Today Bank of Ireland chief Richie Boucher spoke about strategic defaulters, the wording used was different, he spoke about tendencies to engage in “a diversion of rental income that should be coming to the bank”.
Who will the receivers be? I suspect it will be some of the well known estate agents who I know are in talks with other banks on the same basis. The ‘receiver of rent’ clause in many mortgage contracts is often unenforced. The ability to obtain it is not generally contested but it still requires a court order and then the operational difficulty of getting to the property to explain this to the tenant and then taking over the collection of the rent.
Why has the level of arrears spiked in the investment pool of business? Theories abound, my own (which makes me vastly unpopular) is that it is down to making a business decision in favour of oneself. However, getting a rent receiver is not a ‘fix’ and I think Bank of Ireland will learn that the hard way.
First of all there is the legal cost, then the engagement cost of appointing the receiver who needs to get in touch with the tenant who may or may not feel sympathetically towards their landlord – in some cases the tenant doesn’t cooperate with the request.
If this happens they do have a legal right to remain via their tenancy because the rent receipt is on foot of the mortgage but the tenancy is on foot of a lease so you are into a quagmire of issues, the bank were not the ones to register with the PRTB which puts another functional layers of problems into the mix.
What banks should be doing is just taking the properties but at present the Start/Gunn ruling that Justice Dunne deliberated on last July has caused a problem with the repealed 1964 Registration of Title Act upon which the right to repossess often stands.
The whole point of the exercise is to remove the incentive to default and divert monies elsewhere, by appointing a receiver of rent you strip out the income and leave the borrower only with the implications of the default, but what does that say of the implications of merely not servicing the debt? Avoiding the cost is not dissimilar to making a gain.
This problem won’t be going away any time soon.