RENTING? Check your LL has permission to let that property.

franklee

mizzbiz wrote: »

I don't agree with you at all on this. A landlord being repo'd due to financial problems and people with low LTV letting out their empty properties are two different ball games.

Yes. One is a business, having selected the property to be viable as a let, with appropriate equity and rental income that convinced the bank they are a good risk. The other is a combination of landlord and property that do not meet these criteria, otherwise the bank would be giving consent to let or a BTL mortgage. I know which I'd prefer to keep the roof overhead.

mizzbiz wrote: »

Those landlords with BTL mortgages can still get into financial difficulties and the situation becomes the same. Why does formal consent from the lender change the financial situation for the landlord? All it does is give slightly, ever so slightly, more protection to the renter.

A tenant with a fixed term contract is bound to pay rent till the end of the term. If the landlord has no consent to let this tenancy isn't binding on the lender. Therefore the tenant could be put in a position where they know there is a repossession on the way but they aren't free to leave as they are contracted by the tenancy agreement to pay rent. If they leave and the repossession is staved off at the last minute by the landlord the tenant is still bound to pay rent right till the end of the fixed term. Basically the tenant is stuck not knowing if they are coming or going till the last. OTOH if there is consent to let then the tenant knows whatever happens repossession or no, he can just wait to be given the appropriate notice which will be a minimum two months so he can manage an ordered move and have certainty when his liability to pay rent will end.

Obviously this was a bigger issue when this thread started, as since then the law has been changed to give a tenant notice of a repossession. This is an improvement but it still doesn't allow the tenant to move as he doesn't know if the repossession will be staved off, nor does he know if the notice of repossession letter arrived before his tenancy started.

mizzbiz wrote: »

And if your landlords house is repossessed, why don't you just move????? As a renter, there are plenty more fish in the sea. In fact, there would be more fish in the sea, and more competition, if we lived and let live.

As explained above a tenant can't just move as if the repossession is staved off at the last minute they will be liable to pay rent till the end of any fixed term which may be months away.

Besides moving costs time and money, removal van, referencing fees, overlap of rent and utility bills etc. It may also come at an inconvenient time, end of pregnancy, illness, preplanned holidays, or when money is tight. I'm sure none of us wish to move unexpectedly and the uncertainties added by lack of consent to let make it worse.

I hope this makes clear that being a tenant bound to a tenancy that isn't binding on the landlord's lender isn't a good idea

franklee

Here is a link to guidance on the new Mortgage Repossessions (Protection of Tenants etc) Act 2010:
http://freelegalweb.org/6116/2010/10/guidance-on-tenant-mortgage-protection/

An extract from the covering article I've added the bolding that shows a tenant may seek redress from the agent which I didn't realise:

"The guidance document is aimed at tenants who are facing eviction by a mortgagee and any agent approached for advice by people in this unfortunate position should be directed to the guidance document as a first port of call. It is good practice for agents to require landlords to provide them with evidence that the mortgagee has assented to the letting of the property. There is possibly scope for a tenant to seek redress from an agent who has failed to do this. "

Looks like the tenant with an unauthorised tenancy can apply to court to postpone possession for up to two months. But the tenant still has uncertainty of the outcome of this, and it gets complicated if there is a suspended possession order which the landlord breaks the terms of etc. Does anyone know the details of what happens then, the tenant can only apply for the postponement once. It's an improvement but not as good as a tenant getting a definite minimum two months notice or even maybe the full fixed term one of which an authorised tenant would get. Also it's up to the unauthorised tenant to make the application, attend the hearing etc. and presumably to keep up with the ins and outs of how the repossession is going which I imagine is time consuming and stressful.

Couple of extracts from the guidance:

10.1 How can a tenant check if their landlord has obtained the necessary consent to let? Professional letting agents should request evidence from a landlord that the property has received consent to let from the landlord’s lender. Letting agents should not market a property for letting if they have not satisfied themselves that this has been obtained. The tenant can request this assurance from their landlord.

10.3. Does the tenant always get two months delay? Any postponement of possession must not exceed two months but it does not have to be two months, for example if the tenant feels that one month is adequate for their circumstances and there is a mutual agreement to this with the lender. The court will make the final determination if necessary. Tenants may not get any delay if the court does not allow their application.

10.11 Can the tenant request another delay to possession if their landlord clears arrears and then falls into arrears again? A landlord may receive a suspended possession order and at the same time the tenant may have requested and received a delay to possession. If the landlord complies with the terms of the suspended possession order in full then the order may fall away. If this happens quickly the tenant, despite having previously received a delay to possession, may decide to remain in the property now that the possession will not be enforced. If subsequently the landlord falls into arrears again, the lender will have to bring new proceedings and seek a new possession order. In this situation it is our view that there is nothing to prevent a tenant requesting a delay to possession again as this is a new possession process and that it would be within the jurisdiction of the court to allow this. This is ultimately a matter for the courts to decide.

MissMoneypenny

mizzbiz wrote: »

As for the NRAM comment, no there is no 125% mortgage. It's around 85% and is not with NRAM due to risk, as far as I know. It depends on their criteria for risky I suppose. My pal has always paid her mortgage on time and has overpaid in the three years she has had it.
<SNIP>
She moved because having a husband and a baby in a top floor, teeny one-bed flat is not viable. How did she know how the market would go and that she wouldn't be able to sell it when she had a family?

Your "friend", your "pal" and her "husband" seems to be you, your family and your "ruddy flat".

mizzbiz wrote: »

Hia all,
My question is, could he also apply for a joint mortgage with me even though we still have this ruddy flat? Like I say, we could afford to pay both mortgages should the worst come to the worst and it not sell, or we could rent the flat out. The problem is getting this house that we want now as it will go if we don't buy it.

mizzbiz wrote: »

Hi GMS,
It's comforting to know that we could apply for another whilst already having a mortgage. We have the deposit for the new place but are only at 85% on the flat mortgage and wouldn't have the funds to bring it down to 75%. We might be able to get consent for 12 months from NRAM for letting without the BTL equity but would like the second mortgage either way, even if we have to pay two mortgages until the flat sells.

You can't keep blaming everyone else for you buying the flat. You decided to buy it: you decided not to drop your price to sell it: you decided to buy another house and take on a second mortgage.

Why not calculate what the mortgage payments will be for 1 year and drop the price by that amount? It's what we did when we moved areas in the 80s. We ended up selling the house for what we paid for it, which was a lose in real terms.

MissMoneypenny

franklee wrote: »

Here is a link to guidance on the new Mortgage Repossessions (Protection of Tenants etc) Act 2010:
http://freelegalweb.org/6116/2010/10/guidance-on-tenant-mortgage-protection/

An extract from the covering article I've added the bolding that shows a tenant may seek redress from the agent which I didn't realise:

"The guidance document is aimed at tenants who are facing eviction by a mortgagee and any agent approached for advice by people in this unfortunate position should be directed to the guidance document as a first port of call. It is good practice for agents to require landlords to provide them with evidence that the mortgagee has assented to the letting of the property. There is possibly scope for a tenant to seek redress from an agent who has failed to do this. "

One of the barristers on this site also said that the agent could be accountable too. 'Taking by deception' was one of the charges they mentioned; I can't recall what the other charge was that they said.

Tenants need to ensure they take out the Legal Cover option with their house contents insurance policy and that the policy doesn't exclude 'action against', or 'defending action from', a landlord.

Thanks for the link.

Blackjack_Davy

Well reading this thread I have to say Thank You to MissMoneypenny and others for pointing this information out - as a former tenant I simply had no idea that I could have been kicked out of my flat at anytime and that the tenancy agreement I signed was potentially as worthless as the paper it was printed on, it's been quite an eye opener - :beer:

since the letting agents require you to go through such hoops and pay such charges before they'll give the keys I automatically assumed that similar checks must have been made on the landlord - clearly I was mistaken in that view and that has been the most surprising -

I future I certainly will be more careful in asking for said proof of CTL. If the landlord obfuscates or simply refuses, I'll give them a wide berth -

come to think of it I used to get letters from mortgage companies and managing agents addressed to him through the letterbox, I forwarded them on without thinking about it. I think if I knew then what I know now I would have reported him to his bank and the HMRC, pity I don't remember his name. He was a lousy landlord and the place was an absolute s**thole. Actually it may be possible because I know for a fact there is a foreign couple renting right now so if the land registry shows up a British name (I met him once and he was definately English) then I think I know what to do. It's not like he can claim poverty I know from the letting agents that he has a "string of properties in the area" so I hardly think he's on the breadline. My only qualm is the couple already in there it could make life difficult for them.

Until it's made compulsory for letting agents to get landlords to provide proof of letting eligibility then these kind of horror stories are only going to continue it seems. I simply cannot understand why it hasn't been made so already.

Welshwoofs

franklee wrote: »

Such an accidental landlord if he is refused consent to let can improve terms with the lender by putting in more equity, or he could shop about for a deal elsewhere. If a landlord genuinely can't afford a few hundred in fees or an extra percent or so on the mortgage that this would cost then I'd be extremely concerned that they don't have enough contingency to let out in the first place. If the problem is significant negative equity then the potential landlord is stuck, but then the lender is at greater risk especially if the let is being run with a loss month on month as well. That isn't what the lender signed up for when they gave a residential mortgage and it isn't a situation I'd like to walk into as the next tenant so it seems reasonable to me, especially on a money saving site, that these risks are explained to the consumer that is the tenant.

It's absolutely fine to explain the risks but what I object to most strongly is posters calling all landlords in this position 'low lifes' and basically advocating trying to financially ruin them. That sort of rhetoric has absolutely no place on this site and is, in fact, against the rules for the forum.

I'd also mention that in many cases (certainly mine) it's not the mortgage fees or a few percent extra in interest - it's the dirty great whack of money they want if your LTV is not to their liking. In my case, I bought at peak of market and put all my savings into a 30% deposit and a total refurb...as the market dropped away under me that equity disappeared and I didn't have the odd £25k to pull out of my backside to fulfill a lender's BTL requirements. I do have the money to pay the mortgage however, with or without tenants, and I'm insured up the wazoo against ill health, death or redundancy.

My tenants know my position; luckily they aren't interested in trying to ruin me 'just because' and they don't give a flying whatsit what the mortgage is. Quite the opposite, they're bloody happy that they are renting a high-spec house with over half an acre of land for a little over the price of a 1 bedroom flat in the same area. Now in some posters' eyes this makes me a 'low life' - but the reality is in my case, I'm making the best of a bad situation and the tenants are completely happy.

franklee

Welshwoofs wrote: »

It's absolutely fine to explain the risks but what I object to most strongly is posters calling all landlords in this position 'low lifes' and basically advocating trying to financially ruin them. That sort of rhetoric has absolutely no place on this site and is, in fact, against the rules for the forum.

I'd also mention that in many cases (certainly mine) it's not the mortgage fees or a few percent extra in interest - it's the dirty great whack of money they want if your LTV is not to their liking. In my case, I bought at peak of market and put all my savings into a 30% deposit and a total refurb...as the market dropped away under me that equity disappeared and I didn't have the odd £25k to pull out of my backside to fulfill a lender's BTL requirements. I do have the money to pay the mortgage however, with or without tenants, and I'm insured up the wazoo against ill health, death or redundancy.

My tenants know my position; luckily they aren't interested in trying to ruin me 'just because' and they don't give a flying whatsit what the mortgage is. Quite the opposite, they're bloody happy that they are renting a high-spec house with over half an acre of land for a little over the price of a 1 bedroom flat in the same area. Now in some posters' eyes this makes me a 'low life' - but the reality is in my case, I'm making the best of a bad situation and the tenants are completely happy.

Well if it really works for you and them ... but in my experience it's highly unusual for a landlord to be willing to disclose any of their own financial information to the tenant. There are certainly plenty of it's not your business responses from landlords on this thread when asked if they'd show a tenant proof the mortgage is paid to date before he commits to the tenancy, never mind anything to demonstrate the landlord is financially secure. Consent to let is one thing a tenant is entitled to ask that should not upset the landlord.

In your case it's strange you had to go so much below market value to avoid it being empty, as market value ought to mean the price you can achieve in a reasonably short amount of time. That your lovely house near the beach is a similar price as a one bed flat does reinforce the point made earlier that an intentional landlord would select a property that's viable to run as a let but an accidental landlord goes with what they've already got which if it's like yours is running at a loss that may over the years become quite a financial drain. Also if all your savings were in the deposit can you cover expensive repairs?

The forum is full of posts from wanna be accidental landlords who clearly can't afford to let out, they are often told so but I doubt they take much notice. If there is little or no equity and the let is running with a loss month-on-month then there is greater risk of the landlord falling behind with mortgage payments, especially if he was unrealistic about the many problems letting out brings (voids, expensive repairs like a boiler, non-payment of rent etc.). The worse the landlord's financial position the more likely the lender is to act to limit their losses if the mortgage payments stop being paid on time.

There are doubtless tenants who don't mind uncertainty or having to move at short notice should a repossession occur, but others who are renting furnished with a lot of stuff, may be limited in the time they can take off work, or may have children to consider etc. really do need the security of knowing for sure they will get a minimum two months notice to move no matter what.

Asking for consent to let is IMO a must, the answer will give valuable insight into the landlord's position. It's also worth asking for written proof of what's claimed, unlike I once did which was to believe the line there was no mortgage, only for what were obviously mortgage letters to arrive at the rental address.

Welshwoofs

MissMoneypenny wrote: »

Thank you for confirming to the site that there are still illegal landlords around (and those who thanked you?) who don't have Consent to Let from their mortgage lender. Tenants should still protect themselves by checking that the prospective landlord has been given Consent to Let from his mortgage lender.

I don't give a horse's ar-$e whether I'm an 'illegal landlord' by your rather anal definition - all I care about is that my tenants are happy...and they are.

If you want to try and portray all accidental landlords as devil's spawn then you're simply going to end up making yourself look a) stupid and b) like someone who'd have been better suited standing around Salem screaming 'burn the witch!!!!!!!!!' at every passing duck.

Thankfully there are decent people like Martin, his staff, other site owners and posters on here and other Internet sites, who are helping people protect themselves, by warning tenants.

I hope you're not counting yourself amongst the 'great and decent' because it seems to me that you've crossed the line between giving impartial advice and a vendetta against accidental landlords a long time ago.

silvercar

franklee wrote:

Such an accidental landlord if he is refused consent to let can improve terms with the lender by putting in more equity

franklee wrote:

Also if all your savings were in the deposit can you cover expensive repairs?

welshwoolfs wrote:

I do have the money to pay the mortgage however, with or without tenants,

So the mortgage is more likely to be paid and the landlord to be able to afford repairs, if the landlord isn't forced to spend all their savings raising the deposit to be allowed a BTL mortgage.

The worse the landlord's financial position the more likely the lender is to act to limit their losses if the mortgage payments stop being paid on time.

The reverse is often the case. A lender is less likely to repossess if doing so in today's depressed market means they won't get all the money lent back and waiting may see an upturn in prices. If the landlord hasn't any savings there is little reason in repossessing with a shortfall, whereas if the landlord had chunks of money to spare it would make more sense.

If there is little or no equity and the let is running with a loss month-on-month then there is greater risk of the landlord falling behind with mortgage payments, especially if he was unrealistic about the many problems letting out brings (voids, expensive repairs like a boiler, non-payment of rent etc.)

The amount of equity has no bearing on the landlord falling behind with mortgage payments; a better indicator would be the date the property was purchased. Please don't expect sympathy for non-payment of rent tenants who lose their home precisely because they haven't paid the rent!

You harp on about consent to let being the golden ticket to a trouble free rent, in fact it offers very little security, even less so since the recent act automatically giving tenants 2 months notice. If an amatuer landlord has been forced into a greater interest rate or high fee to get CTL how does that protect the tenant? If CTL expires while a tenant is in situ how does that help the tenant? If a lender secures other debts on the property, how does CTL help? All CTL does is raise the costs to the landlord and give a false sense of security to the tenant.

Welshwoofs

franklee wrote: »

Well if it really works for you and them ... but in my experience it's highly unusual for a landlord to be willing to disclose any of their own financial information to the tenant.

That would be because the tenants were already known to me. I was completely up-front with the situation and they were fine with it. I wouldn't rent to strangers, nor would I go through an agency.

In your case it's strange you had to go so much below market value to avoid it being empty, as market value ought to mean the price you can achieve in a reasonably short amount of time.

I didn't have to go below market value to avoid it being empty, I'm simply not doing it for a business, I'm doing it so a) a house I'm nearly 5 hours away from doesn't sit empty all the time and b) so that a nice young couple I knew would look after it because they were also getting a damn good deal..and know it.

That your lovely house near the beach is a similar price as a one bed flat does reinforce the point made earlier that an intentional landlord would select a property that's viable to run as a let but an accidental landlord goes with what they've already got which if it's like yours is running at a loss that may over the years become quite a financial drain. Also if all your savings were in the deposit can you cover expensive repairs?

As long as repairs don't run over about the £5k mark, yes. Although as the place was stripped back to plaster, completely rewired, re-roofed, damp-proofed, new windows/doors, new kitchen, bathroom, central heating system and flooring just a couple of years back I doubt there'll be too many massively expensive repairs to do.

Asking for consent to let is IMO a must, the answer will give valuable insight into the landlord's position. It's also worth asking for written proof of what's claimed, unlike I once did which was to believe the line there was no mortgage, only for what were obviously mortgage letters to arrive at the rental address.

And I'm with a lender who will not give consent to let; they move you to a BTL and will expect a chunk of money I don't have (I've been with the same lender since I bought it). So it's either doing what I'm doing or I just leave the property empty and keep paying the mortgage until the market picks up. The latter option is inconvenient as it obviously means sending people in to mow the lawns and check on it and an empty house is always a security risk.