Tuesday, 21 October 2008

Sympathy For The Devil

I am surrounded by boxes. My belongings are all packed up and ready to go but I’m wondering about my landlord. ‘William’ is a decent man: jovial, down-to-earth, compassionate and reasonable. Admittedly, he never got round to sorting out those blinds (by the time I had completely lost patience he was obviously going bankrupt) and I always organised repairs, which, while not ideal, hardly adds up to a Rachmanite reign of terror.

William is in trouble. He isn’t stupid, but then neither does he possess a rapier-like business mind; he’s no ruthless, highly driven tycoon. He simply followed accepted wisdom: invest in property. Many others did the same, a decision which has condemned them forever, as serial investors like William are burdened with around £750,000 of debt, if not more. He’ll never repay his creditors. I understand that even when you’re discharged from bankruptcy, they never let you go.

Nor was William unhinged by greed. Like many people he realised that we are all living longer, while the state pension, upon which we reasonably intended to rely, is shrinking by the day. Sensibly (it seemed) he accumulated flats to safeguard his future. Swiftly and easily he expanded his newbuild portfolio until he owned twelve buy-to-let properties. Who financed all those mortgages? The now infamous Northern Rock, that’s who, currently the official Emperors of Repossession, despite having been nationalised.

I may have inadvertently given readers the impression that William was based abroad: he’s not. He lives in a different town, far enough away to explain why he misunderstood the dodgy nature of this particular neighbourhood. When he bought my flat in Dovecot Towers the market was booming. His perhaps cannier friend was purchasing the flat next door, but quietly backed out.

William visited just the once, and gazed approvingly at a then modest building-site opposite, before announcing his ambition to invest there as well. He appreciated that the surrounding area was ear-marked for development, but was never told exactly how many better quality blocks were planned. Obviously, the widespread and ill-timed completion of nicer ‘apartments’ has devalued his stock.

We met recently on neutral ground. He wanted me to stay. I begged him to seek legal advice and stressed the dire nature of Dovecot Towers, emphasising the troubles I’ve detailed here. He was devastated, and actually started to sweat as the magnitude of his predicament hit home. Afterwards, I sent him a formal document detailing the many problems in this building which have decreased its value, intended to support any claim against the idle and ignorant management company if it allowed him to claw something back from this catastrophe.

My compassion is currently under strain, however. William has vanished without providing the promised reference. I know there’s a lot on his mind, but it’s impossible to find a flat without such assurances, and I don’t even know how long I can stay here. The bailiffs could arrive within the next month. I was living in the devil’s own piggy-bank, and somebody has smashed it.

29 comments:

G Orwell said...

The culprit of course is G Brown whose raid on pensions encouraged people to look at something else - BTL.

Now of course BTL is no good as an investment and neither is anything else.

RenterGirl said...

Nor sure about a 'raid' on pensions, but people are suffering for doing what was widely accepted to be clever and smart. How many former BTL'rs now owe a million?

Dave said...

"I understand that even when you’re discharged from bankruptcy, they never let you go."

Could you explain what you mean by that? The point of bankruptcy is that your creditors end up with nothing to pin on you. It's quite a big step, and it does affect your future, but it's memes like the one above that cause some people to choose suicide over bankruptcy, and bankruptcy is clearly not that bad.

Northern Rock, [...] the official Emperors of Repossession, despite having been nationalised.

I'm not sure about 'despite' - NRK's agressive chasing of reposessions is arguably a consequence of their nationalisation!

RenterGirl said...

You will never get credit again, which means that even a rented tenancy might prove difficult. I also understand that bankrupts may still have to repay their debt. I know of people who think: "..oh well, I'll just get loads of stuff and go bankrupt. They can't get me then." Which is inaccurate. And you might epect a nationalsied bank to chase domestic mortagages less vigorously. I know the Northern Rock mortgage portfolio is laregly BTL, which is why they're repossessing so fast. But this ignores the plight of tenants.

Dave said...

"You will never get credit again, which means that even a rented tenancy might prove difficult.

I'm not about 'never again': a bankruptcy falls off your credit record after a fairly small number of years. Some things -- particularly for large loans like mortgages -- may ask whether you have *ever* been made bankrupt, but by no means all of them do, and even the ones that do ask may not turn you down because of it.

I have never been asked whether I have ever been made bankrupt as part of setting up a tenancy. Although credit checks seem part-and-parcel of dealing with those dratted lettings agents, in my experience it seems that landlords don't pay all that much attention to them either.

I also understand that bankrupts may still have to repay their debt.

While you are an undischarged bankrupt you are expected to contribute whatever you can afford towards your debts (including any assets that you might own) but once you are discharged then that really is it.

(Except, of course for statutory debts like student loans that never go away)

I know of people who think: "..oh well, I'll just get loads of stuff and go bankrupt. They can't get me then." Which is inaccurate."

If they still have all that stuff then their Official Receiver will take it and sell it against their debt. If they were particularly frivolous then they might remain undischarged for a long period and/or receive a Bankruptcy Restriction Order, but I think those are pretty rare.

Anonymous said...

Penny,

Since you write for 'The Guardian' about these problems, you could always tell your prospective landlord about your articles and about your blog, in lieu of a reference.

IMO landlords are scared above all of the dishonest or irresponsible tenant - this is what a reference is designed to avoid. You are clearly honest and besides, you have a reputation to protect!

The Internet, like the night, has a thousand eyes...

Cheers and good luck, David

Alice Cook said...

Penny,

I have actually started to feel sorry for your old landlord.

Excellent post.

Alice

RenterGirl said...

Thanks for all of these comments, and for reading. Bankruptcy is clearly not the dark grinding halt I had been advised, but it is still nasty (you can't hold a bank account and I wonder if - in the current climate banks will be keen for your custom.) But there is life afterwards. As for my landlord, I am worried for him. It's quite complicated. There's more to come next week.

Dave said...

I'm sorry to appear argumentative, but I do feel it is important to get rid of some of the myths about bankruptcy. It really is about drawing a line under your past mistakes, making a fresh start and getting on with your life, and in some circumstances that's the right thing to do.

Clearly it'll affect you a bit in the future. It will, for example, make it harder to get credit until you've proved that you've learned your lesson - no bad thing perhaps. It will not totally destroy your life, and in particular...

you can't hold a bank account

is plain wrong. Who can get by these days without a current account? I have *never* heard of a bank closing a current account of one of its customers when they went bankrupt. Removing your overdraft facility and cancelling your credit cards is quite likely, but you'll probably get to keep your debit card and chequebook.

The trouble with that is, of course, your bank is quite likely to be one of your creditors and they will take all your salary as soon as it is paid in to pay off *their* debts before your other creditors get a look in. In that case the Official Receiver won't let you do that, so you'll have to open a new bank account elsewhere, with an organisation to whom you owe no money, and get your salary paid into that.

Typically this happens before you go bankrupt, but at least two banks (the Co-op and Nationwide) offer 'basic' bank accounts that are available even to undischarged bankrupts. They're really basic - just somewhere to have your salary paid and a cash card to get it out - but you can upgrade to one with a chequebook and direct debits and so on after a few months if you've managed your account ok.

Some credit unions are also starting to offer fairly full-featured accounts to less, er, traditional customers.

and I wonder if - in the current climate banks will be keen for your custom.)

A good point - I'm sure banks won't want to lend to bankrupts (even less than they used to) but they make a reasonable living off people with positive balances too.

RenterGirl said...

You're not being argumentative, but helpful! I base this on people I know who were bankrupted and claimed in three seperate cases that they were forbidden from holding bank accounts, so in light of what you say, I'm not sure why this was the case. (And it was the case that had no account, causing them major difficulties with being paid by cheque, or transfer, and paying rent by direct debit.)

JB said...

On the issue if bank accounts, a friend of mine went bankrupt some years ago and the bank would only allow him to have an account with a book, so he had to do all his banking in branch. No debit card, no cheques, not even a cash card. I'm not sure if they would deny you a cash card nowadays.

I think you can always open a basic post office account regardless of what has happened to you.

RenterGirl said...

I hope so: we have created a world where banking has entered the fibre of our existance, and to have no account makes life impractical even impossible. Although, what banks are supposed to do, and what they actually do is often very different. Thanks for reading.

Anonymous said...

Do you have a boyfriend?

the reaper said...

'Penny,

I have actually started to feel sorry for your old landlord.'

I don't.All this sympathy for people who played with leverage and got burned is utterly misplaced.I have far more sympathy for the people who have not bought into this Ponzi scheme and are now expected to front up for the bail outs of said idiots.

wouldn't worry about not having a refernce.All I do is take in a bank statement.

FWIW,rents are tanking in the East Midlands.Oversupply is chronic.A house I looked at last year at £1000 per month is now on at £825 and still sat there frinedless and viewerless.

If you are solvent,they(the letting agents) are desperate to hear from you.

My standard search is now reeling off 2000+ results as opposed to half that last year.and they are all just sat there.

RenterGirl said...

There are flats, and they depleting in value. For me, it's more complicated. See tommorow's post. I do feel sorry for landlords to an extent. The banks should never have lent the money. They have a responsibility. Thanks for reading.

Mike Dimmick said...

A good site for bankruptcy information and what they can do to you is Piggy's Bankruptcy Site, written by a discharged bankrupt who had started his own financial services business at age 25.

RenterGirl said...

Thanks for that Mike!

red333 said...

Well done Rentergirl for an insightful and extremely pertinent blog.

The landlord/tenant situation is largely defined by the laws of security of tenure. The 6 month tenancy, created in 1988, gave rise to this type of investment trend and clearly we are seeing here why it is a woefully inadequate law, which encourages unwise investment on the part of some and makes it nigh on impossible for others to own their own home. Epicurus said 'if a law is not mutually beneficial then neither is it just'.

I can't go and invest in a school or a hospital to see if I can make some money, why should I be able to invest in someone else's home? Is housing less important?

What, in this sense, is the differnce between a bookies and a BTL estate agent? Property speculation is, by defenition, a pyramid scheme which requires losers in order to provide winners. The glamour and interest surrounding it comes from this game of chance - people are attracted to it like they are attracted to casinos or any other form of betting. The differnce, if any, is that casino gamblers know their odds!

Where we have lost out as a society is in forgetting what housing is really meant to be for - secure accomodation.

RenterGirl said...

I agree. Houses are for homes. We need to live in them. many landlords (especially social landlords, like Housing Associations) treat tenants like freeloading teenagers who have outstayed their welcome in the parental home. And yep, it's a pyramid scheme for sure.

the reaper said...

'many landlords (especially social landlords, like Housing Associations) treat tenants like freeloading teenagers who have outstayed their welcome in the parental home'

quiote liek they're doing you a favour.I had one LL who seemed genuinely shocked that I hadn't done his house up for him by the time I left.Luckily he'll be bankrupt soon,so that kind of dissappointment won't be the problem it was.

RenterGirl said...

Yep. My neighbours had blinds that reached 3/4 down the window, and were basically told tough. I think you should have to have some sort of training/certificate before you can be a landlord. So you know: (1) it takes time (2) maintenance is costly and a pain (3) you won't make money for years and years. They are being prevented from increasing rents due to awful conditions (this happened in Dovecot Towers recently.)

red333 said...

People wanted to own property for the social status it gave them, there was no impetus to be professional about it - 'how big is your portfolio, etc'.

I recently advised a man who had problem tenants in his BTL house but couldn't deal with it because he was 'in South Africa a lot'. My advice was 'Don't own a BTL house in ENGLAND when you are in SOUTH AFRICA a lot'.

When will the law intervene and put these idiots out of their misery?

RenterGirl said...

I have to agree with you. Many problems in Dovecot Towers are caused by absentee landlords. Many local BTLrs think that maintenance and reapirs are performed by lovely property goblins, and not them.

red333 said...

I've been lobbying the govt for 2 years now to give PRS tenants more security, have met housing minsters. Ironically, doing this would decrease the amount of BTL activity possible, especially in the mortgage industry (notwithstanding current economic climate but I am thinking more long term). I spoke to Julie Rugg prior to her PRS report commisioned by CLG that was published last week. Given the nature of my arguments, I was pleased to find in-depth material on security of tenure, although her overall conclusion that the legislative framework covering BTL is 'largely fit for purpose' is in my view totally wrong. More people need to be educated on how the legal definition of a tenancy length has an effect on the 'financial liquidity' - to quote Julie Rugg - of a landlord. Or, in other words, short tenancies that do not cover a long enough period of someone's life to define it as a home (such as 6 months) give rise to an abundance of BTL mortgages when the economy is in a growth period, and enable investors to hold onto their proerties in econominc downturn periods. Although the terms in use such as 'buy to let' and 'the private rented sector' may be new, the principle behind them certainly isn't.

The idea that the PRS is a demand-driven sector is misleading, and merely serves the political bias towards investment into property, which holds a stronger influence over our Govt than we realise.

Sorry for the long post, I could go on, thought this might be of interest.

RenterGirl said...

No; that's fascinating. Landlords need to understand that longer stable tenancies are best for them. This will mean treating tenants with respect and fulfiling their repair obligations. Too many landlords, when faced with complaints like to bully tenants '...you can always move' not perhaps realising that, with regard to urban newbuilds, the pool of people willing to live that way has dried up. Keep up the good work lobbying. More similar posts welcome! I wonder though, if a cast iron year tenancy is too long?

red333 said...

I think tenants should be able to ask for two years as a minimum and only agree to six months if they themselves intend to move. This way the agents won't be able to lie that the landlord is looking for a long term tenant - they'll have to look for one. In a previous blog you describe well the feeling of being a landless peasant living in someone eles's pension fund - well the reason you feel like that is that, thanks to the 1988 housing act, you have no securty of tenure.

The 1988 act also introduced, in seciton 21, the ability for a landlord to serve two month's notice to quit for any reason whatsover - in fact they don't have to give one. This is arguably more damaging to tenants' rights than the 6 month framework. Because of this we are now not even able to monitor the reasons why s21 notices are served. This is not what I would call an even balance of rights, and the worse set of tenants rights in Western Europe or most of the US.

The whole Assured Shorthold Tenancy legal framework is an undignified law, which has created an unhealthy culture within UK housing. It was introduced, as far as I can tell, on account of yuppies in 1980's london who wanted city accomodation on easy terms, while they saved up for their real home elsewhere. It did allow for a lot of run-down london properties to be re-developed for the london professional, the owners of which were no doubt eternally grateful, but somehow it has become the norm for the rest of the UK rented sector, which is an entirely different matter. The BTL gold rush that you are no doubt familiar with was a result of the 1988 housing act, not demand from a 'mobile generation'. I get very angry just having to write those two words. Its total drivel, and normally perpetuated by people who own their own homes.

The current govt debate on housing reform is now raising the issue of security of tenure after a number of lobby groups, mine included, have highlighted this issue to them in the last few years, since we have seen an increase in the amount of people living under the AST. One of the most sucessful campains is that of Debbie Crew who was a Citizens Advice Bureau worker who identified the problem of 'retaliatory eviction' whereby a tenant complains to the landlord about conditions but is then served a 2 month s21 notice to quit for their troubles. In other words the section 21 law has neutralised their statutory rights as a consumer, and is therefore unacceptable. Even a court judge would be unable to reach any other concusion. Mrs Crew's bill has now been signed by 82 MPs and I hope that won't be the final tally. If she succeeds her efforts will have been of untold value to every PRS tenant in the UK.

In terms of my efforts, I believe I have had some hand in getting the phrase 'security of tenure' to appear in national debate, the PRS report I mentioned earlier paid it some attention (my conversation with it's author was certainly interesting) which in turn has the Chartered Institute of Housing talking about it, and so on. It's still only there as an after thought and largely the received opinion in the housing profession is that the PRS is a needed sector that just needs some adjustment in terms of landlord licensing. Again, I have to say I think this is down to ignorance of what being an AST tenant is like, especially if you have children. I disagree entirely that we just need to tweak the licensing, so the debate will continue. I hope that between us what we have already done will be enough to keep the PRS in check, but if not then I anticipate getting a lot more support from people as slowly the penny drops that they are being ripped off.

I have a whole mine of information on this issue if you are interested let me know and I'll contact you directly.

RenterGirl said...

That is fascinating, and a generation have been forced to become nomadic by BTL. Any info is interesrting. Thanks for taking the time for such an informed, useful and timely comment. Any info is alwasy useful. Thanks.

red333 said...

Hi Rentergirl,

I will try to be more consice this time :-) - just focussing on the two months notice to quit law (section 21 of the housing act 1988) there are three legally sound arguments to be made against it that I am aware of , and am endeavouring to promote:

1) Retaliatory Eviction (Introduced by Debbie Crew of the CAB): Tenant complains about conditions but is evicted before the issue can be legally resolved. Incompatible with consumer rights.

2) 'Unconscionability' - slightly complicated but basically where a tenancy is advertised on the basis of requiring a long term tenant but then the tenancy is not renewed - this applies particulalry for the sell and rent back schemes - could lead to court orders for longer tenancies, or a delay in handing possesion to l/l. Hasn't been contested yet as sell and rent back is a recent phenomenon as is Buy to let, but there are examples of this being proven in other areas of property law.

3)European Human Rights Act 1998 section 8 'Undue disturbance to family life' - can a household reasonably be expected to find suitable alternative accomodation in 2 months, taking into account children registered in schools, etc. Was acknowedged by a court judge as an issue but passed over as 'a matter for parliament'.

RenterGirl said...

I think the law needs a major overhaul. Landlords and letting agents who laugh in the face of CCJ's, and who refuse to co-operate with repairs, since tenants are vulnerable, and the expectation is that we can just (JUST?) move out. In this climate landlords need to use their own real insecurity to keep tenants happy and paying rent. Evictions lead to voids, and that leads to fianncial problems. Thanks for that; it's truly interesting, and useful.