Buy to Let Partner going Bankrupt- Advise, Help needed

spleigh

Hi,

I have three joint mortgages with a business partner.

£105K - Buy to let mortgage - Apartment
£103K - Buy to Let Mortgages - Apartment
£117K - Joint Mortgage - House

All properties are currently occupied. Both apartments are occupied by my business partner and seperated wife. The house is rented to a good tenant of over 5 years.

The apartments have zero equity in them and can be sold with no early redemption penalties for about £100k. They are on the market now.

The house has about £15k equiity and cannot be sold before September 2010 due to early redemption penalties.

The problem with my situation is my business partner is going to declare himself bankrupt. Can anyone advise me on where I stand legally and financially in regards to these debts and what are my options.

Many Thanks

theartfullodger

Whose names are on each mortgage?? Does the mortgage share reflect the ownership of the property (usuallu has to)

You state "Joint" - Joint with whom??

Re. Can't be sold before... err... you can sell it any time you like, if you pay the redemption penalties..

Has your "Business Partner" declared himself bankrupt?? IIRC when he does all his assets (his share of whatever) become "owned" by whoever is handling the bankruptcy.. Where is he ?? (England, Wales, Scotland?? ) - the law is different...

Cheers!

Lodger

PS I take it you've read, learned & inwardly digested
http://www.insolvency.gov.uk/

spleigh

Thanks for quick reply.

All properties are owned 50/50 by me and business partner. Both our names are on all mortgages.

I have only recently been informed of my business partner's future bankruptcy. He has now stopped paying his debts.

We are based in England.

I am in full time work and intend to pay my debts.

silvercar

If there is no equity then the official receiver will probably let you buy out their interest in the properties for £1. This is because there is no money in them, so the Official receiver (who would acquire all the bankrupts assets for the benefit of creditors) will have no interest in the liabilities. It will cost you the legal costs, so about 2-400 per property. That leaves you owning them entirely.

Same with the house, if you buy out your partners share (7.5k?) then you can own the house.

The official recevier will investigate the funding and may want to know how you managed to get 100% mortgages on buy-to-lets and where the money has gone.

You will have to talk to the lenders. Their agreement will be needed to transfer into your name. Though if they refuse its no big deal, you will still own the properties.

spleigh

Thanks Silvercar.

I have just been reading the "What will happen to my home" pdf on page 7. (Can be found on the Insolvency Website. Not allowed to insert web links as new user)

This confirms what you have just told me.

The apartments were purchased at a lower price and then remortgaged at a valuation of £125k each.

peachyprice

Just to clarify, buying the beneficial interest from the OR will not change who's name the mortgage or deeds are in, all you would be buying is the rights to any future equity, you will still have to have his name removed from the deeds and remortgage in your own name for a clean break.

You should also bear in mind that having a financial link to him could effect your credit rating.

HTH

spleigh

It looks like it may be worth even selling the apartments asap at a slight loss and get a loan to cover the loss. At least then the loan would be in my name
only.

Would it be worth discussing this with the existing mortgage company now or should I wait until he is bankrupt?

silvercar

spleigh wrote: »

It looks like it may be worth even selling the apartments asap at a slight loss and get a loan to cover the loss. At least then the loan would be in my name
only.

Depends whether you want to keep the apartments for rental income or until house prices improve. Selling now and taking a loan crystalises the losses.

spleigh wrote:

Would it be worth discussing this with the existing mortgage company now or should I wait until he is bankrupt?

I would wait. Mortgage lenders may not agree at the moment, as two people responsible for a debt is safer in their eyes than one. Also, the official receiver will investigate recent transactions, so you don't want to be accused of undervaluing to secure it in your name alone. You already have the wuestion of where the money went on remortgaging, I would be reluctant to do any transactions until the bankruptcy is sorted.

GDB2222

I have spent a few minutes reading the mortgage terms and conditions of a well-known lender, which is rather an interesting read. It's amazing what they have buried in the small print. Strictly, all 3 mortgages are now repayable in full, immediately. Of course, that may not apply in your case, as it depends on what your lender requires. However, it would be worth reading the T&Cs.

franklee

GDB2222 wrote: »

I have spent a few minutes reading the mortgage terms and conditions of a well-known lender, which is rather an interesting read. It's amazing what they have buried in the small print. Strictly, all 3 mortgages are now repayable in full, immediately. Of course, that may not apply in your case, as it depends on what your lender requires. However, it would be worth reading the T&Cs.

This makes sense as the other party may not be able to afford to take the mortgages on or the lender may view it was too high a risk..

Lenders can instead ask for more equity to be put in if the house price has fallen to make an unacceptable LTV, that's even possible for a normal BTL loan without the bankruptcy IIRC.

OP can you afford the loans and costs of running the properties on your own?

DesG

Just to check, who is going to pay the mortgages now? Is your business partner and his ex-wife paying rent now? Do they have AST's?

Cheers, Des.