Receivers, Renters and Ramifications

MarkAnthony

So this has come up a few times in a few different threads. I've recently had to do a bit of research on the subject and being rather thick I thought I might be able to shed some light on it in simple terms, the basis being if I understand it everyone else should be able too! :pac:

I'm going to pop some info in below and keep it simple. I'm more than happy to try and explain some of the finer legal points as people ask them, and I will likely get them wrong. This will happen for two reasons, (i) I am thick (ii) The Supreme Court don't even really know where the legislature is going with receivership let alone undergraduate law students.

So how is it that I have to pay my rent to the receiver but no one fixes the heating?

This is down to S108 of the LCLRA 2009

Essentially what this provides for is for a receiver to be appointed in the case of mortgages in distress. The problem is Subsection 2

(2) A receiver appointed under subsection (1) is the agent of the mortgagor (person with the mortgage - the landlord), who is solely responsible for the receiver’s acts or defaults, unless the mortgage provides otherwise.

(My additions in italics emphasis added.)

This can result in a receiver washing their hands of any problems and these issues falling back to the landlord. Nothing has changed, the landlord is still liable under the RTA 2004 but you can't get blood out of a stone. Responsible receivers will however try to assist where possible.

That's mental, bloody legal profession!

It's actually got very little to do with lawyers or even Judges. It's simply that receivers stem from Company law and in that sphere harsh rules are okay as one would expect to be dealing with prudent persons of business. In fact Mr. Justice Clarke has recently opined that in Company receiverships the approach should be one more favourable to the company than traditionally applied.

The situation is no one really saw this coming as although the LCLRA is a 2009 Act it was penned during the latter stages of the celtic tiger and only really restates the law from the late 19th century.

So do I have a contract with the receiver or not?

I'm not great on agency law but essentially it flows from the contract with the landlord. It's a bit like buying a car from an employee of the car dealership. You contract is with the dealership, not Larry but it was Larry you bought the car off of.

Any questions feel free to ask, I'll try and answer. Hopefully some of the lawyers that are round these parts might throw in what are no doubt numerous corrections. Please do not discuss your specific legal situation this is a hypothetical discussion only.

If you need help the following resources will assist you:

FLAC
Threshold
PRTB

The_Morrigan

Anyone who has studied law will realise the horrors of legislation being intertwined or transferred or touched upon, but the regular Joe & Josephine Soap will have no idea. Just for property alone you have property law in its entirety which is a horror for all law students. This is then linked with commercial law (lending), company law (all the company structures for developers/construction companies/contractors), contract law & and as you have point out, agency law.
You then have legislation, LCLRA 2009, RTA 2004, civil partnership, family home protection act, statute of frauds, the MUD Act to name but a few. If that wasn't enough to melt your brain, you then have equity.

With property in Ireland a person will go to seek independent legal advice when they draw down a mortgage - on that, they won't receive ancillary advice on defaulting, on the appointment of a receiver, on the risks of co-habiting, or on the difference between a tenant in common and a joint tenancy. Most Solrs probably don't even point out that the mortgage is due for repayment in full within the first year and that it's at the banks discretion that you have a lengthy term like 30 years.

People are being thrown into situations they have absolutely zero knowledge of and they have little to no resources to seek legal advice on every single area of law that could touch on their property ownership over their lifetime. The biggest issue right now is receivership and by the looks of it the Govt have been fapping about talking about getting legislation in place to deal with it since 2012. The only real work seems to have been done with the banking federation who did up a Dummies Guide To... by talking to receivers and how they would approach a receivership with tenants in situ. Personally I feel that isn't enough & it shouldn't fall to a tenant to go to the courts to get a law in place that we can rely on.

campingcarist

Just thinking aloud, but an "unwilling landlord" who rents out his house without approval of his mortgage company.

So, if a receiver is appointed, would the lease still be legal without the consent of the mortgage company?

What ramifications does that have on
a) the landlord and
b) the tenant.

The_Morrigan

campingcarist wrote: »

Just thinking aloud, but an "unwilling landlord" who rents out his house without approval of his mortgage company.

So, if a receiver is appointed, would the lease still be legal without the consent of the mortgage company?

What ramifications does that have on
a) the landlord and
b) the tenant.

Two issues here:

Contracts between the landlord and the bank; so the credit facility agreement and the charge agreement (the document that allows the bank to have powers over the house until the mortgage is discharged in full) are separate to the tenancy. If the landlord has breached clauses of these documents the bank can take legal action against the landlord. Commercial rates and residential rates for lending are different, they may wish to seek compensation for the difference. Alternatively, they may do nothing but try recoup the existing arrears and call it quits.

The tenant has no contract with the bank or the receiver. This is the crux of the issue. The situation of the landlord breaching their contract with the bank has been imposed on the tenant. The tenant is then in a situation where their lease could be worthless and they have no protection. If it was me, entering into a new lease with a landlord, I'd be looking to insert clauses that protect me on the off chance that it all goes wrong in later years at least then, as a tenant I have recourse through contract law even if legislation and the PRTB are not available to me in a receivership situation.

campingcarist

The_Morrigan wrote: »

Two issues here:

Contracts between the landlord and the bank; so the credit facility agreement and the charge agreement (the document that allows the bank to have powers over the house until the mortgage is discharged in full) are separate to the tenancy. If the landlord has breached clauses of these documents the bank can take legal action against the landlord. Commercial rates and residential rates for lending are different, they may wish to seek compensation for the difference. Alternatively, they may do nothing but try recoup the existing arrears and call it quits.

The tenant has no contract with the bank or the receiver. This is the crux of the issue. The situation of the landlord breaching their contract with the bank has been imposed on the tenant. The tenant is then in a situation where their lease could be worthless and they have no protection. If it was me, entering into a new lease with a landlord, I'd be looking to insert clauses that protect me on the off chance that it all goes wrong in later years at least then, as a tenant I have recourse through contract law even if legislation and the PRTB are not available to me in a receivership situation.

But, would a landlord agree to such a clause and this would cause a tenant to seek legal advice which tenants rarely do.

I have never sought legal advice about a lease in all the years I have rented.

It would be interesting to know, of all the properties rented in the country, how many are rented by buy-to-let mortgage holders (business landlords) as opposed to how many are rented by "unwilling landlords"; just to see the likely percentage you have of renting from an unwilling landlord.

The_Morrigan

campingcarist wrote: »

But, would a landlord agree to such a clause and this would cause a tenant to seek legal advice which tenants rarely do.

I have never sought legal advice about a lease in all the years I have rented.

It would be interesting to know, of all the properties rented in the country, how many are rented by buy-to-let mortgage holders (business landlords) as opposed to how many are rented by "unwilling landlords"; just to see the likely percentage you have of renting from an unwilling landlord.

Why shouldn't a landlord agree to it? Typical leases seem to be all about if the tenant does something wrong and how the landlord can mitigate their losses - this is to allow a tenant to mitigate against their losses if the landlord does something wrong. I've re-negotiated leases for myself in the past and my landlord was open to the idea. These days if there is a chance that I could lose over a grand in a deposit, then I'd rather pay out 200 quid to a solr to help me out.

The buy to let vs unwilling landlords has zero impact on this discussion - the appointment of a receiver has the same impact on a tenant in all cases.

MarkAnthony

The power to appoint a receiver is a statutory one, it doesn't need to be in the mortgage, although I believe one could contract out of having the receiver, which of course the bank would never do. Equally unlikely is a clause in the mortgage allowing for the receiver to be liable for the landlords defaults, which is specifically mentioned in the legislation.

I have feel I have to correct on a couple of points.

The tenant never loses the protection of the RTA2004 against the landlord. The issue is the enforcing those rights. What are you going to do if the PRTB awards you €5,000 but the landlord is on the brink of losing their family home, let alone their investment (accidental or not) property? Unfortunately adding in an extra contractual clause becomes redundant.

In regards to no contract, well that's a tricky one but boils down to could the receiver sue you the tenant for rent and the answer is a most definite yes. Now given this process would first be through arbitration at the PRTB I can imagine the situation being complicated but black letter law is clear, you have to pay the rent to the receiver who is not responsible for breaches of the lease.

P. Breathnach

It is the function of the receiver to act in the best interests of the creditor who appoints him or her. That is potentially inequitable. The receiver has no great responsibility to the mortgagor or the tenant.

In my (non-lawyer's) opinion, the tenant should behave in his or her own best interest while also acting with some sense of honour. Were I a tenant dealing with a receiver, I would demand guarantees (a) that management charges be paid so that my rights in relation to the development are not abrogated; (b) that repairs for which the landlord is responsible be paid by the receiver, or paid be me and allowed as a deduction from rent; and (c) that moneys be reserved to refund my deposit when the letting ends.

That puts pressure on the receiver to deliver the service that is built into the rental agreement. Without that service, the receiver would have difficulty in collecting rent from me.

MarkAnthony

P. Breathnach wrote: »

It is the function of the receiver to act in the best interests of the creditor who appoints him or her.

This is the 'great debate' in relation to receivers in the context of company receiverships. The two opposing views are Medforth and Downsview. The problem is that there has only been obiter statements on the matter and the Irish judiciary are tied to the decision (or perceived indecision in this instance) of the legislature. The receiver's only duty really is to get market value, that doesn't (it is argued) involve repairs, improvements or even waiting for the market to pick up.

Does any of this translate to the case of receivers appointed under the LCLRA2009 - nobody, to my knowledge at least, knows.

P. Breathnach wrote: »

That is potentially inequitable. The receiver has no great responsibility to the mortgagor or the tenant.

That's putting it mildly! It's patently unfair and unworkable in most cases.

P. Breathnach wrote: »

In my (non-lawyer's) opinion, the tenant should behave in his or her own best interest while also acting with some sense of honour. Were I a tenant dealing with a receiver, I would demand guarantees (a) that management charges be paid so that my rights in relation to the development are not abrogated; (b) that repairs for which the landlord is responsible be paid by the receiver, or paid be me and allowed as a deduction from rent; and (c) that moneys be reserved to refund my deposit when the letting ends.

That puts pressure on the receiver to deliver the service that is built into the rental agreement. Without that service, the receiver would have difficulty in collecting rent from me.

You've opened the door on this so I'll share my view on the matter and I would hope no one is stupid enough to take it as legal advice.

Personally I would withhold any rent for reasonable repairs, erring on the side of caution, i.e. doing the bare minimum. The problem in these situations is the tenant thinks they have a right to have the place how they want it, which might not be the objective point of view.

Management co fees is a tricky one. I could see liability for the tenant here, that said if one could come to an accommodation with the OMC I would be tempted to go down that route.

As for the deposit there is no question in my mind I would withhold the final month's rent hang the consequences, assuming of course I had done no damage.

The law needs to change and the process involved needs to be one that preserves the right of the tenant. By far the easiest way to do that IMHO is making the receiver liable, so long as the rent is current and being paid to them, then putting a clause into the RTA2004 allowing the receiver to break the tenancy with the same notice period as if the LL was selling.

P. Breathnach

MarkAnthony wrote: »

... That's putting it mildly! It's patently unfair and unworkable in most cases....

I'm not happy with the legal position on receivership generally, and I don't limit my concerns to tenancies. But most of that is outside the scope of this forum.

I look beyond the law at what is workable, and I am mindful of the cost of litigation. Rather than worry about the cost, I ask myself what the receiver might do if I were challenging. And I think it is simple: a receiver would not risk costs of many thousands in a somewhat uncertain pursuit of a small number of thousands.

Suppose these figures:
Monthly rent: €1500
Annual management fee: €1500
Deposit: €1500
Provision for repairs: say €500.

If the receiver accepted my terms, in a year the money available to the mortgagee would be about €14,500 out of a total rent of €18,000 - without any great hassle or risk. That's a good deal for the receiver and the mortgagee. I think pragmatism would win out here.

paul71

Ok, quick simple but perhaps stupid question. The receiver has a reduced onus of responsibility to the tentant as it is unclear as to wheither the a contract exists between the receiver and the tenant. If the receiver is not repairing issues in the property and the tenant decides to withhold rent to pay for the repairs himself can the receiver issue notice of eviction if he is not party to the teanancy agreement (ie. must it be the landlord who issues the eviction notice).

MarkAnthony

paul71 wrote: »

Ok, quick simple but perhaps stupid question.

Not stupid at all.

paul71 wrote: »

The receiver has a reduced onus of responsibility to the tentant as it is unclear as to wheither the a contract exists between the receiver and the tenant.

There is a definite contract between the receiver and tenant, just one the tenant can not enforce against the receiver, only the landlord.

paul71 wrote: »

If the receiver is not repairing issues in the property and the tenant decides to withhold rent to pay for the repairs himself can the receiver issue notice of eviction...

Yes but they would likely seek a court order. Frankly this is exactly what the law on the subject needs. Testing on appeal to the High Court. I doubt that will happen.

paul71 wrote: »

if he is not party to the teanancy agreement (ie. must it be the landlord who issues the eviction notice).

The receiver is the LL agent, just like Mickey the barman is the pub owners agent. Mickey can sell you pints, a receiver can issue an eviction notice, rent increase etc.