Author Topic: BTL Mortgage and bankruptcy  (Read 16312 times)

polly

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BTL Mortgage and bankruptcy
« on: Jul 08, 2016, 01:24:01 PM »
Can anyone give advice please. My husband and l were both declared bankrupt in May 2016 by HMRC. We have two interest only mortgages,with payments up to date, one on our home and the other on a BTL with The West Bromwich. Both properties are in negative equity. The BTL has a good tenant with no arrears. We recently had our face to face interviews with the O/R who told us that as the BTL was generating surplus, @ £350 per month after all expenses were paid, that they would now collect the rent money but we would be responsible for maintaining our current legal obligations as landlords. Basically, they would have the £500 rent money, but we would be responsible for all the payments ie the mortgage,repairs safety checks etc. Is this correct?
Also we understand that this property will not be returned to us after three years, is that correct?
Any advice would be appreciated

Lisa Thomas

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Re: BTL Mortgage and bankruptcy
« Reply #1 on: Jul 11, 2016, 09:58:36 AM »
Hi


The OR/Trustee can indeed collect the rent.  However the Bank will probably jump on this at some point and appoint a Law Of Property Act ("LPA") Receiver to collect the rent instead to stop the OR from keeping it and offset that against their debt.


The 3 year rule does only apply to your residential property so they can take as long as they like to 'deal' with their interest in the BTL.
www.Nevilleco.co.uk 01752 786800

polly

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Re: BTL Mortgage and bankruptcy
« Reply #2 on: Jul 11, 2016, 10:41:50 AM »
Thanks for your comments Lisa. Can l just ask. If the rent is being paid to the O/R or Trustee, are they then liable for making  all payments and repairs to the BTL property as they become due. I.e Mortgage, insurance repairs etc?
Surely the O/R etc should not be putting us in more debt and make a situation worse? As l have said previously, both mortgages are paid up to date, the property has no outstanding repairs etc, gas safety is up to date and we have landlords insurance up to date.

Lisa Thomas

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Re: BTL Mortgage and bankruptcy
« Reply #3 on: Jul 11, 2016, 04:43:15 PM »
No there is a bit of a loophole I'm afraid.  I am the Trustee of a Bankruptcy in similar circumstances and have been collecting the rent for sometime whilst waiting for the chargeholder to appoint a Receiver.


I do not have to hand any of the funds over.


I did however use some of the funds to repair the roof - this was to keep the tenant happy and ensure they continued paying the rent, although strictly speaking I did not have to.


I suspect what may happen in your case will be that the chargeholder will appoint an LPA Receiver to sell the property.
www.Nevilleco.co.uk 01752 786800

polly

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Re: BTL Mortgage and bankruptcy
« Reply #4 on: Jul 12, 2016, 11:20:45 AM »
Thanks Lisa for your frank advice. I have been trying to understand the rules regarding the BTL in our situation. I have been reading about the LPA receiver but am l correct in thinking that whilst there has been no breach of the mortgage contract, the lender cannot appoint an LPA? Also if we were to maintain the mortgage payments for the next three years, whilst an income order is in place, would we then be able to get the property returned to us? At the moment the BTL is in negative equity of @ £20k but is generating a surplus and should be able to maintain that surplus for the forseeable future.

Lisa Thomas

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Re: BTL Mortgage and bankruptcy
« Reply #5 on: Jul 13, 2016, 09:26:56 AM »
Hi Polly


Any Income Payment Agreement/Order makes no difference to the position regarding the BTL (Unless from the payments you paid enough to clear the total debt, statutory interest, bankruptcy taxes and costs).


The problem I suspect you will probably face is if the O.R/Trustee is collecting the BTL rent from the tenant/s how are you going to afford to keep up with the mortgage payments?
www.Nevilleco.co.uk 01752 786800