We had a property fall out of bed today. Not due to any lack of intention from the side of the purchaser, it is just that the mortgage fell through. A few missed payments on the existing mortgage and the mortgage application is refused, and the deal falls apart. The missed payments were not even in this country, the applicant is an expat.
The property was being purchased blind, on the basis of an 18 page property report done on the strength of the area. The report is a thorough analysis on the location, showing the impact of Crossrail, and analysing the effect this will have on property prices.
There are two very strong factors as to why this location will be increasing steadily over the next 5 -7 years. These were analysed in great depth. Neither factor has anything to do with the ongoing Brexit negotiations or indeed anything else in the economy. They are based on need alone. The need for shelter. This basic need is often forgotten in the property world.
Property prices are driven up by speculation and desire. Rarely does one look at the bottom of the pyramid and see that actually in the same way we all need to breathe and require food, we also need shelter. This sector in the market would be almost immune from any uncertainty in the economy. The same principles ensured Dominos profits actually increased by 11% in the third quarter in 2009, post credit crunch.
This demonstrates the bottom of the market may even thrive during times of economic uncertainty. The money floating around London has both domestic and international origins, this money will always be looking for a home, despite the environment. And there are few markets as safe as the UK.
This report establishes the case for the location, and a video confirmed the state of the property; and so, it was on this basis the client felt this was a very solid investment.
The mortgage issue has come out of the woodwork and threatens to derail the investment if it is not overcome. We are trying with another broker, however, I’m doubtful whether another broker can neutralise the missed payments.
The case may require a complete overhaul, and instead the applicants could be the children rather than the parents, which was the original intention. These events, therefore, may actually be a blessing in disguise; as this would tackle the issue of inheritance as well, which will be a problem sooner or later.
This issue may force them to think about and tackle this problem now rather than waiting for the inevitable to happen, and then tackling it from the backfoot from a reactive place.
This means there will need to be input from the accountant, lawyer and mortgage broker to make sure this happens in a holistic way, and to ensure there are no time bombs set up for the future.
Agony Agent Is Here To Help!
Q: I gave my tenant notice and have yet to start court proceedings, however, I think they have left the property. What should I do?
A: When this type of situation occurs, it can sometimes be called abandonment. But, this is normally the case if they do this without notice, before a tenancy comes to an end. In your situation you have served a Section 21 for them to leave, and they have saved you a lengthy process through the courts.
What is more commonly known as abandonment of tenancy, is where a tenant has “done a runner”. Often, you will not know the property is vacant until rent payments stop, and if no regular checks are carried out on the property, several weeks can go by before you know this has happened.
Your insurance policies usually request you to inform the insurers if a property is vacant for more than two to three weeks, so insurance cover could be compromised when the property is abandoned.
When tenants leave like this, they often leave possessions behind, even pets in some cases! They may post the keys through the letter box, take the keys with them, or even give them to someone else.
When tenants’ possessions are left behind, you owe a legal duty of care to the tenant to protect them. This is the case even though the tenant may be in rent arrears or has damaged your property. But what is more of a pain for the landlord is that if the tenants have left possessions this shows that the tenant may come back at some point, which means the landlord must take extra care not to breach the Protection from Eviction Act: "It‘s a criminal offence to unlawfully deprive a residential tenant of his or her occupation of the premises, or attempt to do so." Basically, a landlord cannot stop a tenant from entering a property without first obtaining a surrender of the tenancy, or gaining consent from the courts via a Possession Order.
In either case, first of all you should be sure that the property has definitely been abandoned. So, keep a watch on the property for signs of abandonment, for example, unopened mail piling up behind the door, bins not emptied, drawn curtains, empty parking spaces etc. Better still, it is a good idea to talk with the neighbors. Once you are sure the tenant has left you should cautiously enter the premises with spare keys (after having dropped a letter through their door giving notice that you will be coming in).
Have a witness like an agent or friend with you, and be prepared to find the premises occupied. If that is the case you would need to make your excuses and leave fairly quickly – tenants should understand if you state your concern for their safety.
If you change the locks you must inform the tenants of this despite how bad your tenant was.
If you are experiencing something like this, give me a call and I’ll happily offer you some free advice.
Sow & Reap