As an increasing amount of borrowers face up to the prospect of being unable to sustain payments for their buy-to-let properties, lenders continue to face the task of successfully managing and assisting customers through this potentially sustained period of risk.
The route of formal repossession represents a costly conclusion for lenders, who are subsequently unable to retrieve the vast majority of shortfall. As a result, lenders are increasingly seeking alternatives to ensure they are minimising the cost associated with the management of their buy-to-let properties, whilst maintaining their adherence to the principles of treating customers fairly and, of course, mitigating ongoing arrears.
Instructing on a rent receivership basis primarily reduces the upfront and often unnecessary cost of full LPA receivership, as in the majority of cases the properties are already let with fully paying and legitimate tenants in situ. Furthermore, lenders have a significant duty of care towards tenants and their rights of occupation and cannot be seen to force vacant possession for the purposes of sale.
A rent receiver will work closely with their chosen rental managers and service providers to ensure they are in the best position to provide an objective view and manage each case scenario professionally and proactively to maximise net rental payments.
Whether used as a short or medium term measure, the utilisation of rent receivers looks set to increase as lenders look to collect the maximum income due under existing assured tenancy periods. Where traditional appointments of an LPA receiver with powers of sale are often viewed as an expensive solution, and difficult to justify in terms of return, this is no longer the case as a modular approach with proportionate costing is available.
The implementation of a staged receivership solution, in which costs are broken down and charged only for the specific elements required, allows the cost of initial appointment to dramatically fall and the overall fees to become proportionate to the amount of work required.
This revised approach allows lenders to justify the use of a receiver appointment in many more situations than previously thought. Firstly, to establish the occupation status of each property and, secondly, to assist with the structure of subsequent strategies and ongoing management of rent, focusing on maximising incomes and the risk management of both tenancy and property.
Date: 2nd, February, 2010
Author: By Peter Gammon, asset management director at movewithus
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