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Banks set to repossess substantial number of buy to lets - claim

A  leading property law firm says the government’s ‘eviction ban by the back door’ means many buy to let properties are likely to be repossessed in the coming months.

The government claims there is no overall eviction ban because courts are still open and possession cases can still be heard. However, it has also said that there there will also be a moratorium on all evictions during lockdown, over the Christmas period running from December 11 to January 11, and thereafter in areas designated for Coronavirus as tiers 2 or 3. 

“It means that even though the courts will process residential possession claims, up to and including a possession hearing, but tenants will not be evicted for an indefinite period” says the property litigation firm Hagen Wolf.  

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A statement from the company says: “Given that areas can be moved into Tier 2 or 3 overnight, this in practice means no evictions for the foreseeable future. However, that could change if the Lord Chancellor seeks to impose legally dubious exceptions. Good luck evicting anyone right now, or for the foreseeable future, whatever the reasons.”

Even more ominously, the firm says that for many landlords, who are already entering month 10 of no rental income following the earlier eviction bans, these further delays could prove a bridge too far. 

“The goodwill of mortgage lenders will only stretch so far. Without further government support or regulation, we anticipate an increase in the numbers of banks taking possession of buy to let properties, either through the courts or via Law of Property Act receivers. Fortunately, rights to a further three months mortgage holiday have been announced if lenders apply quickly, but this means bigger mortgage payments going forwards” the firm states. 

Now the company is urging landlords to speak to their lender and tenant about the situation. 

“If the lender agrees to a payment holiday, it may create some breathing room, and a tenant may agree to vacate the property and surrender the tenancy. Doing so will allow the property to be to re-let. Be wary of having an empty property for which you have not only mortgage obligations but also council tax and utilities” it advises.

It says the alternative is for the landlord to focus on recovering arrears from the tenant, rather than possession of the property. 

“There are no restrictions on applying for a County Court Judgment against the tenant, and it can be reasonably quick to apply using the Money Claims Online system” says Hagen Wolf.

“However, trying to enforce any CCJ then to recover the money may prove difficult as bailiffs agree not to enter properties in Tier 2 or Tier 3, or during a lockdown, to recover goods under a writ of control, and if the tenant is unemployed or has no assets your options will be severely restricted.”

 

 

The current situation arose because on October 21 - in news given relatively little publicity at the time - the Lord Chancellor and Secretary of State for Justice, Robert Buckland QC MP wrote to bailiff organisations asking them not to undertake any evictions in areas that have been classified as Tier 2 or Tier 3 under current Covid alert systems.  

On November 5 he wrote a further letter asking bailiff organisations not to undertake any evictions during the lockdown unless these were cases relating to illegal trespass, squatters, nuisance or antisocial behaviour, domestic abuse, fraud or deception and properties unoccupied following the death of a tenant. 

“How bailiffs are supposed to know the story behind individual evictions is unclear” says Hagen Wolf.

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    It won't just be the over indebted landlord properties, there will be plenty of over mortgaged owner occupier properties being reprocessed as jobs go and relationships break up, bargains to be had in the auction rooms over the next couple of years.

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    BTL is alive and well for over 95% of landlords outside of overpriced areas. Plenty of demand from renters with middle class guarantors. Double digit yields on 25 to 50 ltv mortgaged properties, around 8% if no mortgage - these yields ignore capital growth which could be around 4% plus in addition.

    I think Andrew is right and I will be back in the Auction rooms next year with a war chest which is only earning between 1 and 3.05% as cash deposits.

     
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    • 10 November 2020 07:53 AM

    Yep its starting.
    The great cull will see thousands of tenants made homeless along with quite a few LL.

    Those with cash will find some great deals.
    BTL is dead.

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    • 10 November 2020 07:59 AM

    All I can say to those tenants that get made homeless - GOOD RIDDANCE!!!!!!! And I hope you rot.

    They deserve it.

    In the real world of business, they would have been fired a long time ago, or if it were a non-paying customer, no one would do any business with them for now and forever.

    They would be blacklisted. Very quickly......

    It is a crime that non-payment is a civil offence. It must be changed to a criminal offence.

    Then, for sure the majority of this problem will stop.

     
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    • m d
    • 10 November 2020 13:44 PM

    These homeless tennants, will their former LLs be burning down the houses? Otherwise there will still be the same number of people and rooms for them to sleep in overall, just with changed ownership. Will the banks want thousands of derelict empty properties, or to flood the auctions with stock? Surely you could see banks leasing reposessed properties to housing associations to avoid either of the above. We have heard for years about LLs being held to higher standards for their properties than HAs, so surely ex LL stock will be good to go. Either way the taxpayer will be paying for someone's home, just without a private LL as middleman.

     
    Mark Wilson

    Paul I have been saying this for months! Pleased to see you have come round to my thinking, despite the abuse. Exit via the gift shop!

     
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    • 10 November 2020 08:13 AM

    Or better still just allow rent defaulting tenants to be evicted after 2 months and 14 days of rent default.

    No court action required.
    45 days from 1st rent default tenants are booted out by LL with Police assistance if necessary.
    Job done.

    That would change tenant behaviour!!

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    • m d
    • 10 November 2020 13:46 PM

    As LLs you and I get only 1 vote each, just like every oneof our tennants. There is no electoral incentive to implement what you propose, and in fact the prevailing current has been moving in the opposite direction for years

     
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    @ m d Of course you are correct , however I cannot see many tenants voting tory what ever this government gives them.

     
  • Tony Egan

    It's amazing that the powers that be could not see this was going to happen.
    In 2015 when George Osborne announced the Section 24 tax it was obvious that landlords would not be able to bear the tax imposition without many going bust.
    Add the latest fiasco into the equation and hey presto...the knock on effect is homelessness caused by an inept Government.
    The sad part is that a few bad tenants will make good tenants and landlords homeless because the deck of cards topples.
    When will people, banks, media, know it alls realise that the local councils don't have the stock to house people (that's another story) so they are heavily dependant on the PRS which has grown as a result.

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    • m d
    • 10 November 2020 13:49 PM

    It takes character to acknowledge leveraged BTL as a house of cards (assuming that was what you meant by deck of cards). It is innevitable that every house of cards tumbles eventually, in a sense they are just patiently waiting for a gust of air or a bump against the table.

     
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    Will the loonies now recognise the real world consequences of their support for rent dodgers?

    Don't bet on it!

    Problem is that is exactly what many landlords have been forced to do and are suffering the consequences, along with many decent tenants.

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    Nah! It’ll still be the landlord’s fault in some way!

     
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    Apart from "lets all bail out, sell up etc", if one is setting up a new tenancy whats the way to mitigate risks?

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    If after the first month they don't pay the rent, you have avoided the most secure way of mitigating risk which is to bail and and sell.

     
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    I would be wary of anyone from abroad. My tenants were, they have money as they moved back to their homeland and bought property there. It's not worth me trying to pursue them for the £10k (and rising) unpaid rent and damages as they aren't in this country and probably don't intend coming back.

     
     G romit

    No home owning guarantor -> no tenancy. Simples!

     
    PossessionFriendUK PossessionFriend

    ' ALWAYS, ' insist on a suitable Guarantor.

     
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    Fair point Eddie but I guess I meant if one didn't want to bail out - plus predictions are that it will take well over 12 months to evict a tenant and then there are lots of conditions.

    I like the idea of home owing guarantor but I assume they should be working as well?

    How does a guarantor being a home owner help? I'm assuming you can't force a house possession just to claim unpaid rent!

     
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    Raj

    Most home owning guarantors want a squeaky clean credit rating for future remortgage or house move. I have always had any missed payments made up promptly either by the guarantors or their errant offspring as soon as they realised the potential consequences. Joint and several liability tenants and guarantors also spreads the risk.

    Finally, in my experience, the risk lessens the better the property being rented and the higher the rent charged as renters and guarantors tend to be better off with more to lose from a ccj on their credit record.

    I've only had one eviction out of around 300 tenancies, which was due to me wrongly assuming the area where the guarantor lived was owner occupied but it was actually a bit like Grenfell Tower in the middle of Kensington. I now use Google street view or drive past to check out guarantor addresses, and write to them at the home addresses given to confirm that they live there. A final check is to confirm the guarantor's address is not a PRS property itself.

    You could even go a step further and insist on guarantors and tenants getting their own credit reports from Equifax, Experian etc. and giving you an up to date copy. This would work best if your property is in high demand so you can call the shots more firmly. This is another reason to go up market with the properties you rent out. Leave the lowest quality tenants and properties for the councils and housing associations.

     
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    • 10 November 2020 10:11 AM

    Gromit you are in a dreamworld.
    Just not possible to source home owning guarantors.
    In 12 years not one of my occupants could source such.

    You are in a very tiny minority of LL that is able to source as you suggest.
    We LL would love to do as you do.

    Unfortunately it just isn't possible so LL are forced to take an informed gamble.
    Many LL are finding that they have lost the gamble.
    BTL for most LL is dead.
    Just far too risky with repossession scheduled to become even more difficult.

    Is the game worth it!?

    I suggest NOT!

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    I dunno Paul. I think Gromit has a point. I operate in SE & East of England and don’t have much trouble with home-owning guarantors. Granted not everybody can provide one, but the majority do, and if this becomes the new normal they’ll have to get used to it or not have a tenancy.

     
    Sarah Taylor

    My tenants always come with a homeowners guarantor. Never been a problem so far!

     
    PossessionFriendUK PossessionFriend

    @ Blank profile, who said a Guarantor has to be a Home owner to be suitable ?
    Local Authorities or Shelter would be acceptable, as they have more than sufficient financial reserves, - They just don't want to take the risk, but expect Private Landlords to do so.

     
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    How does having a homeowner guarantor help you recover rent arrears or excessive damage costs?

     
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    • 12 November 2020 13:33 PM

    If the tenant cannot supply a proper and real guarantor, then there is no tenancy.
    How simple can it be?

    At the worst when you ask for a guarantor, that will eliminate a whole load of applicants who know they can never supply one.

    Saves a lot of work.

     
  • Keith  Johnson

    Refinance all your properties, and build up a war chest as there will be some great bargain properties coming up

    As for prospective tenants dont take them unless they can provide a rent guarantor who is a home owner!

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    • 10 November 2020 10:19 AM

    All completely unrealistic ideals.

    Of course what you suggest is perfectly correct.
    Very few LL are able to achieve as you suggest.

    Remember even as a cash buyer you will still be subject to the dysfunctional eviction process which is scheduled to become even more difficult!!

    Your suggested ideals which are very sensible will rarely be possible for most LL.
    Even with no mortgage would you want to wait a very long time to evict?

    Obviously if you are able to achieve as you suggest then you have all the bases covered.

    You would be an extreme rarity in being able to achieve such.

    But quite frankly if LL are unable to readily do as you suggest they would be better off selling up.

    Or diversify to non-AST lettings.

     
    Fredy Jones

    Instead of refinancing why not sell before the big falls, then buy back twice as many properties after the 50% HPC

     
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    • 10 November 2020 10:47 AM

    @jamesfraser

    Of course I agree with the ideals that Gromit espouses.

    I'm in the SE as well and have never been able to source home owning guarantors.
    Nor bar one have any of my occupants qualified for RGI.

    The one that did qualify ended up costing the RGI company over £10000.................yep she knocked me.
    Best £85 annual premium I ever spent!!!!!!!

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    With regards to Bucklands letter Do Rent Arrears Count as an exception ?

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    • 10 November 2020 12:03 PM

    Once again, the Government take advantage of the anti-landlord sentiment that prevails. They know they don't need to support landlords, because who's going to cry if one of us goes to the wall. The tenant can just walk away leaving the landlord in a mess. Never mind it could be a soon-to-be retiree with a single BTL to supplement their state pension. And here's the irony - the reason BTL boomed is because savers were getting little return on their savings and pensions, so put it into property instead. That interest rates were so low, was largely down to the Government Funding for Lending Scheme which resulted in banks not wanting savers' cash. This scheme was set up to assist first time buyers, so it's ironic FTBs are complaining the BTL brigade are responsible for buying up their homes and all the ills of tenants who can't afford their rents.

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    Refinance there could be something in that although I only ever had a primary education, depending on your situation and you are into property to some extent but own your own Home. Supposing you form a Property Company sell your own Home to the Company you have a ready made buyer, Mortgage it up to the max, get your tax free money out. The Company then rents out the House even to Council on some 5 year thing or what ever taking full advantage of Section 24 as long as the income covers the Mortgage why worry when you can use S24 it should be easier and don't forget you sold it but still own it. With the tax free money behind you up size or down size which ever suites you, buy another Home on a Mortgage with a good Deposit keeping a war chest behind you to withstand what ever comes and be financially secure, some time down the line you will have another Personal Home to sell.

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    Just imagine if professional landlords had an Association that actually represented them in all such matter instead of flogging courses and other such stuff. It's because we have no voice that we are in the situation we are in now.
    The NRLA have no voice and are unable to stand up the Government. Time for a change,

  • Fredy Jones

    I would have thought England would provide loans to tenants to cover rent arrears just like wales and Scotland

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    Yes Fredy, speaks volumes doesn't it about England, hang your head in shame Boris.

     
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    The SNP have an election next May and are buying votes - with our money!

     
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    When the tenants are actually being paid by the government but not paying rent to the landlord they should be removed immediately. When tenants have had housing benefits stopped due to fraud they also should be removed immediately but this is not happening

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    In an ideal world Lia, but I've not found one of those yet.

     
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