P2P Lending. Mortgagee in Possession. First Time Buyer?

Werdnasteel

[LISA Related]


Hello, any advice appreciated!

I have a Lifetime ISA and also invest in P2P loans. Recently, one of these loans might be going bad, and there's the stated possibility that the lenders may become 'mortgagee in possession' should things go a certain way, according to an email from the P2P platform.

Firstly, it says lenders would become liable for costs etc if this were to happen. I haven't seen this anywhere online as a risk of P2P lending. Secondly, would it mean I'm no longer classed as a First Time Buyer? Could I lose my FTB eligibility for the LISA from having a relatively tiny amount of "right" to a borrowers loan security? My stake in this particular loan could be as small as a few pounds! I've only got a few thousand £'s in the platform. Hardly a properties worth. The Lifetime ISA Gov campaign website links to a website which links to this document as the FTB declaration: helptobuy dot gov dot uk/documents/2015/12/eligibility-of-ftbs dot pdf (I'm a new member so can't add links)

Does becoming one of many 'mortgagee in possession' in this case give me right to 'possess or occupy' as a 'joint owner' (words used in the First Time Buyer Declaration linked above), and would this make me not a First Time Buyer like if someone inherits?

The P2P platform on the phone said I should post on the loan Q&A with my question, so I did, but it got removed for not relating to the loan enough and they said they can't give advice. HMRC haven't been much help, and my LISA provider, despite being very good and escalating the enquiry, haven't given a definitive answer. I can't get through to anyone who knows at HMRC. I was going to get transferred to another department then it cut me off and when phoning back a recorded message tells me they can't take my call.

I would hate to lose my eligibility this way. I know the FTB declaration plays a role in defending against people abusing the system, and I agree with that. Common sense suggests this shouldn't apply to someone in my position. I dream of owning a home one day and manage my finances as sensibly as I can. I'm 24 and have been working full time for over 5 years in a trade. I thought I could boost my money by being in P2P lending and opening a LISA, which I have, but if I lose LISA FTB eligibility, it won't have been worth the P2P gains. I'm very worried. Please if anyone has insight, please advise.

Thanks!

masonic

This wouldn't happen to be Assetz Capital would it? If so, the scenario won't be allowed to happen and they will act as agent for lenders to prevent such a situation arising.

In general, becoming mortgagee in possession would not impact your FTB status, because enforcing a legal charge and taking possession of an asset does not mean that you own the asset. It affords specific rights to dispose of the asset in recovery of the secured debt and comes with a bunch of duties and responsibilities to the owner of the asset (including getting a fair price and returning any excess funds after costs). Becoming mortgagee in possession does not give you the right to start living in the property or benefiting from it in any other way.

In the case of P2P platforms, legal charges are usually registered in favour of a corporate entity (the security trustee), and either it or a separate "agent" company acts on behalf of lenders, so that individual lenders do not have any direct rights over the loan security.

Mr.Saver

Theoretically speaking, you should not lose the first time buyer bonus. If you could lose there bonus because of this, then someone with malicious intent could set you up by gifting you a very small part (say, £1) of their house.

Werdnasteel

Thank you both for the replies. Thanks for the details masonic! That makes sense to me. But would Section 2 C (ii) of the FTB Declaration; 'which entitles me to possess or occupy that land' not include this situation? The 'possess' part specifically.

The email didn't mention the P2P platform acting as agents. One of the options we had to vote on said it would allow the platform to accept receiver recommendations should one be appointed so as to not have lenders become mortgagee in possession, alluding that if that option isn't selected, lenders may become mortgagee in possession. Perhaps they expected us to know someone/something would be acting as agents in that situation and not lenders specifically so didn't see the need to mention it in the email.

masonic

Werdnasteel wrote: »

Thank you both for the replies. Thanks for the details masonic! That makes sense to me. But would Section 2 C (ii) of the FTB Declaration; 'which entitles me to possess or occupy that land' not include this situation? The 'possess' part specifically.

The mortgagee in possession situation is a transient one, in which the mortgagee is briefly in possession of the property while it is being sold. However, it never really becomes the mortgagee's possession, so I'm sure the 'possess' in section 2C(ii) of the FTB declaration does not encompass this situation.

Hypothetically, you could send me to pick up your Rolex watch from the repair shop and hold on to it until you were back from holiday. I'd briefly be in possession of it. That wouldn't permit the bailiffs who came around in pursuit of my unpaid debt to take the Rolex from me, because it's not my possession.

But don't get too hung up about the 'possess' part of that term. You're going to struggle even more with the 'occupy' part. I hope you haven't ever been party to an agreement entitling you to occupy a property (such as a tenancy agreement)

It's best to read the start of clause 2, along with sub-section (A) (both of which must apply) before jumping in at sub-section (C).

The email didn't mention the P2P platform acting as agents. One of the options we had to vote on said it would allow the platform to accept receiver recommendations should one be appointed so as to not have lenders become mortgagee in possession, alluding that if that option isn't selected, lenders may become mortgagee in possession. Perhaps they expected us to know someone/something would be acting as agents in that situation and not lenders specifically so didn't see the need to mention it in the email.

I suspect you are misreading the the passage that mentions becoming mortgagee in possession. You are probably referring to loan #251.

You seem to have confused 'option' with 'receiver recommendations'. Lenders will not be at liberty to reject the receiver recommendations if the option is selected so it will not be possible for them to inadvertently become mortgagees in possession.

Rejecting the option will result in the loan not being defaulted and there will be no receiver recommendations, so again, the situation will not arise.

Even if it did, it does not constitute an:
2 ...interest in land, whether in the United Kingdom or elsewhere, which:
(A) is (i) in England or Wales:
(a) freehold;
(b) leasehold, where the lease was originally granted for a term certain exceeding 21 years;
or
(c) commonhold

as specified in the FTB declaration