What will happen when Labour re-introduce the Renters Reform Bill?

This is purely hypothetical at the moment but just imagine what could happen when Labour introduce their own version of the Renters Reform Bill. Imagine a scenario.

Labour have got in to 10 Downing Street, and Angela Rayner decides that all private renters should benefit to the same extent as she has, and landlords can no longer sell their tenanted houses. Judges no longer award possession to the landlord, but allow the tenant to pay back their arrears at £1 per week. Landlords wanting to sell their properties is no longer a valid reason to seek possession.

Now imagine a frustrated landlord. He has a £200,000 property, with an awful tenant who is destroying it, and causing more in repair bills than they pay in rent. The new RRB and the Courts won’t let him have the property back. He bought it 20 years ago for £50,000 with a £10,000 deposit and still has a £40,000 mortgage on it.

If he was ever able to sell it he will have around £120,000 left after CGT and the mortgage being paid off. But he can’t get at that £120,000 as the law won’t let him have his own property back.

But suppose he re-mortgaged it. That he had taken out another £120,000, bringing his mortgage to £160,000, i.e. 80% LTV; a perfectly plausible idea. And suppose that he had created a trust fund for his children, and given away that £120,000 to that trust fund, and indeed he had done the same with all of his own wealth. Or maybe moved it offshore, or some other tax efficient, inheritance tax planning strategy, designed to look after his children in the future.

On paper, the landlord is now penniless, apart from his pension or employment income. But he doesn’t need credit again as his wealth is now secured in these trusts or other tax efficient ventures.

But there is still the problem of the tenanted property. He is making no money from it as it is all disappearing in interest and repair bills. He can’t sell it as the law won’t allow it so long as the tenant won’t leave. So he decides to stop paying his mortgage. That’s it, simply decides to stop paying it. The mortgage company are going to want their money back; they can’t get their money back from the landlord as he has shifted all his wealth out from his own name.

They will want to sell the property, and sell it under market value, just so long as they get their £160,000 back.

Would banks be able to seek repossession of a property in an easier way than the original landlord, under any revised RRB? Other than the inability to ever get credit again, what would be the downsides for such a landlord?

Thanks,

Jessie

Share This Article