Tuesday, 28 October 2008

Battered By Butterflies

There’s a proverb suggesting that apparently insignificant actions can have disproportionately large consequences: a butterfly flutters its wings and on the other side of the world, a million people die.

Throughout my time in Dovecot Towers letters were stolen from the communal post-room. My landlord seemed extremely sympathetic, but to be honest, I was never sure if he took the problem seriously.

Earlier this year, I tried to withdraw cash but my card was declined. I had no phone credit, no food and no fare to reach my friends and ask for help. It was a nightmare. I couldn’t pay my rent. I emailed my landlord explaining: my post-box robbed, my cheque book stolen, my bank account emptied, then a debit-card was taken despite banning my bank, or anyone from sending post to my home.

This might still look bad on my part, but remember that William’s side of the ‘pay rent – maintain property’ bargain is habitually broken. Previously, he admitted that he wouldn’t want me to leave, acknowledging that I’m a good tenant. Even so, he didn’t bother to get his arse into gear and organise repairs. However much he needed my money, I think he was overwhelmed by the demands and responsibility of managing property.

As forcefully as I could within the boundaries of carefully assertive tact, I said that if he didn’t make a fuss, if he didn’t really cause a commotion and press the management company, nothing will change. The management noted, but ignored his requests. He claimed to know them, but I don’t think they were his friends; for once in his life, I think he felt important. Emphasising that I couldn’t sort this problem out myself, I added that the situation won’t vanish of its own accord and reminded him that even if I do reach the end of my tether and leave, subsequent tenants will be equally irate and then move as well. He agreed, and offered to fit a letterbox on my front door. Remaining sceptical, I thanked him.

Meanwhile on Wall Street, vultures, not butterflies were flapping their wings. Soon, William’s many mortgages were in arrears. Interest rates had risen dramatically and he was clinging to financial life by his over extended fingertips. Along with a vacant flat elsewhere, my missing a payment had pushed him over the edge. The bank has delayed replacing my money since (I suspect) they think I am somehow complicit. Those repairs are not his fault, but most definitely his responsibility.

When William and I met up, he asked what it would take to make me stay. I think he intended to muddle through the recession, but now he knows that Dovecot Towers is thoroughly unsafe, and that I couldn’t stay even if I wanted to. William should have sorted out the post-box situation, the unlikely tipping point which nudged him towards financial catastrophe.

And so, a butterfly fluttered by. A door was broken, another remained unlocked. A post-box was crow-barred open. Life became difficult for me, while an admittedly ineffectual, but otherwise decent man was devastated. Nothing is ever simple.

(NB: This morning, there was a sign, marked urgent, on the post-room door, from our new caretaker: ‘Persons have gained access and levered open the post-boxes, stealing the mail. I have informed the police.’ Then someone delicately explained that it’s been like that for over a year. Bless him for caring, though.)


the reaper said...

'let em burn'.

RenterGirl said...

You're harsh, reaper. I know what you mean, but the point I am perhaps hammering home is that many serial BTL's are not evil, maybe even a bit...simple. Do they deserve mockery and disdain for following what seemed to be good advice? It also affects people like me, living in these shells, which will soon be let to other people. Who will suffer the same problems, as even though Dovecots all over were built to rent, nobody asked us - the inhabitants - what we needed. And communal post rooms are source of evil.

R.A.D. Stainforth said...

I have always rented, apart from a brief period of being married with a mortgage, and my life has been enriched as a result.

Great blog, by the way.

MattW said...

Sorry if this is a bit off tangent but isn't William supposed to buying another 'apartment' close by to rent out? As far as I'm concerned, no landlord can afford to buy a 2nd property to rent out if the 1st rental property is still mortgaged.

RenterGirl said...

Matt, it's better than that: he managed to get TWELVE BTL mortgages somehow. He never bought the flat opposite as far as I know. I understand why people may lack sympathy, but he shouldn't have been granted 12 mortgages. When credit was still available, all you needed was to eran roughly 20k pa, and have small deposit (or no deposit, and a 120% mortgage) and bob was your landlord...Just before the credit crunch, wiser, prudent, socially respsonsible banks lent only 60% of the cost of a newbuild, aware that prices were about to plummet. 'William' wasn't evil, or fraudulent. He's ruined, I have ben stuck with terrible flat, and cities are blighted with decaying moneypits. We are all victims, in a way.

Alantb said...

Why not come and live next door to us in Horbury, West Yorkshire? We live in a small terrace of four houses - posh southerners would call it a mews...... Two of the houses are vacant but cared for (one owner had to move because of her job, the others to buy a bigger house having started a family). This little town has all its own shops, a library, attractive country on the edge, bus services to everywhere and nice people - what more do you want?

the reaper said...

'You're harsh, reaper.'

maybe,but I'm also a realist.the problem in this country is that we are too soft on failure.We will not let banks that should fail,fail.

I have for the last few years kept my money in HSBC for safety's sake.I therefore pay twice for the stupidity of others.Once by getting lower returns on my pension pot money and twice as I am a net contributor to the govt bailout.

I trade for a living.I get no govt bailouts if things go wrong.you take risk,you get burned ergo,if you can't take the heat,stay outta the kitchen.

Whilst you can argue that we need to bail out the banking system,there is absolutely no need to bail out BTL's and that's logically where all this sympahty takes you.

Sorry if I sound bitter,but I have been ranting about the dangers of a house price bubble since at least 2001.During the folowing seven,yes,seven,years I have had all manner of smug platitudes thrown at me by BTLers and Lehman WAG wannabees who just couldn't conceive that flipping property could end in anything but wealth beyond their dreams.Last year I convinced the Mrs to sell her hosue because I don't like debt and could see this coming.I took a heap of sh1t off a number of people until about april when the big cahoona finally emerged on the horizon for these idiots.

I am sorry to offend RG,but you're too soft on William and his ilk.If he'd have been able to flip that flat for a 30% kicker in a years time,he'd have turfed you out on your arse as soon as look at you.In these times,it's important to remember these brutal facts.

He's going down because he is GREEDY.He could have stuck at one,but no,he went for more.That's why he's toast.And the rather blase way he and many other LL's took their responsibilites to good tenants is gobsmacking.I for one have no sympathy.

They, the stupid banks that lent them the money and the regulators that slept on their watch have it coming.They have ruined the lives of a generation.Some have bought and will spend two decades clearing their debt and probably unable to have kids while they are still fertile(call me a wacko if you like but I know a few couples that just can't afford kids).Others (the minority)have had the pain of refusing to buy into the madness of this Ponzi scheme.

'let em burn' and by a band from manchester too....!!

the reaper said...


sorry forgot the link,not bad either

the reaper said...

make sure you play it through to the end,I could definitely see myself chanting through the last few lines
'let em burn
let em burn
let em burn'

right on bra

RenterGirl said...

Reaper, I know what you mean. But I still say that William is one of the 'the little people who got burned at the party.' Banks must be responsible. And now they will be. But what about developers, who inflicted these monstrosities on us? The builders who put them up (and cut corners) are briefly in trouble. I still don't think the Williams, are bad. And I know that many BTl landlords would have thrown me out, but William has been fair, apart from when he was or overhwhelmed.
(Also - FYI people. I can spell. I just can't type...)

AndyD said...

Reaper -

I have to agree that we can't really bail out BTLers.. it just seems madness really that the mortgages were ever granted.

What really needs looking at is the whole structure of incentives in the Financial Services sector - as long as the comission/bonus for a transaction is paid up-front, there is a huge incentive to trash the future for today's profit.

If the salesmen pushing the mortgages only got their bonus after, say, 10 years with no missed payments - and had that bonus cur for every reposession, they would be a lot more careful about who they lent to.

It would probably help if minimum building standards were enforced as well.. soundproofing, letter boxes! (in reinforced doors), decent room sizes, storage.. because it look at lot like some of these towers are going to end up uninhabitable.

RenterGirl said...

Andyd - you're right about all of that. I'm not advocating bailing out bailing out BTl'rs. Just saying: they did nothing wrong. they behaved like kids in a sweet shop, but who let them? Good point about making bonuses conditional. It would also be terrible if councils snapped up dovecots for social housing, since they do not reach their, much better housing standards.
reaper - I now have you singing in my head.
Thanks for the tip Alantb. But...will you promise to organise for a drug dealer to trash the garden, and for someone to play techno until dawn. That's the only way I can get to sleep now.
Thanks for reading!

Anonymous said...

Interesting blog, I remember a few years ago when I lived in central London, in Sainsburys there were free leaflets on Sainsbury BTL mortgages - the maximum they would lend was £1m.

That must have been in 2002/03.

The point is that BLT was being touted as an investment for everyone, despite the obvious downsides (I have had experience of being a landlord, and it wasn't good).

Sainsburys - you cannot really get much more mainstream than that can you ?


the reaper said...

'But what about developers, who inflicted these monstrosities on us? The builders who put them up (and cut corners) are briefly in trouble.'

Barratts are as good as dead in their current form,same with taylor wimpey.persimmon.toast,'ah tell ye'

Besides a generous debt for equity swap,nothing will save their investors.In my experience of tehse things,generosity isn't a characteristic that common in bondholders.

I'm with you RG and luckily they're gonna burn with the BTL's.

the reaper said...

'What really needs looking at is the whole structure of incentives in the Financial Services sector - as long as the comission/bonus for a transaction is paid up-front, there is a huge incentive to trash the future for today's profit.

If the salesmen pushing the mortgages only got their bonus after, say, 10 years with no missed payments - and had that bonus cur for every reposession, they would be a lot more careful about who they lent to.

It would probably help if minimum building standards were enforced as well.. soundproofing, letter boxes! (in reinforced doors), decent room sizes, storage.. because it look at lot like some of these towers are going to end up uninhabitable.'

great post andy,left out the bad bits,so Ive reposted the whole quote.

this is the boom and bust of capitalism in action.Exec pay has been out of kilter for years/a decade+.The only thing that could have been done to avoid this fiasco was to let the market do it's work in 2005 or 2003.thats when the recession could have kicked in but the BOE's IR policy stopped that.Hence we had a few more years of bubble.

I could cite the govt use of CPI instead of RPI,the role of mortgage brokers,bank compliance teams,FSA,BTL wannabees,pricing of risk(ie none) in credit markets etc etc.

Sadly, to sort it out,we have the people who didn't see it coming instead of the people that did.

All you can do is stay short of anything retail sensitive/property/commodities/China/Russia/dollar/sterling...which makes us toast.

Anonymous said...

The bizarre thing is that I had to swap a general repayment mortgage to a BTL mortgage years ago when - due to my house being in negative equity during the last property slide - I had no choice but to rent it out. It was never seen by me as an investment choice. I didn't want to be a landlord. I didn't look at a pile of bricks and think "hmmm... pension". It was more the freedom for me to move on and find another "home" in what was a stagnant market. By chance, it was the best thing that could have happened as the market picked up and I only ever got f*cked around by crappy tenants on a few occasions.

But then I was never in over my head with just that one property that I could - if absolutely necessary - move back into.

So, sure, people have suffered because someone has loaned them the money. And there are cases of people being loaned amounts well over what is recommended. But did these people not think "what can I do if I can't rent the properties out?" or "what is the worst case scenario here?"

Or did they just watch 'How I Made My Property Millions' and saw the pound signs?

Only if you make a significant decision like buying a property (or, rather, if you take on a significant amount of personal debt) you do it as an adult and you're expected to do the research and consider the pitfalls. If anyone has been mis-sold a financial product, they can complain. There are official procedures. If they've stupidly believed in some Get Rich Quick scheme then they really only have themselves to blame. Whether they happen to be a nice person or not.

fajensen said...

I have to agree that we can't really bail out BTLers.. it just seems madness really that the mortgages were ever granted.

There is no helping stupid people!

If they do manage to pull off a stupid stunt, they will think that they are gifted and do it again - with worse odds - and convince more stupid people to do the same.

Up till July 2008 the banks in Denmark were advising people to borrow against their homes and invest the money via a pension fund. My own bank was pushing this great plan even though they know full well what I think about being forced to go to work just to pay the mortgage (I am a consultant so I like to be able to take downtime or refusing crap jobs without getting stressed).

People who followed that advice were stupid I.M.O. But what can one do? They would just have found another way to part with their money!!

RenterGirl said...

I know you're all right about taking risks and getting burned, but at the time, to many, people (I mean everyone really) property was a solid gold cert. People whop not distracted, or who looked carefully elsewhere saw what was coming. This will have lasting repercussions on people like 'William' however deluded he may have been. Thanks for reading, and for your informed comments.

Anonymous said...

RenterGirl (above).

No I am sorry but I simply can not agree. William surely went into this with his eyes open and he made an adult decision cognisant of risks. The banks did the same. Frankly it is not the role of banks or indeed government to second guess the risk appetite of individuals.

I don't know William or what his motives were - quite frankly my instinct is that there was greed involved at some level. Simply to dismiss this as, 'everyone else is at it,' is just not good enough and if anything is a bit glib.

Criticise the banks all you like - they did not put a gun to William's head and force him to take on such an outrageous level of debt.

NOT everyone else became a buy-to-let landlord. Not everyone decided to run up 12 mortgages and probably a seven figure debt. Not everyone planned financially on an assumption of permanent increases in property prices and not everyone took the hype at face value.

You say that this will have lasting repercussions on him - I say good. It is the risk-taking of people like William that will need to be paid for my those of us who decided not to take such an obvious risk.

It may well be that William is a nice person, but why that token I imagine that Robert Maxwell had his moments. It is William and his ilk who have distorted the property market, run up a debt so big is has had to be socilalised and who are at the root of so many problems around us.

It is to your credit that you are charitable to him - they are sentiments however I simply can not share.

RenterGirl said...

William is foolish naive and ill-advised, but not evil. I find it interesting that I thought this post was more about how the fragile of edifice of buy to let was bought crashing down effectively by shoddy planning, maintenance and workmanship. if BTL landlords had bought one flat, and made up the shortfall (which most of them were) then I can't see a porble, as they woul dbe paying for a persnion. But world events rules. And they'll sell their moneypit at a loss.

Peter said...

The buy to let thing really is unravelling. My Landlord isn't evil, but he's not terribly fast out of the starting blocks when it comes to repairs, or organising next years contract.

This year he put my rent up because his "costs were getting dreadfull"! On the tip of my tongue was 'and when the feck did that become my problem' until I realised it became my problem when I signed a contract for the place.

This summer the rents everywhere whent up as Estate Agents looked to find another source of revenue. Now that demand is not so demanding and supply is a flood plane after a few months of heavy rain, prices have dipped back down again.

Two bedroom house in my area started at 625 in Jan 08. They went up to 695 and beyond in the summer (08), currently, they have dropped back down, one extreme case shows a brand new house dropping in price from 725 to 595(yes really) in just four months.

I guess it doesn't take estate agents to work out that a percentage of no monthly rent is nothing and settling for a lesser amount would be wise!

Next year, I will either move (and incur the huge cost of moving, agents fees, washing carpets, etc) or demand that my rent does not increase.

At the moment, my contract states that there WILL BE a rent rise of 5 to 7% ever year. This is regardless of market preasures, theorecticaly meaning its cheaper to rent a different house each year (at a low starting rent) than stay put and pay the 5% built in rise.

Why the goverment is not looking into this is beyond me.

RenterGirl said...

Tenants have been treated like serfs. We are living in a home, not a piggy bank, and the agents must realise that there is a natural ceiling on urban rents, which is roughly £425, and that's how far they're going to fall. Peter, say no. Negotiate, but forcefully. Costs are not your problem, at all. Nebie landlords didn't grasp this when they bought, and pass interest rises onto tenants, rather than - as they must - swallow them up and shell out. There used to be a shortage of urban flats, not there's a surfeit. Wake up landlords and letting agents.

the reaper said...

peter you should bluff the b****** out.one month empty is a minimum,there are places near me just sat there empty while the owner pays the moregage because they're too greedy/stupid to drop the price.there are sooo many empty properties it's frigthening.I would not want to be a LL going where we're going.

im on an AST,and then rolled onto a monthly thing.the agent tried to get me to sign a new 6 month contract by saying
'it stops them putting th rent up'
I couldn't help but laugh out loud when she said that.Just tell him you want a new cooker or you'll leave...

RenterGirl said...

That all depends on where Peter lives. If it's in a place where saturation development means the pool of tenants has decreased, then bargain hard, or tell them you'll move. Otherwise, well - bargain hard with an eye on moving.

Anonymous said...

I think that there's a clear distinction to be made between the city centre and the suburbs and the effect the two areas of residential living have had on tenants and landlords.

The fact is, city living is far from sustainable anyway. The sheer volume of new developments and lack of community facilities assures that. Also as a recent phenomenon tied-in very closely to the 'housing boom', it was always sold as 'investment potential'. It's new and flashy and 'lifestyle' and it's driven by greed (from investors to developers to planning departments). There's really no substance behind it.

I noticed in your comments the amount of people who will say; "I lived in the city centre for ages and had loads of problems and my life has improved massively since moving to a more established neighbourhood". This isn't a coincidence that lots of people have had the same experience.

I don't believe that you tend to have the same kind of transient population or the same kind of short-term investor in the suburbs. And there are luxuries there like schools, doctors and outside space. People who have actually lived in places for more than five years. And have "homes". Homes full of their belongings and their memories. Places they love.

As for Buy To Lets, there's the distinction again between town centres and suburbs. My dad sold the modest family home a few years back and bought three even more modest places with the equity and small BTL mortgages. Each was in a residential, suburban area with good transport links. (One was rented by my sister for a while.) He has enjoyed really good relationships with his tenants and has no plans to sell. There's also a continued investment into the upkeep of those properties.

There are many other families that have had successful BTL experiences: those who purchased homes in key student areas rather than pay rent when their kids went away to university and, following graduation, maintain those properties.

The important bit is that there was a logic behind those purchases. The individuals behind them had done the research and bought into proven neighbourhoods. There was an obvious demand there in terms of both rental and resale. It was a safe bet and manageable in nearly every possible circumstance.

The city though has been this huge gamble with people cleaning up early on. It's opened the floodgates for people who aren't prepared to do the research and are swayed by a flashy lifestyle sold in a marketing suite or swish show flat.

It's all basically been a huge risk. Whether you bought into it as an investor or decided to support those puchases with your rent, you've contributed to a completely flawed environment. And now it's descending into a 'who's to blame?' situation with the greed further manifesting as who should pay in the current climate. Even as a renter, I don't believe hard bargaining is going to solve the problems. Your life will still be in the hands of an inept landlord. One who is even more financially stretched than he was last year. That can't be good. Meanwhile neighbouring landlords will have panicked and are letting their apartments out to ANYBODY. Life won't get easier. I'm not sure that a saving of £25 a month will buy peace of mind. Particularly given some of the harrowing stuff that happens in Dovecot Towers.

There are other options. Am I the only person that hasn't read a Renter Girl equivalent wrote from within the suburbs?

RenterGirl said...

This is indeed a ludricous situation. There was a genuine need for smaller city flats, which fitted onto available brownfield sites. But: why so small? Why build them so badly? I shall post in a few weeks time about the fact that people earn little and may afford to buy a suburban house. Haggling over £25 pcm, when prices were so over elevated will happen, and helps poorer tenants. I like living in the city, and feel that this is desirable to limit urban sprawl. I have lived in the suburbs, admittedly less desirable areas, and found landlords as lazy, negligent as corrupt (or as kind, generous and diligent.) City living shouldn't mean rabbit hutches. Rents are too high, and they are falling. If quality was better, flats larger etc, maybe this wouldn't be happening.
Thanks for all of your comments.

the reaper said...

'Am I the only person that hasn't read a Renter Girl equivalent wrote from within the suburbs?'

RG is the only blog of it's kind that i've read.You seem to be asserting that bad LL's aren't a problem in the burbs...well let me tell ya...

Anonymous said...

In any case isn't the solution to crap new builds to actually avoid living in one? And I agree that haggling over price is a waste of time when it comes to matters of personal safety. You just can't put a figure on peace of mind.

RenterGirl said...

I'm not sure what you mean at all. Personal safety is a given, a right, wherever you live and however much the rent. Why should standards be lower just because flats are in the city; it's no excuse for lax provisions. And, some of the worst experiences I've had myself, or heard of from friends have been in the burbs (see latest post!)