were being duped by their landlords in difficulty. It was becoming a huge problem.

The Act would protect tenants once the mortgage company had been put on notice that they were in there, which, as I illustrated above, usually entails the lender being provided with some sort of documentary proof of occupancy, which seems to vary from lender to lender as they try to get on top of the scams used.

It wouldnt protect lettings begun after possession because the lender would already have possession, its the warrant that has been suspended. The mandatory letter that is sent out by the lender is called a "Notification of execution of warrant". The lender being allowed to still gain possession, just not execute it.

Hope that clears it up; its near midnight after a long week so not sure haha

3:41 AM, 14th January 2012
About 9 years ago

Thankyou for your kind consideration in responding to that point BEN.
I think you are probably going to be correct in your assertions.
I know I would bet on you being correct!

Ben Reeve-Lewis

9:50 AM, 14th January 2012
About 9 years ago

Thanks for the vote of confidence Paul but I am often wrong as well. This stuff is so vast and complex that nobody avoids making inexplicable and basic mistakes sometimes. I was in court on Tuesday, 3 different mortgage repossession cases to defend and I spent 5 minutes presenting a case to the judge before we all realised I was presenting the wrong one, neither the banks lawyer nor the judge could figure out why nobody's figures were adding up haha

Lynne Davis

14:20 PM, 17th January 2012
About 9 years ago

Whenever we get a letter addressed to "Occupier" at our house (about once a week) it's just Virgin Media trying to sell us one of their packages so it goes straight in the recycling. No doubt many tenants make the same assumption!

Ben Reeve-Lewis

17:23 PM, 17th January 2012
About 9 years ago

Yes thats one reason Lynne, another reason I encounter is tenants being blinkered and thinking that nothing ever has anything to do with them.

I know that sounds cynical but I've had a cynical-inducing day. Funnily enough with a tenant of a defaulting mortgagor. The warrant was due to be executed today. I called the bank just before new year and informed them that there were tenants in there and sent their tenancy agreement to the bank who naturally agreed to suspend the warrant for 2 months.

However, said tenant turns up with his family and bags in reception today telling me the locks had been changed. I asked them who had done it, he said he didnt know he was just told to remove his things. I asked him who had said this to him, he replied that he didnt know. I asked if he had requested to see thier ID, he said it hadnt occured to him. I asked him if they said there were from the court and he replied he didnt remember.

AAAAAARRRRGGGGHHHH!!!!!!!!! one of those days

10:20 AM, 21st January 2012
About 9 years ago

Much consternation over the rented sector would be mitigated with a system of registration for landlords always up to date on-line. Secondly banks ar far to keen to reposess and should be forced to go through a due process of debt mitigation before seeking this solution. Dont worry the bonus pot will pay for that.

Don Holmes

20:50 PM, 21st January 2012
About 9 years ago

Another enlightening and informative piece but as a busy Letting Agent and Private Landlord in the North West, I feel I must comment.

We also come across these repo situations,and although my sympathy levels for the banks are that of "the average bear" I think YES we should care!
The Great "fix all ills" AST was introduced in the 1988 Housing Act to offer  Landlords some comfort that there is a mechanism in place to recover their property in the event of a default.

If we do not offer lenders the same support in the same situation,what are they going to do? Quite simple - carry on the way they are, making borrowing,which is very much needed to assist the PRS in bridging the growing housing shortage, much more difficult to attain.
 
Repossession is, don't you think, a very Draconian practice in the 21st Century? We are still simply "kicking people out" onto the streets and surely there is a better way of dealing with this?

We have a massive proven housing shortage, a massive Housing Benefits bill,
surely a much more massive social issue in evicting people.

If we did some sensible "joined up thinking"  and planning, an Act could be passed where under some of the circumstances, if not all, the LA could adopt the mortgage payment which is generally quite a lot less than the pending Housing Benefit claim.  This of course could have a ceiling of say, the National house price average and say for 5 years, giving the home owner some time to recover

Result:-

A)  Potential millions saved on Housing Benefits budgets
B)  An increase in the ever decreasing social housing stock bid for by the local social housing suppler.
C)  Social Dilemma management and improvement.
D)  Mixed communities
E)  More family stability (priceless)

Do Holmes Go Direct Lettings ( Franchise) Ltd

 


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