Tenants at risk as Landlords are repossessed
Questions have been asked in the House of Commons regarding tenants who have been paying their rent and fulfilling all their other obligations but who nonetheless find they are at risk of losing their home. What protection do they have?
We sympathise with tenants who find themselves in this position. So, what can lenders with the charge on the property do in cases where the tenant is paying their rent, but the landlord is not using this money to meet their mortgage commitments?
It seems it all depends upon what type of mortgage the landord has and the protection for tenants falls into two distinct groups, and are affected in quite different ways.
The first are those whose landlord has a buy-to-let mortgage, and these tenants are generally in a much stronger position.
The second group comprises those whose landlord has a residential mortgage. A borrower with this type of loan should seek the permission of the lender before renting out the property. Where the lender agrees, it will be bound by the tenancy agreement. That provides protection for the tenant, should the mortgage lender need to take possession of the property or appoint a receiver because the borrower stops paying the mortgage.
In some cases, however, a borrower with a residential mortgage decides to rent out the property without telling the mortgage lender, in contravention of the mortgage agreement and perhaps even fraudulently. These tenants have been disadvantaged and their tenancies put at risk through no fault of their own.
Likewise the mortgage lender. It is quite likely that neither the lender nor the tenant will even be aware of each other’s interest in the property. Both have been put in a difficult position because of the irresponsible behaviour of the borrower.
But while mortgage lenders may sympathise with tenants in this position, it is important to understand that their legal responsibility – reinforced by regulatory requirements – is to the
landlord, and not to the tenant.
The lender has an obligation to minimise arrears and get the best price possible for the property. This is likely to lead the lender to seek possession of the property quickly. In this situation, the tenant has few rights.
So how common is this problem? Recent television coverage of the issue reported it against the backdrop of 75,000 mortgage possessions this year.
The reality is, however, that only a much smaller proportion of total possessions – perhaps 4,000 this year, or around 5% of the total, according to the Department for Communities and Local Government (DCLG) – will involve residential mortgages where the lender discovers the property is occupied by tenants.
Buy-to-let mortgages
If tenants are renting from a borrower with a buy-to-let mortgage, they are in a better position. Here, the tenancy is normally binding on the lender if it needs to take enforcement action against the borrower/landlord. The tenant will have the statutory right to notice under their assured shorthold tenancy.
Instead of seeking possession, the lender may choose to appoint a receiver, who will, as far as the tenant is concerned fulfill the role of the landlord, maintaining the property and collecting the rent.
Under an assured shorthold tenancy, a tenant is entitled to the remainder of their contractual period – which is typically six months but can be longer – as notice and to a minimum of two months at the end of that period. In practice, a lender or receiver will often allow the tenant to remain beyond the notice period until rent arrears are paid off or the tenant chooses to leave.
Sometimes, a property may be sold with a sitting tenant. This is rare, however, because the lender has a responsibility to the borrower to obtain the best price for the property, which usually implies sale with vacant possession.
New Advice agency campaignA number of organisations, including Crisis, Citizens Advice, Shelter and the Chartered Institute of Housing have launched a campaign to help tenants when the mortgage lender takes enforcement action. The campaign calls for courts to be able to delay possession to allow tenants to find an alternative home.
But if there is a residential mortgage on the property, giving the tenant more time to find a new home could put the lender in conflict with the borrower, particularly if it means mortgage arrears build up and the property is eventually sold for less than would have been the case if it was marketed straight away. If the landlord had had adequate
mortgage protection insurance for commercial premises the situation would not have arisen in the first place
The campaign also calls for notices to occupiers to be made more obvious and perhaps to carry a risk warning.
Landlords Insurance is available to compare online.
Labels: credit crunch, housing market, insurance news, landlord insurance, mortgage, mortgage protection insurance
Cannabis Underwriters and Claims Specialists Required
Insurance Blogger was astounded to read in Insurance Times, at the weekend, that Norwich Union have actually paid out over £1 million in claims to landlords who were 'victims' of so called cannabis farms.
According to the report Norwich Union (soon to re renamed AVIVA don't forget!)shelled out one million quid and is now, rather belatedly, warning landlords to be on the lookout for suspicious tenants.
NU said it settled about 60 cannabis related claims two years ago and the trend in cannabis farming is on the increase. During the same year Police apparantely seized over five thousand plants which was 34% up on the previous year.
Insurance Blogger would love to know on what basis those claims were settled, and is perhaps more surprised to see that NU is so far behind the times.
Unless you've been living on Mars for the last ten years you would have seen Cannabis farms on the local news, and local and national press.
Suburbia has apparantely been overtaken by gangs of Vietnamese and more lately Russians, on their Dutch inspired gardening activites in two up-two down terraced houses with the curtains drawn all through the day and night.
Or as my Copper mate in Southend ( who used to work for General Accident before they made him redundant and who now hunts and sniffs out Cannabis Farms on his mountain bike patrols )says 'The Ping Pong Pong'.
The gardening activities of the farmers causes particular damage to:
i) Walls and ceiling structures, which are often removed to maximise lighting space and for ventilation.
ii) Electrical wiring which is often in a highly dangerous condition due to bypassing meters and the risk has led to fire claims.
iii) Plumbing is often ripped up and expanded for hydroponic cultivation of Cannabis, often leading to flood claims.
Well there's obviously going to be more of this type of activity as we sink into deep recession, and what concerns Insurance Blogger is that this type of 'cover' is open to abuse, and many an unscrupulous landlord may succumb to the financial pressures, and either be engaged in or have knowledge of the cannabis production and actively turn a blind eye or more likely make false claims to get the place 'Done up'.
We are not currently aware of any
Landlords Insurance policy that doesn't include a 'reasonable care' clause, and this must mean regular site and inventory checks are the responsibility of the landlord, which would prevent premises being used in this way.
Furthermore landlords should be made aware that they could face criminal charges for allowing their premises to be used for the production of a class B drug, which carries a prison sentence and is regularly used against landlords suspected of complicity. It will be up to the Landlord to prove that they took reasonable care in preventing the premises from being used in such a way!
Labels: landlord insurance
Landlords must be vigilant warns online Insurer
Online
landlord buildings and contents insurance comparison site, LandlordNet http://www.Landlord-Insurance.net is warning Landlords to be extra vigilant during the current economic crisis.
Troubled times lead to large increases in theft and tenant arrears, they warn, and landlords may be tempted to under insure in the hardening market, leaving themselves open for claims rebuttals should the worst occur.
Security issues are of particular importance at this time of year as the incidence of theft rises around the christmas holiday period. Ensure that your property is fitted with approved locks to the policy minimum standards.
Equally, landlords may have additional problems with their own tenants due to the recsession and credit crunch biting, including rent arrears and tenants leaving more frequently.
LandlordNet warns "By following a few simple tips Landlords can minimise those risks and safeguard their businesses during these difficult times. The first step is to keep a vigilant control of arrears, to flag up and keep an eye on possible rent defaulters before major non recoverable debts are occurred.
Keep up to date records of all enquiries for let properties, and act quickly if notice is given of a property falling vacant. Tenants have a lot of choice at the moment and one returned call can make all the difference.
Labels: buildings and contents, landlord insurance
Landlord Insurer warns 'Tenants must be briefed for winter emergencies'
Rogue and inefficient landlords could face having claims dismissed warns the UK's online
landlord insurance portal and landlord buildings and contents quotation comparison website www.landlord-insurance.net if......."they fail to keep their tenants informed and briefed on what to do in an emergency and major damage ensues that could have been prevented".
They report that 20,000 landlords across the UK could be affected as Winter comes early across nuch of Britain. With almost three million houses in the privately rented sector and weather forecasters predicting a colder winter than last year, simple steps, such as ensuring that all tenants know how to switch off the water, electricity and gas supplies, could save landlords and insurers thousands of pounds, and potentially save lives!
Tenants are the first line of defence against problems in the properties they rent and need to be fully equipped to deal with all kinds of winter emergency situation. If the landlord has
landlord emergency insurance and equipment insurance cover then the tenants need to know who to phone should the landlord not be available. Do the tenants realise that their possessions and property contents won't be covered unless they've taken out their own personal
contents insurance?
If you improve the communication lines with your tenants you will reduce the risks and minimalise any claims that you can't avoid...as a landlord s**t happens.
Labels: Landlord Emergency Insurance, landlord insurance
Landlord Emergency Insurance
Landlord Emergency Insurance pays out for the following emergencies that may occur at your let property.
It's an additional stand alone cover that you can purchase at any time, alongside your standard
landlord's buildings and contents insurance, and provides great value and solutions to everyday problems that can easily blight a landlords life with tenant stress.
Emergency covers include for example:
Tenants lose keys - Lost Key Cover
Toilet Drains are blocked - Plumbing and Drainage cover
Window get broken - Security Cover
Fusebox blows leaving tenants without lighting - Electricity cover
Heating Boiler breaks down on Christmas day! - Central heating cover
At only £60 per year
landlord emergency insurance cover offers great value for a stress free life - sorry I forgot about the credit crunch and the empty properties etc etc.....
Labels: Landlord Emergency Insurance, landlord insurance
Buy to let mortgage repossessions increase
The Council of Mortgage Lenders (CML)today published quarterly data and analysis on buy to let mortgage arrears and repossessions for the first time, having previously published data twice a year.
The Council of Mortgage Lenders reports that 1.44% of mortgages were at least three months in arrears as at the end of September 2008.
*This was up from 1.33% at the end of June. The number of cases in arrears at the end of September was 168,000, 8% higher than the 155,600 at the end of June.
Due to the credit crunch the number of households in arrears by the end of the year is likely to exceed the previous forecast of 170,000.
The report also states that 0.1% of all mortgaged properties were repossessed in the third quarter of 2008, up slightly from 0.09% in the second quarterto 11,300.
This is
12% higher than the 10,100 in the second quarter.
The CML expects the total number of repossessions by the end of 2008 to be around 45,000.
Buy-to-let mortgages have in the past shown better performance than the overall mortgage market in terms of payment defaults.
But in the third quarter the payment defaults of buy-to-let landlords has worsened more rapidly than the rest of the mortgage market.
This is probably due to falling rents and an over-supply of rental property in some localities, resulting in many landlords being unable to let their property or achieve high enough rents to support their borrowing commitments leaving them with a mortgage shortfall. with the housing market stagnant, it is becoming more difficult to sell.
At the end of September 2008, 1.58% of buy-to-let loans were in arrears (up by nearly .5% from 1.10% at the end of June), compared with 1.44% of all mortgages.
The number of buy-to-let mortgages taken into possession in the third quarter in the UK was 900, the same as in the first and second quarters of the year, representing 0.08% of all buy-to-let mortgages (compared with 0.1% across the mortgage market as a whole).
A number of factors will affect the number of buy-to-let mortgage repossessions, including the extent to which buy-to-let mortgage lenders appoint 'receivers of rent' as an alternative to repossession.
Mortgage lenders may prefer this route in many cases where the buy to let tenants are paying their rent however the landlord is not paying the mortgage.
Landlords can protect themselves and purchase rent guarentee insurance from UK landlord and
buy to let insurance comparison site http://www.landlord-insurance.net.
Labels: buy to let insurance, credit crunch, landlord insurance
Landlords and buy to let Insurance to beat credit crunch
Many people who bought into the 'buy to let' dream of owning additional property for income or retirement are now suffering not only from falling house prices ( and in some cases negative equity) and empty properties, unable to be let due to too many available in the market.
Whether your additional property is let or empty, Landlords must protect their investments against unforeseen risks with Landlord Insurance.
At UK Commercial Insurance owned
Landlord-Insurance.net you can save money and beat the credit crunch by comparing most of the Landlord Insurance policies and covers available to Landlords in the UK.
The site allows you to purchase cover whatever type of property or tenants you have. Cover is available for properties let to Professionals, Students, Flats, Asylum seekers, DSS and Holiday Homes.
Additonally Unoccupied property insurance cover is available for up to nine months for properties that are empty or difficult to let.
For a small fee Landlords can also have peace of mind by purchasing
Landlord emergency assistance insurance which provides tradesman to carry out immediate repairs at your property, which otherwise could take two days or more to arrange, leaving unhappy and unsatisfied tenants and perhaps putting your property at risk to flooding etc..
Labels: buy to let insurance, credit crunch, landlord insurance
Bradford & Bingley Nationalised
Hurrah !
Now we the taxpayers rescue another failed business -
Bradford and Bingley - and as a country are now the proud sponsors of Bradford City FC (as well as Newcastle Utd!).
Bradford and Bingley (aka The Government) also sponsor the Bradford Bulls Foundation, Yorkshire County Cricket Club Indoor Cricket Centre and Bradford and Bingley RFC incidently.
Bradford and Bingley were one of the major culprits in the creation of the Credit Crunch with their ridiculous overloading of buy to let mortgages and self certified mortgages accounting for over 80% of their business, and directly accounting for the outrageous growth in house prices. It was bound to fail and City Analysts were predicting months ago that their shares were worth nothing -much to the annoyance of the banking sector!
It Stinks - these bad businessmen are allowed to create a house of cards in the UK housing market and walk away from it leaving us the taxpayers to pick up the pieces - whatever happened to the free market? And where were the
FSA in all this?
On an Insurance front their book of business is relatively small in the larger scheme of things with a lot of home insurance particularly
landlord insurance cover and mortgage protection insurance policies sold on the back mortgages.
Our advice to anyone holding these policies is to switch today. This applies particulary
mortgage payment protection which is a monthly policy and is easy to cancel and set up elsewhere. With lenders charging more than five times the rates for this type of insurance than the independent sector - you would be wise to
switch mortgage insurance today
Labels: Banks, bradford and bingley, Bradford Football, landlord insurance, mortgage, nationalisation, unemployment insurance
