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Our property investment expert is Jeni Browne, Sales Director at
Mortgages for Business
www.mortgagesforbusiness.co.uk
Tel: 0345 345 6788
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Question
How do I recoup the loss from the rental holiday?
I have a buy-to-let mortgage which I only took out a few months ago. I am new to this and feeling very out of my depth as my tenant has just asked to take a break from paying rent due to loss of income during the coronavirus. I think there are problems with debts and they have also been furloughed.
How do I arrange for the money they owe from the break to be repaid? Do I increase rent after this time and how can I guarantee they won’t continue to default? Any advice would be gratefully received.
Answer
There are no set guidelines on how to handle tenants who have asked for a payment break. The general view, from having spoken to many clients, is that many landlords have agreed for their tenant to either take a break or reduce their rent, and their tenant will increase rents once they can again. They will repay their arrears over a period of time, once they are able to.
I don’t think you can guarantee that they will not default, but if you invest time in working out a plan which is not going to be too stretching for them, they are likely to appreciate your support and endeavour to repay you.
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Question
Tenant not paying rent, what can I do?
On my HMO property it was difficult to get a good deal on my mortgage, I paid it off from my ISA and savings.
I have a large mortgage on my residential property; I depend on rents to pay for it. Additionally, on the HMO property I pay council tax, all bills, maintenance and cleaning costs.
I have got a bad tenant who in the past before coronavirus has tried not to pay rent by using different excuses. He is self-employed, so it is not possible to prove his income – he must be getting some cash.
He has now found a legal excuse to not to pay his rent. Keeping in mind the huge mortgage on my residential property, all bills and cleaning etc, I am in a very bad situation. I think some others would be in a similar situation. What can I do?
Answer
I am guessing that as your property is an HMO, you have other tenants who are still paying their rents. So aside from the obvious of speaking to the non-paying tenants, the other option would be to speak to your mortgage lender and ask to arrange either a reduced mortgage payment or a full payment holiday until your finances are back on track.
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Question
Notifying tenants of mortgage holiday
If I take a mortgage holiday, am I legally obliged to let tenants know about this? My worry is that they will say that if you’re taking a mortgage holiday then I don’t need to pay rent for those months.
Answer
In short, no, you are not obliged to notify your tenants if you are taking a mortgage holiday. However, the reason lenders are offering landlords payment holidays is to cover them if their tenants are not able to pay their rent. So it would beg the question, if your tenants are paying their rent, do you need a payment holiday? Your mortgage lender is likely to ask you to evidence this before granting you a payment holiday.
Remember, a mortgage payment holiday is not free money. Any deferred payment will be added to your mortgage, and your overall debt will increase.
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Question
Will savings impact my ability to take a mortgage holiday?
My landlord has said Birmingham Midshires are in the pipeline of offering buy-to-let payment holidays. However, when completing the form the landlord has to disclose their savings because the mortgage company have send they will come to them for payment. Do you know if this is true?
Answer
I have not heard this, but it makes sense. A lender should not seek to indebt a borrower further if that borrower has means to make their mortgage payment from other resources.
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