Ask the Expert - mortgages and property
Every month, Insider invites readers of the Insider Daily newsletter to submit their questions about commercial property and investment to top professionals from the Yorkshire property community.
This week, Ciaran Corry, banking litigation partner at Cobbetts in Leeds, has been our Ask the Expert, answering your questions on mortgage fraud and residential property disputes.
All answers are for general guidance only. Each case must be handled on the individual facts.
Q: My former partner and I have two properties together, both of which are in negative equity to the tune of about £60k. We’re keen to sell, but other than sitting tight and hoping that the market picks up pretty soon, what are my options?
A: "Lenders are generally reluctant to allow sales of mortgaged properties at a sum below what is required to redeem the account. This issue was considered in the case of Palk -v- Mortgage Services Limited in 1992, during the last recession, where the lender refused to allow the sale of the property, which would have resulted in a shortfall. Here, the court decided in the borrower's favour.
"If you wish to proceed to sell the properties, you should obtain the written opinion of two local estate agents and approach the lenders for consent to sell. If the lender consents, you will still be liable for the shortfall on the mortgage debt.
"The other option is to rent out one or both of the properties until the market picks up again, which will probably begin next year. If you decide on this option, you will have to notify the mortgage lender."
Q: I’m a residential landlord with a few properties, and recently, more of my tenants’ contracts are expiring with arrears – how much is it worth chasing, realistically, and when should I just let it go?
A: "You will have to assess, from the references that you received for each of the tenants, whether or not it is actually worth you spending time and money pursuing them. If they have lost their jobs, it may not be worthwhile. While it is relatively easy to obtain monetary judgments against defaulting tenants, the enforcement process in this country is very poor, and more than 80 per cent of small claims debts are unsatisfied."
Q: My partner and I both have properties, so when we moved in to her house a year ago, I rented out my flat. I’m not occupying it and primarily see it as an investment – do I need to change my mortgage? As I’ve been doing it for a year, am I liable for any charges?
A: "There is no need to change your mortgage, but you are obliged under the terms and conditions of most mortgages to advise your mortgagee if you no longer reside in your property. You should be aware that your lender will be within their rights to increase the interest rate on your mortgage. Also, you will have to let your insurance company know, as failure to do so may invalidate your insurance policy."
