BTL £6m loss prompts calls for law change

chewmylegoff

Malcolm. wrote: »

If they don't like how the bank is treating them they should (be able to) seek refinancing elsewhere. I certainly wouldn't trust a judge to make the correct decision. Putting my cynical hat on, the legal system opeartes more on historic rules and rulings than science (although less-so in bonnie Scotland).

well, the way it works at the moment if that if you have a mortgage on a property then the bank can appoint receivers and force the sale of that property within 3 months.

this isn't just something which affects BTL landlords. usually, if you want to borrow any money from the bank to fund a small business, the bank sticks a fixed charge over the house you live in. if you then miss a payment on the business loan, you've got three months before the bank can just force the sale of your house to make good its debt. given that you have fallen into arrears, you are unlikely to be able to find alternative finance.

at least if you got a chance to go to court you could make some alternative proposals and the bank would be required to act "reasonably" - in my experience a judge is actually quite likely to agree to any reasonable proposal from an individual that would repay the debt. eventually courts get fed up with individuals who mess them around, but they usually give them a couple of chances first.

HAMISH_MCTAVISH

Malcolm. wrote: »

If they don't like how the bank is treating them they should (be able to) seek refinancing elsewhere.

Indeed... They should be able to.

But they can't.

That's the result of a lending market still crippled from the credit crunch, that in the words of the CML themselves is "dysfunctional".

Hence the imbalance of power in the relationship that leads to abuses by the banks.

Generali

I suspect that the biggest part of the problem here is that people get confused between business and consumer lending.

Consumer lending has necessary protection against abuses however businesses are meant to be big boys that can look after themselves. If you can't then don't go into business.

CLAPTON

Generali wrote: »

I suspect that the biggest part of the problem here is that people get confused between business and consumer lending.

Consumer lending has necessary protection against abuses however businesses are meant to be big boys that can look after themselves. If you can't then don't go into business.

my mate, who runs a small business, knows all about wooden floors, carpets and superb customer service;
he is no match for a multi billion pound bank

but maybe you're righ,t he should haven't bothered; better work for the state (and become a banker).

Generali

CLAPTON wrote: »

my mate, who runs a small business, knows all about wooden floors, carpets and superb customer service;
he is no match for a multi billion pound bank

but maybe you're righ,t he should haven't bothered; better work for the state (and become a banker).

Nice straw man. Presumably you'd rather argue against what you decide I think rather than what I actually said.

My point is that the state shouldn't be involving themselves in business contracts. If you can't read and understand a contract then you shouldn't by trying to run a highly leveraged, multi-million pound BTL empire. Perhaps a simpler business such as a shop would be a better bet.

The Government can't protect everyone from their bad decisions and they shouldn't be trying to!

HAMISH_MCTAVISH

Generali wrote: »

The Government can't protect everyone from their bad decisions and they shouldn't be trying to!

Forcing a bank to make their case in court before putting a business into receivership is hardly a threat to your libertarian perspective though surely....

I thought one of the key planks of libertarian philosophy was that as we all have access to the judicial system to settle disputes in contracts, government interference becomes less needed.

If you are now saying that access to the courts is tantamount to additional government interference, that seems to be contradictory.

Generali

HAMISH_MCTAVISH wrote: »

Forcing a bank to make their case in court before putting a business into receivership is hardly a threat to your libertarian perspective though surely....

I thought one of the key planks of libertarian philosophy was that as we all have access to the judicial system to settle disputes in contracts, government interference becomes less needed.

If you are now saying that access to the courts is tantamount to additional government interference, that seems to be contradictory.

The businessman still has access to the courts if he feels that the bank has acted in bad faith or against the terms of his contract.

If the terms of the contract are such that collateral becomes forfeit upon default then there is nothing to go to court about.

chewmylegoff

@generali - it's all well and good saying the government shouldn't interfere in business contracts, but it already has interfered by passing the law of property act 1925 which the banks use to force sale of the property to which the fixed charge attaches.

if it repealed the act and left contracting parties to sort out the terms of a business loan bilaterally, that would be the government not interfering. there is also a bit of a disconnect here as if an individual borrows money against their house in order to build an extension, they get more protection than an individual borrowing money against their house to fund a business (and you almost always have to offer up personal guarantees and security if you want a business loan), which may well be repressing enterprise.

CLAPTON

Generali wrote: »

Nice straw man. Presumably you'd rather argue against what you decide I think rather than what I actually said.

My point is that the state shouldn't be involving themselves in business contracts. If you can't read and understand a contract then you shouldn't by trying to run a highly leveraged, multi-million pound BTL empire. Perhaps a simpler business such as a shop would be a better bet.

The Government can't protect everyone from their bad decisions and they shouldn't be trying to!

I can't conceive of a situation where the state didn't moderate commercial contracts.
I would assume it is the same in very country in the world; the issue is to how much it interfers.

As a straw man, do you disapprove of the US chapter 11 provisions.. the state there clearly interfers with commercial contracts.

Generali

I don't understand what would be added to the process of collateral forfeiture by the Government getting involved or indeed what posters think would be gained by tearing up millions of loan agreements.

If you don't like the terms of the contract, don't sign it.