Tenants are being described as the ‘hidden victims’ of the recession as many find themselves unexpectedly homeless when their houses are repossessed by the landlord’s mortgage lender. Housing charities estimate that more than 8,000 rental homes will be repossessed this year, forcing over 10,000 people to leave their house with almost no notice. And most will be surprised to know that they have virtually no protection against this.
Since a rental contract is with the landlord rather than the lender, it becomes void as soon as the property is repossessed. As a result, most tenants are evicted from the property when the bailiffs arrive. At present, lenders are required to give just two weeks’ notice of this, although that will increase to seven weeks from 6 April. Even so, many tenants will still be surprised by the arrival of bailiffs, since letters warning of an imminent repossession are addressed ‘To the occupier’. Many people either forward these letters to their landlords or throw them out, assuming they are junk mail. So tenants should protect themselves from any surprises by opening any post that arrives for ‘the occupier’. It may only give a few weeks’ warning, but that’s better than nothing.
If you find that your house is going to be repossessed, contact the landlord’s lender immediately. Once lenders have a possession order, they may allow tenants to stay on in the property for the duration of their agreement, paying the rent to them instead. That’s especially likely now, given the difficulties of selling property in this climate. Ideally, you should avoid getting into this situation.If you are moving into a new property, consider asking for references from your landlord. This is especially important at present when so many properties that have failed to sell are being rented instead. Many new landlords haven’t informed their mortgage provider that they are letting the property. This means the tenants are unauthorised and will received no warning at all if the property is repossessed.
And never be tempted to make an upfront payment for a substantial amount of your rent. Should your home be repossessed, you will have a fight on your hands to see the money again.
A week in the property market
• UK house prices fell by 2% month on month in February, according to the Land Registry’s index of completed sales. Prices have fallen 16.5% in the past year, leaving the average British house valued at £153,862. Greater London is down 15.6% over the year, while the West Midlands is the biggest faller, with homes there down 17.7%.
• Dundee City Council is set to start offering 100% mortgages to tenants who want to buy their council home. The loans will be introduced next month. “The reintroduction of mortgages for council house sales at 100% of selling price is proposed as a suitable council initiative to assist the local economy and help first-time buyers in their aspirations of owning their council house,” says a council report.
• American house prices fell by a record 19% between January 2008 and January 2009, according to the Standard & Poor’s/Case-Shiller Home Price index. The index is based on prices in 20 of America’s largest cities. “Home prices, which peaked in mid-2006, continued their decline in 2009,” says David Blitzer at S&P on the BBC website. “There are very few bright spots. Most of the nation appears to remain on a downward path, with all 20 metro areas reporting annual declines.” House prices in America have fallen 29.2% since their peak in 2006, according to the index.
• Homeowners are continuing to pay off their mortgages for the ninth month in a row. In recent years housing equity withdrawal has meant borrowing on homes has increased, but between October and December £8bn of mortgage borrowing was paid off, says the Bank of England.