Handing keys back after Bankruptcy

mark1abcd · 18 April 2018 at 4:32PM

Hi
back in 2010 my wife and I went bankrupt after our business failed a year earlier. At the time we had a rental property with a buy to let mortgage on it. We included both the property and the mortgage in our bankruptcy. We had already handed the keys back to the lender prior to the bankruptcy as they told us they had put a possession order on the property and were putting a collector of rent in charge of it. Over the last 7 years we have not been chased for the debt we would just receive a statement each month for the agency they appointed to collect the rent (one of their own companies) and a bill for £120 for their services to be added to the mortgage. Three months ago we received a demand from the local council for council tax as the property is empty for over £1400, We have been told we have no choice but to pay this as our names are still on the deeds and land registry. The mortgage has had over £27000 added to it in charges over the past 7 years and is in massive negative equity because of this. We are at a loss as to what our options are as we are struggling to pay the council tax bill and we just want to give the property back like we thought we had 7 years ago so we do not have to continue paying this every time the property is empty. Any advise on how to do this and what the possible consequences would be would be most grateful.

silvercar · 19 April 2018 at 8:45AM

If the lender told you they had a possession order, why haven't they sold the property. It seems very odd that they are replacing tenants, which I assume they must be if there are periods when the property is empty. Lenders in possession are not meant to take on becoming landlords as an occupation, merely to protect the rights of existing tenants in the short term.

I think you need to speak to the lender. Find out what they have done. There is the possibility they sold the property and the new owner's solicitor failed to register the ownership on the deeds.
If they are continuing letting the property while it is in your name I would consider a complaint. Initially follow their complaints procedure and if that fails go to the ombudsman. Your complaint is that after a repossession they are meant to sell the property to redeem the mortgage.

I'm not sure of the law on you paying council tax on a property that was repossessed years ago. If there has been a change of tenant the new tenants should have notified the council, after which the lender should have told the council they had repossessed. But this is my thoughts rather than any legal knowledge.

mark1abcd · 20 April 2018 at 7:18AM

Hi Silvercar

Thank you for your reply. I have checked with them and they have not sold the property and have no intention of, they tell me that they have a possession order that entitles them to appoint a receiver of rent, they have been renting the property over and over to different tenants for the last 7-8 years. At the moment the property is empty and the mortgage has not been paid for 4 months, they have not asked us to pay it and the only way we found out was when we received the council tax bill. We really just want to hand the property back but don't know how as they already have the keys, we have no control over the property and can not enter it even though the property is in our names.

National_Debtline · 20 April 2018 at 10:53AM

Hi Mark

First of all, the basic facts on this are as follows:

- The lender would not have required a possession order from the court to appoint (what I assume are) Law of Property Act (LPA) receivers to manage the property and collect rent. If the lender tells you otherwise, they are either misinformed or they are misleading you.

- If and when the property is eventually sold, any shortfall arising (where the sale price fails to cover the total owed to the lender) will be retrospectively included in your bankruptcy.

- Any council tax liability arising in the meantime for periods where the property is untenanted will however be yours, unfortunately. Obviously it's in the lender's interests to ensure the property is permanently let out, as unless they are prepared to sell it they will not be recouping any of their money. There's nothing for them to gain in leaving it empty, but they will not volunteer to pay council tax bills that they delegate to you. You will therefore need to liaise with the council directly in order to negotiate repayment of any such bills that post-date your bankruptcy.

In summary, you find yourself in a limbo of sorts. The first to do should be to establish whether these are indeed official LPA receivers who have been appointed to handle the property - if so, there are certain guidelines and complaints procedures that may become relevant. You may find the following guidance (NB it is not legislation) of use:

https://www.cml.org.uk/policy/guidance/all/industry-guidance-on-buy-to-let-arrears-and-possessions/

Dennis
@natdebtline

silvercar · 20 April 2018 at 12:31PM

Very helpful National Debtline.

Can we be sure that the LPA has been appointed by the lender and not the Insolvency Service? So we know the rent is going to the lender?

From the document quoted, I would put a complaint in to the lender on the grounds that:

a) The borrower has not been treated fairly. Once the tenant in situ vacated, it would be fair to the borrower to sell in order to release the obligations of the borrower. With no third party (ie tenant) to consider, there is no reason not to sell the property. Point 1.1 treating everyone fairly

b) page 4: "When selling a property:-
how you will assess the best price and ensure
proper marketing;
how you will assess whether sale is the best
course of action;
how you will assess whether to market with or
without vacant possession; and
how you assess whether use of auctions is
appropriate or whether other methods of sale
would realise a better price."
I would be asking the lender for their assessment of whether to sell the property and how the reasons not to sell were justified.

c) the whole section on page 5 on appointing a receiver!

I imagine any LPA appointed wants the situation to continue, after all they get a monthly fee for collecting rent and managing. I wonder why this lender has let this continue, if it is deliberate or if your case has fallen through a net.

CIS · 20 April 2018 at 4:17PM

mark1abcd wrote: »

Hi
back in 2010 my wife and I went bankrupt after our business failed a year earlier. At the time we had a rental property with a buy to let mortgage on it. We included both the property and the mortgage in our bankruptcy. We had already handed the keys back to the lender prior to the bankruptcy as they told us they had put a possession order on the property and were putting a collector of rent in charge of it. Over the last 7 years we have not been chased for the debt we would just receive a statement each month for the agency they appointed to collect the rent (one of their own companies) and a bill for £120 for their services to be added to the mortgage. Three months ago we received a demand from the local council for council tax as the property is empty for over £1400, We have been told we have no choice but to pay this as our names are still on the deeds and land registry. The mortgage has had over £27000 added to it in charges over the past 7 years and is in massive negative equity because of this. We are at a loss as to what our options are as we are struggling to pay the council tax bill and we just want to give the property back like we thought we had 7 years ago so we do not have to continue paying this every time the property is empty. Any advise on how to do this and what the possible consequences would be would be most grateful.

Assuming England/Wales

You need to know it was repossessed or it was an LPA receiver appointed.

Council Tax is a funny thing for repossessions. A few years ago they brought in being legislation which would amend the local government finance act 1992 to make a mortgage company liable for the council tax where it was repossessed - this legislation requires an order to bring in to force however it has never been implemented. This means that the legal owner is still responsible for the council tax aspect for any period where someone else doesn't fall liable in law (an occupier or a new owner) - if the repossession drags on and the property has been tenanted then it's very difficult for the owner to know what has been happening with the property. On the plus side the owner can claim a Class L exemption when the property is unoccupied (again, assuming they know...).

If the mortgage company has simply appointed an LPA receiver to manage the property then the Class L exemption mentioned above would not apply - but again you're stuck with a potential council tax liability that you have no information on which to work. LPA receivers were always a nightmare to work with as their standard reply was 'We're not liable for council tax, contact the owner. We can't tell you anything'.

mark1abcd wrote: »

Hi Silvercar

Thank you for your reply. I have checked with them and they have not sold the property and have no intention of, they tell me that they have a possession order that entitles them to appoint a receiver of rent, they have been renting the property over and over to different tenants for the last 7-8 years. At the moment the property is empty and the mortgage has not been paid for 4 months, they have not asked us to pay it and the only way we found out was when we received the council tax bill. We really just want to hand the property back but don't know how as they already have the keys, we have no control over the property and can not enter it even though the property is in our names.

For their only to be £1400 due means that the council tax charge has been sorted for most of the periods or you have another demand notice on the way for the rest of the periods between tenants.

mark1abcd · 21 April 2018 at 10:27AM

Hi Silvercar

Thank you again, I can confirm that they have appointed an LPA and not insolvency Services and the mortgage company has been receiving the rent when it has been rented. I spoke to them a couple of weeks ago and managed to get online access to the mortgage account that allows me to download the last 7 years of statements. Every year I can see the rent going in and that is more than double the mortgage payment and then a charge that states Costs / Fees / Adjustments for between £3000 and £7000 each year and this adds £27000 over the years.

I can not see why they are continuing with this as the debt is just going up and up over the years, if they had of sold it back in 2009 or 2010 they would of recouped all the mortgage.

I will write to them as you suggested and hopefully they will finally repossess it and sell it.

Thank you again
Mark

mark1abcd · 21 April 2018 at 10:41AM

Hi CIS

Thank you for your reply.

The property is in England and they have only appointed and LPA.

I spoke to the council the other day and luckily they tell me all the years previous have been paid up to date but they could not tell me by who.

It seems that unfortunately we will have to pay the council and hopefully try to get them to fully repossess the property.

Thank you again
Mark

CIS · 21 April 2018 at 11:42AM

mark1abcd wrote: »

Hi CIS

Thank you for your reply.

The property is in England and they have only appointed and LPA.

I spoke to the council the other day and luckily they tell me all the years previous have been paid up to date but they could not tell me by who.

It seems that unfortunately we will have to pay the council and hopefully try to get them to fully repossess the property.

Thank you again
Mark

As far as council tax legislation is concerned you do fall responsible as the non-resident owner (s6 of the Local Government Finance Act 1992). Make sure that whatever discount they award to an unfurnished/unoccupied property is applied.

Handing keys back after Bankruptcy

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