Hi,

I live abroad, and have rented the property out (without the knowledge of the building society) for a number of years. Having problems with the letting agent and they will not communicate with either me or solicitor letters. The solicitor says the next step is to issue proceedings against them, but I cannot afford for them to do that.

Not been paid off them for 4 months, and the money in my UK account has run dry. The rent was barely covering the mortgage payment, and I cannot afford to pay without the rental income.

Last month I didn't meet the mortgage payment for the 1st time, this months is due this coming week, and I'll not be able to meet that either.

I received a letter from the building society last week about the arrears - they think I still live at the property, I've got mail forwarding set up - which runs out next month.

My question is, should I contact the mortgage company and tell them the full situation?. Getting the building society involved and telling all seems like a good idea. Though, when all is said and done, I wouldn't be able to pay the mortgage if they added the 1 or 2% on top of my mortgage payments for me renting it out - even if they were willing to do this as I'm no longer resident in the UK. So I guess they would end up reposessing. There would be a shortfall of maybe 10-12K - about 1/3 of the mortgage.

Thanks

-- James B (buggie@mindless.com), March 17, 2002

Answers

First of all if you are living abroad, do you have any intention of returning to the UK? If not, then why not try and sell the property? If your house is in negative equity, then you may want to see if there are ways of raising the cash to meet the difference, if its not too much, that is.

As for not having told your lender about renting the property - strictly speaking this is against the terms of your mortgage. However if you apply and ask for permission, then most lenders will agree. If you tell your lender that the property will be rented permanently, then they could convert your mortgage to a commercial one, however if you tell them that you want to rent out the property just for a short time, then they are unlikely to raise the interest payments. In my case, I was allowed to rent my house out for 18 months before the lender would have converted it to a commercial rate mortgage. I had in fact let the house out for a lot longer because previously I had not told the lender.

If the letting agent will not correspond with you or your solicitor and you want to avoid any problems, then really you ought to do as your solicitor advises and issue proceedings. The court fees vary depending on the amount you are claiming and you can also claim back solicitors fees, although I think this is up to a certain amount, I'm not sure.

Some solicitors will issue proceedings for a fixed fee, or percentage of the outstanding debt, so if you're not happy with the charges your current one wants to make then consider using a different firm. Lots of solicitors do debt collection, so check out websites of ones local to your property.

I can't advise you want is the correct thing to do, but from the sounds of it, you're not making much from the property and its causing you grief - so perhaps considering selling is a good idea. Also, if you are renting then you will be liable for UK income tax, even if you don't tell the Inland Revenue, the lender will.

As for your lender, think about it from their point of view for a moment. Up until now, as a borrower you have paid them faithfully every month. All of a sudden you do not pay up, they don't know why and so they will send you their usual arrears letters and if you don't contact them, they will just assume that you don't want to pay and start proceedings.

Being honest with your lender may well have its penalities to some extent. But if you intend to return to the UK and live in the house at some point, then I would suggest that you contact the lender and let them know. You don't necessarily have to tell them that you have let the property out for some years, otherwise you will be dropping yourself right in it!

If you decide to let the house go and it is repossessed, then the lender needs to find you before it can do anything. If you have read the information on the website you will see that many people have had a hard time, even years after the repossession. If you've no intention of returning to the UK and want to take the risk that the lender will not trace you, then by all means let it go, but I think that really is a last resort.

Sorry if I haven't given a real answer to your questions, but hopefully I've given you something to think about. Good luck.

-- pendle (Pendle_666@yahoo.co.uk), March 17, 2002.