ej_topmost
Property Hawk

Landlord Repossession Worries

Landlord – repossession worries

Landlords have been hit by several worrying headlines in the media over the last week.  The first headline concerns repossession of buy-to-let properties and the other relates to the increasing problem of negative equity amongst buy-to-let property.

Where do professional landlords go for their buy-to-let insurance?


We decided to investigate these and confront the issues of landlord repossession head on.

The headlines


Firstly, the report that buy-to-let mortgage could be repossessed without the mortgage lender going to court rang alarm bells with many landlords who are struggling with their buy-to-let mortgage payments.  The headline grabbing case  which incorrectly reported it as a buy-to-let mortgage was in fact involving an owner occupying couple. 

The importance of this case was that it reaffirmed the rights and responsibilities of a mortgage lender and borrower, despite the recent arrival of the Human Rights Act.  This is that a mortgagor runs the risk if they do not keep up their repayments of having their property repossessed. 

Professional landlord insurance rates from Alan Boswell Group

The judgement in itself did not change anything. Landlords should be clear that if they don’t keep up to date with their mortgage payments the lender does not have to get a court order to repossess the property, the court order just enables the mortgagee to ensure that they gain vacant possession.  What landlords should remember is that buy-to-let lenders are not in the business of being landlords and would much rather leave landlords to continue to own their property whilst they get on with their jobs of being a bank or lender. 

The CML guidance on buy-to-let arrears & repossessions.


The Council of Mortgage Lenders (CML) which represents 97% of all mortgage lenders has published A Statement of Practice setting out how to handle arrears and possessions.  It suggests that its’ members should take a flexible approach when dealing with borrowers with difficulties.  It indicates that measures that can be taken to help them are:

a) Extending the term of the buy-to-let mortgage – this in most cases will not make a significant difference to the borrowers monthly payment
b) Change the type of BTL mortgage – for instance to an interest only one where payments are less
c) Defer payment – in this situation payment can be deferred or reduced
d) Capitalise interest – this is linked to action c) and where arrears have built up but full monthly payment have been restarted

Falling house prices & negative equity


Landlords who have read the headlines this week could not have failed to notice the recent report by Standard and Poor.

Standard and Poor the credit rating agency painted a gloomy picture for landlords.  In it’s analysis of 200,000 buy-to-let mortgages about 20% of the total, it concluded that

"We also estimate that around 20%-40% of buy-to-let borrowers could fall into negative equity by mid-2009, based on a peak-to-trough house price decline of around 25%-30%,"

Handing back the keys


With negative equity, falling rents and an increasingly restricted buy-to-let mortgage market landlords may consider handing back their keys.

Repossession – not the end of the story


Landlords should be aware that should they ignore the arrears problem and just let the mortgage company repossess a landlord’s residential investment property; this will not be the end of a landlord’s debt problems.  The process of repossession involves the mortgage company taking ownership of the investment property and then selling it.  They may do this at a property auction or through an estate agent.

After a buy-to-let mortgage lender takes a residential investment property into possession, interest will generally continue to be charged on the buy-to-let mortgage until the residential investment property is sold. There will also be other charges made to the buy-to-let mortgage account, including estate agents' fees for selling the investment property and legal costs.

The mortgage lender has a legal duty to sell the  investment property for the best price that can reasonably be obtained. Landlords should note that the timing of the sale and the fact that it is a repossession property can mean that this is seriously below what the landlord considered their investment property to be worth.  If a sale results in a surplus after all the money owed to the buy-to-let lender and any other secured lender has been repaid, then this is returned to the landlord. However, if the sale proceeds are insufficient to pay off the money owing to the buy-to-let mortgage lender, the landlord faces a "shortfall debt", which they still owe to the buy-to-let lender even after possession.

What will the BTL mortgage lender do if there is a shortfall debt?


The action taken by the buy-to-let mortgage lender will depend on the circumstances. Usually, the buy-to-let lender will contact the borrower as soon as possible after the sale of the residential investment property and give them a final financial statement. This will show the level of debt still owing to the BTL mortgage lender. If there is a shortfall of debt, the buy-to-let mortgage lender may:

Immediately discuss proposals with the landlord on how they might repay the debt; or
Try to give the landlord some time to get back on their feet financially before contacting them about repaying the debt.
 
How long after the repossession can lenders seek the recovery of the debt?


In England, Wales and Northern Ireland, a buy-to-let lender legally has 12 years in which to contact the borrower to begin the process of obtaining repayment of shortfall debt; this period is usually restricted to 5 years in Scotland.

Where a forwarding address is known, most buy-to-let mortgage lenders will contact the landlord just after possession with a view to agreeing a manageable arrangement for repaying all or some of the debt.

Silver lining for landlords

The silver lining for landlords is that unlike commercial property a mortgage lender does not require a minimum Loan to Value (LTV) throughout the period of the buy-to-let loan.  This allows a landlord to trade their way out of the situation by making over payments or waiting for property values to recover.

Advice to landlords


Landlords should therefore resist throwing in the towel and taking a big financial hit.  If they do get into temporary financial difficulties then it best to contact their mortgage lender early on to attempt to negotiate revised payment terms whilst they get over their temporary financial difficulties.

The worst approach is to ignore the situation and hope the problem goes away.  Landlords need to take control and if necessary take further advice

FREE LANDLORD SOFTWARE

FREE TENANCY AGREEMENT

Professional landlord insurance rates from Alan Boswell Group



Comments (0)

Name
E-mail (Will not appear online)
Subject
Comment
To prevent automated Bots form spamming, please enter the text you see in the image below in the appropriate input box. Your comment will only be submitted if the strings match. Please ensure that your browser supports and accepts cookies, or your comment cannot be verified correctly.
»
This comment form is powered by GentleSource Comment Script. It can be included in PHP or HTML files and allows visitors to leave comments on the website.
Most popular landlord information and FAQs

 

What rental yield should a landlord try to achieve?
Accelerated possession - Section 21 Notice
Non payment of rent
The Tenancy Deposit Scheme (TDS)
How to prepare a property inventory
Grounds for possession of a rental property
Fair wear and tear on a rental property?
Filling out a N5B form for possession
Landlord insurance advice
Letting to students
How do I choose the best tenant?
Should I use a letting agent?
Commercial Mortgages

Whole market search.
Instant personalised quote.
Rates updated in real time.

Find the most suitable mortgage for your individual requirements using our advanced buy-to-let mortgage finder.

Search
News and Advice for Landlords

MAGAZINE
Landlord Freehold Ground Rent Investments Many landlords are attracted to investing in proper...
Hello, I am Amy Castleman, a specialist Housing Solicitor at Premier Solicitors in Bedford. M...
One of the biggest issues that landlords face when tenants move out is the oven clean. Why is...
Should landlords let to students? Students can make good tenants & here’s why: ...
The risks of a leak in an apartment block To date I have bought two apartments in residential...
The three pillars of successful residential investment I’m often asked by newbie landlo...
This has been a question that has pre-occupied me for several years.  By instinct I don’t l...
I noticed recently there have been some significant repair bills coming through as the age of my buy-t...
“To furnish or not to furnish your rental property, that is the question” The dif...
‘Rent to rent’ sometimes known as rent2rent is the latest get quick scheme dreamt up by th...
What are tenancy renewal fees? A tenancy renewal fee is ostensibly the charges made by the le...
Cleaning Deposit Disputes between a Landlord & Tenant One of the most regular a...
If I had a pound for every time over the last 25 years of renting property and more recently running P...
Dates play an important part in a landlord’s life.    Pict...
Over the last two years, the property industry has seen an increase in the number of disputes between ...
Before you turn off thinking "oh yeah it’s another plug for  landlord insurance,"...
A vital part of being a successful landlord is to get the right tenant. In fact if the truth be known,...
For property investors, particularly first time property investors there a huge number of potential in...
BTL landlords are often portrayed as money grabbing, evil, exploitative beasts. We are accus...
How I started my property portfolio I started my portfolio back in the early 90's. We had jus...
INVESTORS CHECKLIST For potential property investors there is a huge amount to take...
We have spoken before about the life of a student landlord, but here's a little bit more advice for th...
Lease options are all the rage in some landlord discussion forums having usurped BMV or Below Market V...
Property gurus & experts The rise in the buy-to-let residential investment market has bee...
  Advanced residential investment strategies Buy-to-let investment is pretty st...
For landlords with residential investment property it’s rapidly approaching that time of year &n...
Since the introduction of the Tenancy Deposit Scheme (TDS) on the 6th April 2007 it has been a legal r...
It seems timely with the deadline for paying and submitting your self assessment t...
Lee Sharpe from TaxInsider.co.uk looks at the implications for property businesses considering incorpo...
This modern day ‘knight’ of the urban realm can be hero or cowboy depending on the one you...
I'm fascinated by 'financial engineering' and how every so often, quirks of timing cause financial opp...
Rental period confusion One of the most confusing aspects of let...
Caveat emptor for the non-linguists means ‘Let the buyer beware’.  Loosely translate...
Property Hawks Property Manager software is mainly designed for individual buy to let landlords to man...
Here we go again. The leaves are turning a riot of oranges & reds before we descend headlong into ...
Landlords could be forgiven for feeling a little brow-beaten. Over the last 12 months, we hav...
The Government have produced a new Section 21 Notice. We have updated the version of our free...
A number of users have contacted us to share their concern over the proposed tax changes in the Budget...
Is Landlords Boiler insurance worth it? Getting your boiler fixed can be costly for landlords...
Landlords looking for a buy-to-let mortgage will face more restrictive lending criteria in the future....
Cash Back Offer Landlords looking at taking out a buy-to-let mortgage want to look at the Pro...
The Chancellor has not been overly generous to landlords and the buy-to-let sector in his Summer Budge...
PM3s is the 4th generation of our Free Property Management Software. The software has been free to use...
Section 21 Notices are about to change as a result of the Deregulation Act 2015.  Rebecc...
Following the election result. many landlords are breathing a sigh of relief.  Economic stability...
Landlords should be fully aware of the importance of being adequately insured. I know it's a pain to s...
Taxing Concerns for the Buy-to-Let Market The UK’s property market was given an unprece...
I hate change and regulation.  Most of it is badly thought out, counter productive & pointles...
The latest legal case to unsettle the traditional certainties of a landlord’s world is the case ...
Private Rental Sector – Party Policies The big day approaches and finally it will be yo...
Changes that came into force this week (6th April) (see for instance http://www.bbc.co.uk/news/business-32087038) now allow many ...
When selective landlord licensing was introduced  by the Housing Act 2004 it was intended to be a...
My small claims court experience My case came about because my tenant stopped paying the rent...
Rents are rising. Great!  According to the Rentindex they are up over 2.5% over the last year. ...
My tenant has always been an exacting type but it's now getting beyond a joke. Every few week...
Most landlords know that they need specialist landlord insurance.  Why? Because household policie...
It's been a while since I've sold one of my buy-to-let properties, but the potential of a new buy-to-l...
Christmas is a time for reflection and after over 20 years in the landlord game I've seen a fair few c...
Landlords are never off duty.  Last week I was in the middle of a patisserie class of all things ...
Tenants are getting more politically militant! They are mobilising, pulling together, and forming grou...
After 12 years of owning and renting out a flat, the freehold landlord has decided they want to start ...
Refubish to let – finance is key 'Refurb to let' is the latest trend in buy-to-let acco...
The the referendum and the party conferences of the past few weeks have thrown politics back into the ...
We have warned landlords before about the purges on landlords. The cash strapped Revenue periodically...
My problem tenant has gone, and finally I have possession of my rental property. ...
What interest rate should a landlord charge on late rent payments? My problem tenant has fina...
Tenancy Deposit Scheme disputes Tenancy deposit disputes are a messy business, so we asked th...
My tenant has left - time to celebrate? This week I was greeted by a text from a friend/neigh...
Revenge Evictions –time to act? 'Revenge eviction' is a new concept to me .  It&rs...
Letting agent questions I’m just in the process of selecting a letting agent.  I&r...
Buy-to-let hotspots are the ‘talk of the town’ right now.  Clearly we are in some kin...
Letting agents are not the ‘favourite kids’ on the property block. Landlords tend to view ...
Landlords should get fixed up I have been eyeing the latest developments in the economy and t...
What are the new court fees for possession? The court fees for landlords obtaining possession...
What are my allowable expenses? I’ve been contacted recently by several landlords who w...
Solicitors are costly. I'm all for landlords using their initiative and avoiding paying unecessary pro...
Section 21 notice dates – where are we now? Rebecca Brough our resident expert from Fid...
People frequently ask me what is my biggest tip on how to be a successful landlord. The answer is simp...
Not all our users realise that having signed up to our website they are FREE to start using our Proper...
I've been hit recently by a range of maintenance issues on my buy-to-let portfolio, including a number...
We are just a couple of weeks into 2014, so I thought I’d take a look at some of the best deals ...
OMG!  It's here again.  The ‘bloomin’ personal assessment tax deadline looms lar...
It looks like ‘Austerity’ …..‘Prudence’s’ long lost sister is on ...
The Section 21 Notice has not been the easiest of things for landlords to get right. Using the right o...
In the week that the Land Registry released historic data going back 18 years, I thought I would share...
Rebecca Brough solicitor at Fidler and Pepper highlights the potential dangers and consequences of the...
It appears that landlords are starting to fight back over unfair licensing charges by some local autho...
Access to finance is key When I started as a landlord the key for me was access to ...
Prospective property investors thinking of dipping their toes into the residential property market, or...
Longer tenancies?  Sounds like bliss to most landlords. Most of use love the thought of long-term...
The section 21 notice is a powerful tool. It is the one document that gives a landlord the certainty o...
When is a landlord not a landlord? Well the obvious answer is when they are a leaseholder.  ...
Creeping landlord licensing is on its’ way affecting many landlords.  A perfect example is ...
I was talking to one of the waitresses in my local.  She is so excited! She’s ...
Tenancy agreements are our thing.  We have been providing a free tenancy agreement to the landlor...
The latest projections see no immediate end to the long run of low interest rates.  This week Mar...
Our Property Manager software has come on leaps and bounds since we first developed it as free propert...
In these tough financial times some landlords may be looking at how they can pull in a few extra quid ...
The Government's latest proposals are to introduce a statutory obligation on landlords to check whethe...
Many landlords have been thrown into confusion over the last few months as tightening legislation and ...
I love being a landlord.  I’ve recently set up another new business.  I work ...
According to figures from the Dogs Trust, 46% of the population currently own a pet.  Now assumin...
Recently, I was talking to a new landlord about their first ever tenants.  They had been chuffed ...
Should I use a letting agent? The perennial debate amongst landlords is should I use a lettin...
Landlords who may be thinking about buying into purpose built student accommodation should stop and th...
Landlords are increasingly often under a time pressure. With the burgeoning regulatory requirements of...
Most of us ‘hard bitten’ landlords get fed up with the endless splurge of meaningless head...
Are rents about to fall? Landlords have been insulated from many of the harsh economic winds since the...
Tenancy Deposits – ESSENTIALS I’ve recently had a scare over one of my tenants de...
The queen is dead! Yes off course I'm referring to Margaret Thatcher.  Now she never sai...
Landlord Insurance Minefield My landlord insurance falls due this month.  As u...
We have frequently expressed opposition to a blanket landlord registration scheme - the ‘so call...
We’ve all had it - the phone goes, it’s one of your tenants’.  Do you:...
Better The Devil You Know?   I've recently advertised my rental property follo...
I was contacted this week by a fraught landlord who was the subject to a negligence claim from their t...
The buy-to-let mortgage market has gone from bust to boom again over the last few years.  With le...
This is a regular discussion point amongst many landlords.  Those that have been dissatisfied wit...
It's a landlords’ dread!   A nice respectable looking tenant, with a good...
Rebecca Brough of Fidler and Pepper Solicitors asks whether landlords need a tenant guarantor, and exp...
The thing with managing a portfolio of buy-to-let property is that for much of the time you don't have...
Brings Threats and Opportunities Many landlords are adopting a wait and see approach to the G...
Severe rental arrears fell by almost 16 per cent in the fourth quarter of 2012 according to data from ...
Should a landlord let their tenants smoke? Landlords are acutely aware of the bad smells and ...
New Year celebrations are well and truly over, so it’s back to work, and for many landlords, sma...
I was thinking today, what would be the top 5 things I would wish for next year as a landlord.  S...
You may think that as a landlord you are not liable for your tenants’ water bill. Well up until ...
I can't begin to explain how fraught the last few weeks have been.  Most part time landlords will...
The buy-to-let mortgage market has been in the doldrums for several years after the ‘crash&rsquo...
Rebecca Brough of Fidler and Pepper explores the world of fees and charges in respect to a landlords ...
Don’t forget your section 213 notice! Property Hawk has been urging landlord not to forget about...
You are just about to let your buy-to-let.  So what are the essential bits of paper work that you...
Is there such as thing as the ‘fair wear and tear’ of your buy-to-let property? ...
Landlords looking to obtain possession have two basic choices when trying to get their buy-to-let prop...
So it all goes wrong!  The tenant moves out (disappears) and owes you months of rent.  They ...
We recently had a enquiry on the Landlord Forum asking whether it was a good idea to serve a section 2...
Landlords seeking possession frequently have to decide between the merits of using a Section 21 notice...
Renewing a tenancy is one of the most straightforward aspects of managing a tenancy.  But many la...
Getting possession of a rental property when your tenant falls into rent arrears Th...
I read recently on a landlord forum a suggestion from one disgruntled tenant that landlords should be ...
My latest round of tenant gripes has hit me after a relatively quiet period. I suppose it was...
After launching the new version of the property management software we felt the actual site pages look...
Rental yields have always been a critical metric when evaluating a buy-to-let investment and they are...
Any landlord who follows London politics will not have escaped the fact that the private rented sector...
I was chatting this week to my joiner Steve. He was having a nightmare! Steve had done most o...
The Co-op announced last week that it was stepping up lending into the buy-to-let mortgage market by a...
Legislation should be in place by the end of the year to allow landlords to benefit from the Green Dea...
It's January which means only one thing for most landlords, yes it’s time to get to grips with t...
As the year comes to an end many landlords will be drawing up their plans for 2012. With the ...
I was contacted several weeks ago by one of our longstanding users. Kevin wrote to highlight ...
I'm like the majority of small landlords in that I have opted to use the Deposit Protection Scheme (DP...
Europe is at it again! Not content with their crazy project “Euro”  putting ...
You might be aware that I’ve had a number of new tenants recently. This has i...
It’s a great time to be a landlord. Many of us including me are making record rental pr...
I was contacted last week by a landlord looking to gain access to their bu...
I’ve written before about landlords not needing to use a letting agent. We al...
It's been a while since I've had a new tenant move in. The new tenant seems amiable enough. A middle a...
My landlord insurance fell due at the beginning of this month. DAMMM! Yet again the dilemma. ...
It is possible to get a company to fill out your N5B.  This will cost anything upwards of £...
Most landlords use an Assured Shorthold Tenancy agreement to let their property. So how long ...
I've been looking at some recent enquiries from landlords who use our Property Management software to ...
Most landlords who let a property that is tenanted will not be liable for council tax.  This is b...