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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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I have a buy to let property which I have owned since 2003.

Resolved Question:

I have a buy to let property which I have owned since 2003. It is mortgaged with a company called CHL (they have ceased to lend since the 2007 crash but still operate current loans). Approx 3 1/2 years ago the property was converted by tenants into a cannabis farm causing very extensive damage to the house. After that situation was resolved I began renovations on an ad hoc basis, as and when I had cash to carry out the works but the property was broken into and further damaged and I therefore decided to wait until I had enough capital to carry out the works in one go (approx £20,000).
For various reasons this has not as yet happened (predominately because my son was diagnosed with autism and I am paying privately for his therapy at a cost of £2000 per month) so although CHL have been kept fully up to date, the property has been insured throughout, had all essential repairs conducted to prevent any further deterioration and every mortgage repayment made on time it would now appear that my mortgage company are planning to repossess the house under the Law of Property Act 1925 as I have had three phone calls from companies who deal in repossessions/auction properties asking for access to conduct a valuation, all of whom have confirmed that they are instructed by CHL. (I have denied all three any such access)
I have contacted CHL and spoken to them re this several times but they have refused to confirm or deny their intentions even after I proposed to renovate the house and put tenants into occupancy by the end of July 2015.
If they do repossess and sell the property at auction in its current condition and with the local housing market still recovering from the credit crunch there is likely to be a shortfall of anything up to £70,000.
I have informed CHL that I am not willing to conduct any repairs until they give written confirmation that they will not repossess provided the repairs are carried out as per my proposal.
My questions are this
In your expert opinion can CHL repossess- arguing presumably a breach of the mortgage terms (i.e. failure to tenant the house for such an extended time) under this act
If I were to carry out repairs and tenant the property without a written agreement from CHL can they continue with the action
If they do so and then take CCJ action for the inevitable shortfall would I be able to defend the action given that the shortfall is caused by their actions when alternative remedies are still available to them.
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Joshua :

Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.

Joshua :

May I ask if the mortgage loan is in arrears or has ever been in arrears or are payments up to date please?

Joshua :

Has the lender appointed a receiver to your knowledge?

Customer:

there have never been any arrears at any time

Joshua :

Thanks. Presumably their complaint is therefore related to disrepair issues. Is that their only complaint to your knowledge?

Joshua :

Do you know if they have appointed a receiver?

Customer:

they are not providing me with any information despite repeated requests

Joshua :

Thank you. it is important that you review thoroughly the mortgage conditions associated with your mortgage. Buy to let mortgages are not regulated in the way that residential mortgages are and as such, lenders hold most of the cards.

Joshua :

Most buy to let mortgage conditions do not include the condition requiring you to ensure the property is let out for a minimum period each year. However virtually every buy to let mortgage I have ever seen includes a condition requiring you to keep the property in good repair and condition and if you have failed to do so, however good your reasons in this respect, this would constitute a breach of your mortgage conditions I fear.

Joshua :

the consequence of the breach of noise conditions includes the right for a lender to appoint something known as a rent receiver. This right is based on a very old law in the 1925 of property act but that law is still very much alive today and is used with great enthusiasm by buy to let lenders because it gives them so much power and control. If a rent receiver is appointed, they purport to act on your behalf to collect rent and manage the property but in practice, they act on behalf of the lender and charge you a fee to do so. They can install tenants and sell the property without your permission and effectively replace you as day to day controller of the property. In addition, it is very difficult or even impossible to remove a rent receiver once appointed. In order to remove the rent receiver, you need to be able to show that there was no breach of your mortgage conditions and as such, the power by the lender to appoint a receiver did not arise.

Joshua :

A rent receiver will typically be appointed if arrears arise but a lender can appoint a receiver in respect of any substantive breach of mortgage conditions. Failure to keep the property in reasonable repair would constitute a justifiable reason and you should do all you can to avoid a receiver being appointed.

Joshua :

If a receiver is appointed,the only way to remove them is to make an application to the County Court and show that there was no substantive breach of your mortgage conditions and based upon what you say, I suspect you would find such an application difficult.

Joshua :

Accordingly, my view would be that you should take immediate steps to ensure the property is brought up to a fair standard in order to remedy the breach of condition. You do not need to ensure the property is finished to a high standard - it simply needs to be kept in reasonable repair. If you can do so and advise the lender that you have attended to the repairs, and so remedied any breaches of your mortgage, the power to appoint a receiver falls away.

Customer:

It appears that there intention is simply to sell the property at auction so how strong would their case then be in any subsequent ccj action for the shortfall

Joshua :

If a receiver is appointed they can do this. They are only required to obtain market value for the property based on its present condition. They do not have to maximise the value of the property. They will seek to recover any shortfall from you. The position is grim. Hence it is crucial to remedy any breach of condition as soon as possible to avoid receivers being appointed.

Joshua :

There is nothing fair about buy to let mortgages unfortunately. Providing a borrower abides by the conditions, the lender has little power but as soon as a breach occurs, the lender has substantive powers it can bring to bear and there is little if any redress available to the borrower. This is because the courts treat these loans essentially as commercial lending and so none of the protections afforded to the consumer apply.

Joshua :

If you move swiftly and a receiver has not yet been appointed, you should be able to head this off before receivers are appointed and hopefully then return the property to income generating. I appreciate this is likely tobe financially challenging but the alternative could be substantially more costly.

Joshua :

Does the above answer all your questions or is there anything I can clarify or help you with any further?

Customer:

how long would it take to appoint a receiver and would i receive any prior notification?

Joshua :

They need only serve you notice that a receiver is being appointed. There is no need for a court application as you have given them the right to make an appointment on your bahlf by signing the mortgage deed and given the receiver power of attorney to sell the property for you if the mortgage is in line with normal mortage conditions which it is sure to be. It is all hidden away in the small print. There was a significant ruling just over a year ago which confirmed borrowers have almost no rights (save as above) to challenge such appointments and the lenders o***** *****ttle duty to the borrower

Joshua :

Hence my recommendation to proceed to remedy the position as soon as you are able if no notice has yet been received.

Customer:

one last question how long does it take to appoint a receiver. the works will take about 2-3 weeks

Joshua :

It only requires them to serve notice upon you so in a sense it takes no time beyond preparation of that notice, but they have a general duty to treat you fairly and so would normally provide you with a warning that you are in breach of your mortgage conditions first otherwise they would be in danger of being found to have acted unfairly. Normally they would write to you advising of a breach and requiring you to remedy it and only a 2-4 weeks after that appoint a reciever (usually a longer time frame would be followed)

Joshua :

If a receiver has not yet been appointed, if you are in a position to carry out the works, you may consider writing to them advising that you are attending to the repairs immediately and will ensure the property is brought up to standard within whatever timeframe is reasonable. There is a risk that they appoint a receiver in the meantime, but that would be potentially open to challenge if you can show that this was done after works had commenced. Alternatively you could proceed and notify them once the works are complete. This also carries risk. The sooner you can complete the basic works the safer your position will be generally. The intervening period will carry some potential risk whichever approach you decide.

Joshua :

Is there anything else I can help you with?

Customer:

no thank you Joshua that has been very helpful in clarifying my situation. I will start works tomorrow and hopefully remove their grounds to appoint a receiver.

Joshua :

I am sorry I was not able to be more positive but there is no advantage in my sugar coating the position so I hope you will excuse the bluntness of the above. ON the bright side if no receiver has been appointed and you can complete sufficient works to bring the property up to a reasonable standard, providing there are no arrears, the lender should fall away. It may be a nervous couple of weeks but hopefully little will come in the meantime

Joshua :

If I can assist any further as the situation develops please do not hesitate to revert to me

Joshua :

If you have no further questions for now I should be very grateful if you would kindly take a moment to rate my service to you today. Your feedback is important to me. If there is anything else I can help with please reply back to me though

Customer:

I will do and thanks again

Joshua :

Best wishes

Joshua, Lawyer
Category: Law
Satisfied Customers: 25358
Experience: LL.B (Hons), Higher Prof. Dip. Law & Practice
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