Over the years as a property lawyer and adviser, I have seen far too many sad, sometimes tragic stories, of what can go wrong when property owners fail to take proper professional advice – in good time – before their property problem becomes serious or incurable.
In this blog I take a look at some of the worse things that can go wrong for property owners if they ignore the warning signs of impending property disaster or fail to properly address property risks.
1. Not dealing properly with mortgage difficulties
The most serious threat to homeowners is of course falling behind with mortgage payments.
The problem becomes critical when a homeowner ignores the problem and hopes it will go away – failing to secure all necessary advice and take all due steps – the most important being early contact with the mortgage company.
At first the problem is very much manageable with the homeowner just one month behind with payments. However, if not tackled, one month can easily grow to two or more – until there comes a point where the homeowner feels completely overwhelmed and cannot see a way out.
BEST PRACTICE IS TO TREAT A SINGLE MISSED PAYMENT AS A POTENTIAL CAUSE FOR SERIOUS CONCERN.
If there is no realistic prospect of paying the missed payment by the time the next payment is due, treat the situation as a crisis and seek expert advice at once. The Money Advice Service, created with government support, offers help with debt matters in a wide number of areas
Mortgage arrears can lead to possession proceedings by a lender, with the homeowner – and family – losing their home and becoming homeless.
2. Downplaying council tax debt
Some homeowners get the idea that local authorities are somehow benevolent, and not at all like other nasty creditors.
As a result they fail to shut down council tax debt as fast as they should and end up being in serious arrears.
- If they approach the council quickly and frankly, and have good reasons for why the arrears came about, they may be able to reach an agreement to pay off the arrears by manageable instalments.
- The problem comes when they fail to fully engage the council and the council decides to take the legal route for recovery of the amount due
- This can lead to bankruptcy proceedings against homeowners or a judgment debt leading to a charging order being placed against their property.
It comes as quite a shock to homeowners when they realise for the first time that the council can force a sale of their home and evict them for non-payment of council tax. The council will also insist on payment of its legal fees – which can rapidly exceed the amount of council tax owed.
The lesson is clear – if you are having difficulties paying your council tax liability, seek expert advice at the earliest possible date and engage promptly with the council.
If the council is pressing for full repayment which you really cannot afford, you may need to seek a further advance on your existing mortgage or take out a second mortgage or a loan in order to clear the debt as a way of avoiding risky and expensive bankruptcy or court proceedings.
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3. Renting home without taking advice
Homeowners sometimes decide they will rent out their home without the help of a letting agent or taking legal advice. To make matters worse, they sometimes do so without a written tenancy agreement setting out the dos and don’ts of the tenancy.
Common problems which can arise include:
- Tenants not signing up for the gas, electricity or water in their names and leaving without paying for their consumption
- Tenants not paying the council tax which, in the absence of a written tenancy agreement, may end up being the liability of the homeowner
- Homeowners not knowing and not complying with their legal duties to tenants in respect of matters such as gas and electricity safety, energy performance certificates and repairs.
These and similar events can lead to disputes, litigation, inconvenience and headaches for the homeowner – plus of course significant financial losses.
Homeowners usually do things themselves in order to save money – but that is often a false economy in the long term.
4. Failing to insure
Home owners sometime overlook or ignore the need to fully insure their home.
- Firstly there is the need for building insurance in respect of the building. In the case of a flat, building insurance is usually dealt with by the management company or freeholder and charged for in the service charge.
With a house, the homeowner is usually expected to arrange building insurance.
- Secondly there is the need for contents insurance in respect of the homeowner’s property, goods and possessions in the flat or house. Homeowners with high value possessions such as jewellery or watches should remember that these may need to be separately insured.
In difficult times, when money is short, there may be a temptation to save money by not insuring the building and/or contents. That of course is an extremely risky thing to do.
If the property is uninsured and is destroyed by fire, the homeowner would face the catastrophe of being obliged to repay the amount outstanding on the mortgage with no insurance payout to rebuild their home.
5. Failing to take legal advice when a joint owner moves out
In joint ownership cases, where property is owned by two or more people, it is highly desirable for all parties to promptly seek legal advice in the event of the joint owners falling out and one of them moving out.
Consideration should be given to “severing” the joint tenancy – in which case, on the death of one of the co-owners, their share will not pass automatically to the survivor but will pass instead to their estate.
If there is a “trust deed” or “joint ownership agreement” governing the property, there may be provisions setting out what should happen once one party moves out.
In any event, if the property is not to be sold, the parties should try to agree what should happen in terms of future mortgage payments, upkeep of the property and how the sale proceeds should be shared out following a sale.
If the joint owners are married, thoughts should be given to divorce and the best interests of any children living at the property.
IF THE PARTIES CANNOT REACH AN AGREEMENT AS TO HOW TO PROCEED, COURT PROCEEDINGS MAY BE THE ONLY OPTION.
It is not a good idea for the joint owners to do nothing at all and just let the years roll by.
When the remaining joint owner eventually wants to sell, they will be at the mercy of the other owner who may refuse to sign the sale documents without receiving a certain amount of the sale proceeds – an amount which may be considered excessive where they made no contribution to the mortgage payments or upkeep of the property after moving out.
If the two sides cannot reach an agreement, they will need to go to court for a resolution and in the meantime are likely to lose the buyer.
Truly horrendous problems can arise – with both sides losing out financially – where the remaining joint owner faces repossession and the other joint owner is unwilling to budge on their financial demands, thereby preventing a quick sale or remortgage.
Have you ever been a property victim? Do you wish to share? Other readers may be able to learn from your story. Please leave your comments below.
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Rebel Property Coach
My website is: www.rebelpropertycoach.com