Tenants left homeless by defaulting landlords
What rights do renters have if lenders want to repossess their homes?
Sunday 05 July 2009
Tenants may like to think themselves immune to the property crash, but substantial increases in the number of landlords in arrears has put more renters at risk of losing their homes too.
When landlords struggle to meet their mortgage payments, lenders are able to seek court orders for possession, whether the properties are occupied or not. Tenants can be left with little or no time to find new accommodation. On top of this, many lose any rent they've paid in advance and possibly even their deposits.
Council of Mortgage Lenders (CML) statistics show that 1,700 buy-to-let properties were repossessed in the first quarter of 2009, compared with just 900 in the first quarter of last year.
In an effort to combat this problem, the Government announced earlier this year that legislation would be introduced to give all tenants a minimum of two months' notice if living in a home that has been repossessed.
The promise, made before the latest cabinet shuffle, was welcomed by housing charities Crisis and Shelter after they and several other organisations highlighted the number of tenants made homeless after their homes were repossessed. "We now hope that the new minister will honour this commitment and introduce these changes as soon as possible," says Leslie Morphy, the chief executive of Crisis.
In the meantime, tenants need to know where they stand if their homes are at risk of repossession. Those whose landlords took out a buy-to-let mortgage should get some protection. And those who began renting a property after 28 February 1997 will have an assured shorthold tenancy (AST).
These agreements are typically either fixed, often for six months or a year, or periodic, and rolling from one week or month to another. In these cases, lenders who take possession of the property will usually be bound by the tenancy agreement, unless the tenants are in breach of its terms and conditions. So tenants with a fixed agreement in place can stay put, complete their contractual period and then have two months' notice to vacate the property. With a periodic contract, the lender is free to issue two months' notice immediately.
Where the real problems start is with landlords renting out properties under a standard residential mortgage, and therefore without consent from the lender. In these cases, the landlords are in breach of the terms of their mortgage contracts and the tenants are unauthorised.
The lenders are under no obligation to uphold the tenancy agreements and tenants can be evicted with 14 days' notice. The recent surge in accidental or reluctant landlords, who are unable to sell their homes and opt instead to rent them out until the property market picks up, has meant that far more tenants are in this worrying situation.
Once properties have been repossessed, tenants cannot delay eviction, but all may not be lost as lenders can appoint what is known as a receiver of rent. "A receiver will act as a landlord and manage the property as well as collect the rent," says Bernard Clarke from the CML.
This was the case in 2,400 instances in the first quarter of 2009, up from just 100 in the first quarter of 2008. A receiver, typically a member of the Royal Institution of Chartered Surveyors, allows the tenant to remain in the property until the lender has decided what to do with the property.
Tenants are advised to continue paying their rent as usual, even if they are concerned about repossession, because failure to pay rent for two months or more in a row will mean that a landlord (or the lender if it has been repossessed) will consider that a breach of contract and can serve a Section 8 notice under the 1988 Housing Act – giving tenants just 14 days' to leave the property.
The Government has taken some steps to offer more protection for tenants. Changes that came into effect in April ensure that tenants now get seven weeks' notice if their landlords are called to attend repossession hearings. But if the hearing concludes with a decision to repossess, the tenant then has a fortnight to relocate.
But many tenants are unaware of these notices because they leave post not addressed to them personally unopened, thinking it is junk mail, or belongs to the landlord.
"The first and most important thing is, if you get a letter addressed to the occupier, always open it and read it because the court is obliged to write to whoever is in the property before repossessing it," says John Socha, the vice-chairman of the National Landlords Association.
The problem arises because tenants are not directly involved in the repossession procedure. The mortgage agreement is between the landlord and the lender, not the tenant, so the lender deals with the landlord alone. Also, while landlords are free to comb through credit checks and references to deem how reliable a prospective tenant is, it is not so easy for tenants to make similar checks on a potential landlord.
Tenants looking for more security should do a couple of things before signing contracts. First, they should verify that their landlords have consent from their lenders to let out the properties. Second, since all deposits must be put into one of three deposit protection schemes, they should ask which scheme is being used.
Landlords can also take steps to protect themselves and their tenants. Landlords struggling to meet payments should talk to their lenders straight away. Despite statistics showing a substantial increase in the number of repossessions, lenders will work towards alternatives and many offer repayment holidays of several months to give landlords a reprieve from paying their mortgages until they can organise their finances.
Experts recommend that landlords set up buffer or reserve funds equal to at least two months' rent for protection against tenants missing payments, particularly for landlords relying on rental income to cover their mortgages.
They can also serve a Section 8 notice if at least two months' rent is unpaid and some landlords may also want to look into paying for rent guarantee insurance to cover for loss of rental income. These policies should pay out for missed rent payments, as well as legal fees if a tenant has to be taken to court.
Questions of Cash: I don't use Amazon Prime, but my credit card bill says I do
HSBC becomes first bank to offer five-year fixed rate mortgage with interest rate under 2%
Are finance apps stealing your personal data?
Pension freedoms: How to deal with cold calls from scammers
Women to lose benefits from contracted-out pension scheme
- 1 Rarest Beanie Baby bought for just £10 at car boot sale could be sold for £62,500 on eBay
- 2 Katie Hopkins and The Sun editor are reported to police for incitement to racial hatred following migrant boat column
- 3 Katie Hopkins has just written a piece so hateful that it might give Hitler pause – why was it published?
- 4 Australian student Tommy Connolly, 23, adopts his pregnant, homeless 17-year-old cousin to give her a chance at 'a better life'
- 5 Cancel Sky at your peril: man spends 96 minutes in chat but fails to get rid of service
If I’m being racially abused I don’t need a stranger with a saviour complex to rescue me
The only black face in the Ukip manifesto is on the page about overseas aid
Ukip is the only main political party to not address LGBT rights in its manifesto
Food banks: One million Britons will soon be using them, according to Trussell Trust
Religion isn't growing, it is becoming vigorous in its demise, says philosopher AC Grayling
BBC election debate: The one photo that summed up the whole 90-minute leaders debate
iJobs Money & Business
£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...
£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...
£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...
Day In a Page
This four-bedroom detached home comes with a double carport, useful workshop, garden and two walkways that offer views of the adjacent countryside.
With space for an equestrian business, a greenhouse for growing your own veg, a wine store and a gym; this five-bedroom home has all the ingredients for a country retreat.
This four-bedroom home has exposed brick chimneys and a vaulted ceiling in a breakfast room that's ideal for summer entertaining - the doors open to the patio and garden.
The decked roof terrace of this two-bedroom flat is perfect for summer drinks while large windows and ample storage space make for a light and spacious interior.
Surrounded by approximately 15 acres of grounds, this six-bedroom grade II-listed home has been extensively refurbished yet retains many period features.
This four-bedroom home comes with a two-bedroom cottage and commercial office, with planning to extend, in a stunning courtyard setting.
In a pretty Norfolk village, this four-bedroom family home is surrounded by landscaped gardens, with even a self-contained annex for guests.
A few miles from the seaside at Perranporth, this four-bedroom farmhouse sits amongst nine acres of idyllic grounds - including a lake and two barns used as holiday lets.
This five-bedroom home is arranged over three floors of a converted Victorian hospital, offering spectacular views of the Pentland Hills - only three miles from the city centre.
This four-bedroom detached home comes with grounds that span to approximately 2.5 acres, as well as two large patio areas and a double garage.
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000