Tag Archives: Bankrupt

Personal Feelings Aside: Good Business or Good Samaritan? Guest Articles, Latest Articles, UK Property Forum for Buy to Let Landlords

When you have a business of putting people in homes, it may be quite easy to get wrapped up into doing what’s “right” as opposed to what’s “profitable.” Many of us want to help our fellow humankind keep off of the streets, but when does it become problematic to do so? We may feel like we are in a position that can help those in dire straits, but does the bank account agree with that assessment? Good Business or Good Samaritan

Keep Mindful of the Business

Many landlords can be seemingly heartless when it comes to the misfortunes of others. They seem to be comfortable with throwing families out on the street. However, is this a justifiable way to view someone who is simply looking out for their business? After all, doesn’t a landlord have the right to eat and sleep under his or her own roof? Being a good Samaritan can have a deeply negative impact on the lifestyle of the landlords themselves.

Provide Customer Service

Having good business sense doesn’t mean you should turn your back on humanity, however. Word of mouth and customer service play hand-in-hand for future success regardless of what your business pertains too. This doesn’t mean you should let every person who has a difficult time scraping together the rent take advantage of your hospitality. There has to be a middle area where business and being human coalesce.

Screen Every Candidate

Depending on the area your properties are in, you could hear sad stories from nearly every person walking into your doors about previous housing experiences. While many of them may be justified in having a harsh time, such as layoffs or debilitating injuries, many more still are looking for someone who isn’t going to give them a hard time once per month. Performing a background check on every potential candidate can help you see what kind of a past history the person has had in terms of paying rents on time. If he or she has had a long history of multiple housing due to a lack of payment, you can almost assure yourself that you may have the same experience with them.

Sustain Your Business

If you are able to sustain a loss from a potential candidate, then the risk may be worth your own peace of mind knowing you did what’s right by society. However, you need to make sure that your own needs are met as well. If you put yourself into bankruptcy in order to help others, then you will no longer be in a position to help additional people. In today’s world, being a goodSamaritan can only get you so far. Banks and debt collectors may not care that you are helping your fellow humankind keep off of the streets. These organizations are going to want the money without excuses. If you are affected by turning people away because they are unable to help you keep your business afloat and make sure you’re not in the same position they are, then you may want to look for a new profession.

You can be a good Samaritan and practice good business as long as you’re able to sustain yourself. It’s a fragile balance that could weigh heavily in one direction or another. There is nothing wrong with helping those in need, but it needs to be a method that the business can absorb. Your business is a separate entity that needs to survive in order to help you and your staff survive. Just because you turn someone away with a terrible decade long history of non-payment to a landlord, doesn’t mean you are any less of a person.


Negative equity – forced to repay mortgage Latest Articles, UK Property Forum for Buy to Let Landlords

I have a buy to let mortgage with Mortgage Express. This mortgage finishes in April 2015. The value at present of the property is around £50000. I paid £126,000 for it 6 years ago with a mortgage of £113,500. There is now negative equity in the property in the region of £76,000.

I have paid the interest on the mortgage consistently and the property has been let at a fair rent allowing the mortgage payments to be met.

I have asked Mortgage Express for an extension of the term to allow equity to build in the apartment so as to give me a chance to sell it and redeem the mortgage. Negative equity - forced to repay mortgage

I have asked Mortgage Express to allow me to overpay and they have agreed, however I don’t want to overpay to find that I am made bankrupt due to their unwillingness to extend the mortgage in April 2015. There will be a shortfall of £45000 even if I over pay £1000 a month.

I earn a good wage and can afford to overpay by over a £1000 per month.

I have also written to the Prime Minister who has given the treasury my letter who in turn have responded. They say tackle the case with the Financial Ombudsman. My past dealings with them seem to be that they are weak to say the least.

It seems unfair that due to no fault of my own, indeed the financial crisis of the country being the cause and the disastrous dealings of the banks being responsible, I have to be responsible and accountable instead of the perpetrators.

Any suggestions?

Regards

David


The evolution of the Private Rented Sector – Deed of Assurance Buy to Let News, Cautionary Tales, Landlord News, Latest Articles, Legal, Letting, Lettings & Management, Press, Property Investment Strategies, Property Market News, Property News, The GOOD Landlords Campaign

TMW now agree to three year AST's - Stupidly in my opinionWhy on earth would The Mortgage Works “TMW” agree to three year AST’s?

More to the point, why would landlords and tenants?

It has always been legally possible for landlords to offer AST’s for up to 3 years and indeed in theory for any fixed term though a term longer than 3 years, even by one day, means the agreement must be executed as a Deed and witnessed. However, until now, you would almost certainly be in breach of your buy to let mortgage conditions if you agreed to a tenancy of more than 12 months. TMW have broken the mould by agreeing to allow landlords to offer 3 year AST’s. However, in my opinion they are doing nobody any favours including themselves.

I have read Shelters arguments about offering stable rental contracts and to some extent I can see where they are coming from. However, I think the concept of longer term AST’s are potentially dangerous for landlords, tenants and mortgage lenders. Perhaps the most compelling evidence for this belief is that Shortholds first made their appearance courtesy of The Housing Act 1980 in the guise of Protected Shortholds. These tenancies had to be granted for a minimum 5 year term and came with other restrictions on notice being given and rent increases.

Although an improvement on the then Secure tenancy regime The Protected Shorthold was not popular with Landlords and the lesson was surely learned with the improved terms applying to Assured Shortholds as introduced in the Housing Act 1988 and amended since.

The concept behind 3 year AST’s

three year AST conceptPeople with children in schools and also retired people want more security of tenure but not at the risk of being tied to one property if their circumstances change. What these tenants don’t like is the idea of a landlord having the ability to serve notice on them after just six months regardless of whether they have been model tenants and just got settled or not.  I sympathise with that and I’ve met several people who have been in that exact position. Indeed one of my former employees was forced to move twice in less than 18 months through no fault of her own. She was a model tenant but in one case the landlords decided to move back to their former property and in the other case the landlords decided to sell. My employee had a disabled daughter and it was very important to her to keep her daughter settled in the same school. She had done nothing wrong but had to deal with a lot of stress and worry, not to mention the expense of having to move.

The problems with three year AST’s

If a landlord grants a three year AST there is no ability to gain possession on “no fault” grounds under section 21 of the Housing Act 1988 unless there is a break clause that can be operated to shorten the originally stated fixed term. This of course defeats the object of a longer term tenancy, certainly from the tenant’s viewpoint. What this means is that there is absolutely no way to legally evict a tenant during the first three years unless the tenant is in breach of their tenancy agreement as mandatory possession will not be available to the Landlord.

What’s wrong with that? I hear you say.

Well just consider a few “what if” examples:-

  1. What if the landlord falls ill and needs to sell to raise cash?
  2. What if the landlord dies?
  3. What if the landlord goes bankrupt?
  4. What if interest rates go up and the landlord can’t afford to pay the mortgage and needs to sell?
  5. What if the landlord desperately needs to move into the property due to an unforseen change in circumstances, e.g. a marriage breakdown?
  6. What if the landlord get’s divorced?

The list is a very long one already and I could go on. The killer blow for me from a landlords perspective is that if the tenant doesn’t comply with the tenancy agreement the only way to get possession before the end of the fixed term is by mutual agreement with the tenant, or by serving a section 8 notice for the breach. This can be and often is challenged though the serious arrears Ground 8 is a mandatory ground, whereas a section 21 notice cannot be challenged other than on its legal validity and ability to enforce it. The reality though is that possession cases under section 8 can be challenged and dragged through the Courts for several months. That could mean months of no rent or a tenant who abuses a landlords property or occupants of neighbouring properties.

My advice to all landlords is not to offer more than a 6 months AST in most cases, 12 months for some student type accommodation where re-letting part way through the academic year is more difficult.

Why would a lender agree to three year AST’s?

Why would a lender agree to three year AST's?To do so is crazy in my opinion.

I’ve read David Lawrenson’s points of view and whilst I concur that a lender “could” appoint a receiver of rents until it is possible to serve a section 21 notice I just can’t see why lenders would agree to that. Perhaps they are doing it just for a bit of positive PR from the do-gooders and hoping that landlords aren’t stupid enough to actually offer three year AST’s?

The mind boggles!

The bottom line for a mortgage lender is surely the ability to be able to recover their debt as quickly as possible if they need to isn’t it? Agreeing to a three year AST not only devalues their security but it also massively limits their recovery options for up to six times longer than they need to commit to, i.e. 3 years instead of six months.

Is a three year AST really that attractive to tenants either?

What if their circumstances change? Do they really want to be tied into paying their landlord for the full three years? Do they really want their estate to be charged rent for the entire contract period if they die? Committing to a three year tenancy cuts both ways. Most tenants would prefer the flexibility of a tenancy with a Council or a housing association because they are not tied in for a fixed period but do enjoy greater rights of tenure. However, Housing Associations only provide around 50% of the UK rental stock with the other half being provided by the Private Rented Sector.

Deed of Assurance could be a far better alternative

A Deed of Assurance is a relatively simple legal agreement which sits alongside an Assured Shorthold Tenancy Agreement “AST”. It is a separate agreement between landlord and tenant which does not affect the landlords rights to serve notice or to obtain possession, therefore it does not affect the rights of a mortgage lender either. However, it does offer tenants peace of mind.Deed of Assurance

From a tenants point of view, a Deed of Assurance provides far more flexibility than a long term tenancy because they are only tied in for 6 months and can then move on if they need to. What a Deed of Assurance offers in addition to an AST though is peace of mind.

A Deed of Assurance is a document in which a landlord promises to pay an agreed level of compensation to a tenant if possession is obtained within a given time period. I have never had to pay out compensation and because I’m in the business to provide quality tenants with quality accommodation long term I see absolutely no reason why I would ever need to.

The compensation amount offered by the landlord can be anything but obviously the idea is to agree something which is meaningful to both parties. For example, I offer to pay anything between £1,000 and £5,000 compensation if I obtain possession within the agreed period, providing the tenancy conditions have been observed impeccably by the tenant of course.

Similarly, the agreed period can be as long or short as makes sense too. Typically I offer 3 or 5 year terms but I would happily consider a longer period if the circumstances were right. What this means to the tenant is that if I obtain possession within the agreed period I will pay out compensation. This doesn’t stop me serving notice on a model tenant, it just means that if I obtain possession the tenant is compensated for their inconvenience.

But what if the tenant has not complied with the tenancy? Well that’s covered too. If the tenant does not comply the compensation isn’t payable, that’s very carefully worded into the Deed of Assurance by the solicitors who drafted it. Obviously there could be a dispute over whether the tenant had complied with all of the reasonable conditions in the AST and in that case the tenant would have to make a claim against the landlord for the compensation through the Small Claims Courts.

Deed of Assurance is not for everybody – by offering a Deed of Assurance a landlord is agreeing to pay compensation if they obtain possession of a property within a time scale they commit to with their tenant. It doesn’t always make sense for a landlord to make such a commitment but in some circumstances it can pay dividends. If in doubt, take professional advice.

What do others think?

The simplicity of the Deed of Assurance is its strength. Chief Ombudsman Lewis Shand Smith confirmed this by saying “The Deed of Assurance clearly sets out what the tenant can expect from the landlord and vice versa. In a sector where clarity might be lacking, this is a fantastic development”.

What’s the point of offering a Deed of Assurance?

Demand is very high from tenants who want/need greater assurance from their landlord that they are not going to have to move after just six months even if their tenancy has performed impeccably. Whilst a Deed of Assurance doesn’t actually provide tenants with any greater security of tenure, it’s certainly the next best thing. It’s a landlords opportunity to put his money where his mouth is, or perhaps more to the point, it’s a tenants opportunity to ask a landlord to do so when a landlords says words along the lines of “if you comply with your tenancy you can stay here for as long as you want”.

In practice, by providing properties which appeal to the types of tenants who want extra peace of mind in terms of stability they are also prepared to pay for that peace of mind. Many of my properties are typical family homes near to good schools, otherwise they are suburban bungalows which appeal to baby boomers and retired people. When I explain what a Deed of Assurance is to them they love it and often choose my properties over comparable properties for that reason alone. In many cases I’ve had several people bidding against each other to move into one of my properties despite there being plenty of comparable alternatives at lower prices. The reason they are prepared to pay more is for that peace of mind and legally documented assurance.

Conclusion

If you have the right type of properties to attract long term, good quality tenants, don’t stitch yourself or your tenant up with a long term AST or Shelters Stable Rental Contract. Consider the benefits to all concerned of offering a Deed of Assurance instead. Give your tenants the peace of mind they want and an incentive for them to perform to your requirements impeccably. It’s then a true win/win situation. Tenants know that if they perform you will have to pay up if you take possession of your property. On the flip side you may well stand a far better chance of being able to attract the tenants you really want, a premium rent and less voids periods too.

To purchase the Deed of Assurance document template please see below. The price is £97 for unlimited personal use.

Buy Now


Choosing the wrong letting agent could cost YOU thousands! Latest Articles, Letting, Lettings & Management

Choosing the wrong letting agent could cost YOU thousands!It’s devastating when you put your trust and faith into a letting agency, you pay them a monthly management fee; and all of a sudden they disappear with rent and the tenant’s deposit.

This week saw Smith & Jones Lettings in Market Deeping made bankrupt without a warning to their clients or time for them to act. Continue reading Choosing the wrong letting agent could cost YOU thousands!


Superstrike Ltd vs Rodrigues Tenancy Deposit Protection Court of Appeal Latest Articles, UK Property Forum for Buy to Let Landlords

Superstike vs Rodrigues Tenancy Deposit Protection Court of AppealMy reading of a recent Court of Appeal ruling (Superstrike Ltd vs Rodrigues) is that thousands of possession orders may have been granted in error due to lack of clarity in Tenancy Deposit Protection legislation.

What’s worse is that the vast majority of landlords may have inadvertently broken the law and face bankruptcy!

Scary stuff hey?!

So what is it all about? Continue reading Superstrike Ltd vs Rodrigues Tenancy Deposit Protection Court of Appeal


How I doubled my money in three seconds on a property deal Landlord News, Latest Articles, Property News

How I doubled my money in three seconds on a property dealOK, so I wrote this headline and added an image to attract your attention. I really did manage to double my money on a property deal in three seconds, however …….

Yes, there’s a catch – but you probably guessed that didn’t you?

Please allow me to share a story with you, it is relevant to everybody in the property investment business and particularly newcomers. Continue reading How I doubled my money in three seconds on a property deal


Some good News for Landlords in Scotland at last Landlord News, Latest Articles, Letting, Lettings & Management, Property Investment News, Property News

Good News for Landlords in Scotland at last

I keep in touch with what’s going on in the lives of my fellow landlords North of the border via my friends at the Scottish Association of Landlords (SAL) and via listening to members of the Association, many of whom joined SAL on my recommendation.

Members of SAL tell me landlords in Scotland are feeling the pinch of all the new regulations. Letting Agents fees are rocketing to offset the premiums they used to charge to tenants and many of the online portals have pulled out of working with Scottish landlords altogether.

Just because I don’t own any properties myself in Scotland doesn’t prevent me from keeping an eye on the market to look out for solutions though, my ancesters are Scots so I know that every penny counts.

The new regulations might be a pain in the neck for some (OK most!) but as they say, as one door closes another one opens.

I’ve been discussing the challenges with several of my contacts and one of them, an online letting agent (member of the Scottish Association of Landlords and ARLA), has decided to buck the trend and create a brand new product for Scottish landlords whilst their competitors are exiting the market in droves.

This is an overview of their product and I would be very interested in your feedback, especially if you own and let properties in Scotland.

Scottish Landlords Letting and Rent Guarantee Package

  • Advertising of your property on all the major property portals (Rightmove, Zoopla, Prime Location etc)
  • Tenant referencing
  • Dealing with Deposit Protection
  • Rent collection
  • Legal Expense Insurance Cover and Rent Guaranteed for 12 months up to £2,500 pcm and £25,000 in total (with an option to renew each year)
  • Eviction Proceeding costs covered

What’s more, you remain in control. You do the viewing so you get to look your prospective tenants in the eye and decide whether you want them living in your property. This also helps keeps costs down 🙂

The outcome of a tenancy is set at the beginning I think you will agree? However, on top of the increased regulation in Scotland and the associated costs being passed onto landlords, rent arrears, which are every landlords worst nightmare, are increasing too.

One bad tenant can leave you unable to pay your mortgage with prospects of losing your property and possibly bankruptcy. Worse still the court system can take well over 6 months to achieve eviction!

Add to that extortionate lawyers fees and damage to the property, is it any wonder that rent arrears and rising costs of compliance are the biggest fear amongst Scottish landlords?

The rent arrears situation is getting worse.

Arrears are increasing, courts are closing and the process of re-gaining possession of your property is taking longer and longer…

Is it any wonder that “professional rent dodgers” are having a field day?

Things are now about to change for the better for Scottish Landlords though 🙂

The rent guarantee insurers are happy to partner with the agent offering the above scheme due to their unparalleled tenant find and vetting procedure which provides for low risk letting.  

The bottom line is that if the tenant does not pay – you still get paid, and you still save money :-)

Given that 10% of tenants are in arrears amounting to thousands of pounds, and you get rent protection and legal cover, you’d expect a hefty premium wouldn’t you?

Not so – because of this letting agents bulk buying power already established in England and Wales, all of the above can be offered for a full year for just £247 + VAT. Compare that to the fees that your letting agent charges!

It get’s better though!

The deal even comes with a Money Back Guarantee!

If your property is not “Let Agreed” within 30 days you can cancel your instructions and have a full refund.

It’s a meaningful guarantee too, not from some two bob business operating from a bedroom, these agents are qualified members of ARLA and are also members of the Scottish Association of Landlords.

So, why take the risk with your property when you can use this service and get complete peace of mind at such an incredible price?

To find out more please complete the form below.


How private landlords can beat the rent arrears problem Advice, Buy to Let News, Landlord News, Latest Articles, Property Investment News, Property Investment Strategies, Property News, UK Property Forum for Buy to Let Landlords

How to beat rent arrearsRent arrears are every landlords worst nightmare.

One bad tenant can leave you unable to pay your mortgage with prospects of losing your property and possibly bankruptcy. Worse still the court system can take well over 6 months to achieve eviction! Continue reading How private landlords can beat the rent arrears problem


Do I need to re-protect my deposits? Landlord News, Latest Articles, Property News

Do I need to re-protect my deposits?

I have been told that I need to issue another Deposit Protection Certificate when my fixed term Assured Shorthold Tenancy agreement “AST” reverts to a Statutory Periodic Tenancy “SPT”. Is this correct and if so, do I need to pay to re-protect the deposit with the insurance backed schemes such as My Deposits, The Dispute Service “TDS” and Deposit Guard?

I have also heard that the Deposit Protection Service “DPS” service need to be informed when a tenancy reverts to a Statutory Periodic. Continue reading Do I need to re-protect my deposits?


Homelessness suitability order and PRS landlords by Ben Reeve-Lewis Guest Articles, Guest Columns, Landlord News, Latest Articles, Property News, Property118 News

A bombshell was dropped recently. Admittedly an expected Bombshell, but it took all us people working in the public sector by surprise in the speed of introducing the Homelessness Suitability Order, having hung around in the wings for over a year.

Since the advent of the Housing Act 1996 councils have been able to make offers of private rented accommodation to homeless applicants as a discharge of duty but the offer was always a voluntary take-up, called the “Qualifying Offer”. The new suitability order abolishes the qualifying offer, so, in short, a council can prevent homelessness by offering someone walking through the door, a 12 month AST. Continue reading Homelessness suitability order and PRS landlords by Ben Reeve-Lewis


Property Forum and News website where UK landlords and letting agents share best practice