HARD question!!!!

Darnit_2

OK folks, here is one I am struggling with. We have a rental property in negative equity. We have a paying tenant, but it doesn't cover all the costs, although not far off. We would prefer to keep the house as we were told before BR, that as it has no equity, the OR will have no interest. We have enough money after IPA to keep up (just) in the hope that in the future, prices will recover, and it may actually do what we bought it for and offer a long term investment.

However, OR has stated that it has to be repossessed. But how can they force that when the mortgage payments are up to date? They say they will instruct an IP to get rid, but it won't sell for the mortgage balance, and so the bank would not agree, as we are still able and willing to pay the mortgage?

I understand that they don't want to be the legal landlords, but surely there is another way to manage that?

nervousmother

This is a new ruling so I dont know much about it, it does sound daft to me as they are creating another debt.
We went BR in january, discharged now but were able to keep our rental property (the rent was triple the mortgage repayment) no equity in it though but we bought our BI. Since then though the rules changed, why I dont know but I understand they dont let anyone keep rental properties.
Saying that though, if things are tight now how would you go on if the tenant did leave? you would then get into hardship having to cover a mortgage with no rent coming in... (as our mortgage is only £80ish I knew we would be ok..)

Darnit_2

Thanks nervous mother. The reason I want to keep it is becasue we put a huge amount of deposit down in better times, but the value has dropped to rock bottom. I really can't see it falling much lower. The mortgage has been fixed at a high rate but is due to drop, then we will be fine paying it. It is a risk I know and OH wants to get rid, but I am finding it much harder to accept that as an option. I really feel that letting go of a potential asset in a recession is a bad move. Fact is, we will never be in a position to do it again, so I see it as the last property we will ever be able to own, and I don't think the situation with the economy will stay like this forever. I am being hopeful, I know.

nervousmother

As far as I am aware you wont get a choice in it now.. you need to talk to the OR to see if there is any way around it.. maybe parents helping out?

peachyprice

Unfortunatley as nervousmother said, the rules changed considerably recently, they were always there but were virtually ignored by the OR in cases where there was no BI in a BTL.

However, you've answered your own question really

Darnit wrote: »

I really feel that letting go of a potential asset in a recession is a bad move. .

In bankrutpcy you're not supposed to come away with assets intact, even if they are in NE Before the changes there will have been people who have been allowed to keep whole portfolios of NE property, which won't always be in NE, so really they've had the benefit of BR but held onto assets that will be worth something once this recession is over.

Is there any possibility that you can move back into the property short term, or do you already also own a family home?

JPS29

nervousmother wrote: »

This is a new ruling so I dont know much about it, . Since then though the rules changed, why I dont know but I understand they dont let anyone keep rental properties.

Can anyone (JCS/DD etc?) verify this. RTLU keep "stalling" me buying the BI, one of my rentals is included in the OR's BI.

peachyprice

The rules are all there in the tech manual ITBS, but were never really implimented before.

To start with:

31.3.50 Mortgaged property
If there is not expected to be any surplus funds from the insolvent’s interest in the property and the official receiver is satisfied as to the validity of the mortgage or charge, he/she should leave the mortgagee or chargee to realise the property and should pass the case to the RTLU to deal with (see also paragraphs 31.3.51 and 31.3.12). Changes in the property market may create an equity at a later date and so mortgagees should be requested to inform the official receiver of any attempted dealings with the property and to account for any surplus should one arise on the sale of the property URL="http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter31/part3/part4/part%204%20notes.htm#1#$35096#1"]note 1[/URL (see also paragraph 31.3.14). Unlike dwelling-houses that are the sole or principal residence of the bankrupt, his/her spouse or civil partner, former spouse or former civil partner, and subject to the provisions of the Insolvency Act 1986 section 283A (see Chapter 33, paragraph 33.6), the insolvent’s interest in non-qualifying property will remain in the estate until it is dealt with.

http://www.insolvency.gov.uk/freedomofinformation/

JPS29

Cheers Peachy.

StillIt's a bit vague

I might be misreading but I cant see anyhting that says under no circumstances can the BI be bought back in a BTL property, and it must be sold
Just that the 3 year rule doesn't apply, and the interest will remain "until dealt with"

Clear as mud

peachyprice

Ok, the next paragraphs

PART 4
SEPTEMBER 2008
DISPOSAL OF PROPERTY WITH NO EQUITY
31.3.50 Mortgaged property
If there is not expected to be any surplus funds from the insolvent’s interest in the property and the official receiver is satisfied as to the validity of the mortgage or charge, he/she should leave the mortgagee or chargee to realise the property and should pass the case to the RTLU to deal with (see also paragraphs 31.3.51 and 31.3.12). Changes in the property market may create an equity at a later date and so mortgagees should be requested to inform the official receiver of any attempted dealings with the property and to account for any surplus should one arise on the sale of the property URL="http://www.insolvency.gov.uk/freedomofinformation/technical/TechnicalManual/Ch25-36/Chapter31/part3/part4/part%204%20notes.htm#1#$35096#1"]note 1[/URL (see also paragraph 31.3.14). Unlike dwelling-houses that are the sole or principal residence of the bankrupt, his/her spouse or civil partner, former spouse or former civil partner, and subject to the provisions of the Insolvency Act 1986 section 283A (see Chapter 33, paragraph 33.6), the insolvent’s interest in non-qualifying property will remain in the estate until it is dealt with.

31.3.51 Transfer of cases to RTLU
When the equity is insufficient to attract a nomination of an insolvency practitioner (this amount is not set at any particular level and would vary depending on local and general circumstances), the case should be transferred to the RTLU who will attempt to sell the property using the Property Conveyancing Scheme. Where the property is not covered by this scheme, TLT should be employed on a case by case basis, (see paragraph 31.3.43) or, if this is not possible, ensure that the interest in the property is protected for review at a later date (see paragraph 33.18 and the Case Help Manual Chapter on the sale of bankrupt’s interest in jointly owned property or the sale of the bankrupt’s interest in solely owned property).
The fact that the case is on the investigation register need not prevent the case from being transferred to the RTLU as there is facility on LOIS for the administrative and investigatory parts of the case to be separated.

I don't know how to lionk to relevant pages in the tech manual, but the link is above.

peachyprice

Also, exclusions from being able to buy the BI in a jointly owned property are:

x Exclusions
The agreement excludes transactions concerning the following descriptions of property:

1. in the sole ownership of the bankrupt;
2. which is not used solely for domestic purposes;
3. for which planning permission for a non domestic purpose has been applied for or granted;
4. which is subject to an uncompleted conveyancing transaction at the date of the bankruptcy order;
5. which is jointly owned by the bankrupt where the purchaser agrees to purchase only the official receiver’s beneficial interest and is unable to pay the deposit;
6. which is subject to a third party claim (other than in matrimonial proceedings) made before the date the official receiver gives instructions to the solicitors;
7. the sale of freehold reversions.

Which is the bit OR's have been ignoring until very recently.

Darnit_2

Juts to clarify folks, I don't need any one to help me out with payments, I didnt go BR because I couldnt afford to keep this house going, just couldn't afford other debts on top.

I still don't understand how they can enforce a re-possession if we continue to pay the mortgage? Spoken to an IP today, who says no-one will touch it due to the NE. Where does that leave us and the tenant? Do I keep paying the mortagage or am I wasting my money?