For all the talk of high returns, Kirstie and Phil fuelled renovations, and hype about the man on the street gaining a property portfolio, buy-to-let has been a key cause and casualty of the downturn. But while media attention has focused on losses of buy-to-let investors, the sudden loss of thousands of family homes faced by their tenants has been kept quiet. Without urgent additional protection, the UK could face an unexpected homelessness crisis in the most unlikely of places.
 
The life of buy-to-let as prime investment has been short and sweet. It’s easy to forget that buy-to-let mortgages didn’t exist until government introduced them in 1996, but by 2000 70,000 had been issued, and by 2007, the figure had soared to 800,000. Recently though the Council of Mortgage Lenders estimated that 75,000 properties will be repossessed this year. A tragedy for investors, but a time bomb for the three million people living in privately rented accommodation.

The problem is stark. When banks take action to repossess homes rented out by the owner, there is no obligation for anyone to inform those actually living in the property until the repossession hearing. By that point, it’s often too late. When a lender does send notice of a repossession hearing, data protection means that details can’t be passed on and the notice is sent ‘To the Occupier’. In practice, this consigns many of these letters to the junk mail pile and their vital message is missed. For some families, the arrival of a court bailiff demanding they move out is the first they know of their landlord’s financial trouble. Government has acted and reformed the civil procedure rules to ensure tenants are given more warning. However even with this change, and assuming letters are opened, tenants will still have as little as three weeks’ notice of eviction. This is much shorter than the usual two month legal minimum enshrined in tenancy agreements and a very tight timeframe to find new accommodation.
 
The Citizens Advice charity recently highlighted the case of a single mother from Surrey who returned from holiday to find that the locks to her flat had been changed. She was allowed only 10 minutes access to the flat by the lender, to collect essentials including her son’s GCSE coursework, and had to fight repeatedly before being allowed access to collect the rest of their possessions. All because the owner had defaulted and a repossession hearing had taken place while the tenant was away. Given the minimal rights available to buy-to-let tenants, cases like this are far from isolated. Crisis has been approached for help by people who have come home from work to find their belongings on the street, and a family who had to sleep in their car until emergency hostel accommodation could be found.

Repossessions are only likely to increase now that banks are aware of the high risk nature of buy-to-let products. Savill’s Private Finance claimed recently in the national press that NatWest have demanded some buy-to-let investors make an immediate repayment of 20 per cent of the mortgage value, to protect the bank’s investment. This will only increase the pressure on struggling owners and place more tenants in grave uncertainty.

It is unacceptable that tenants should be made homeless, sometimes with no notice, because their landlord gets into financial difficulty. Unacceptable that the people who suffer the most, are those least to blame for the default. Unacceptable that the media, so concerned about the demise of small time property magnates from the shires, have ignored the very real plight facing sometimes extremely vulnerable tenants. Citizens Advice and Shelter are running a campaign to help improve protection for tenants, but what’s needed is clear action from our Labour government. Four simple steps, would significantly improve the situation.

Firstly, tenants must have legal protection to provide adequate time to find alternative accommodation. Repossession courts should take into account the needs of the tenant, rather than dealing simply with a bank and the property owner. The two month notice period should be a reasonable guide. This would require amendments to the Administration of Justice Acts and the Consumer Credit Act, but is a crucial step in providing justice for tenants.

Second, where repossession notices are issued, envelopes should be clearly marked ‘Important – Repossession Notice’ to distinguish them from junk mail and circulars. A simple point that could make a big difference.

Third, government should create an obligation for owners or landlords to contact tenants directly to inform them of likely repossession. After all, it seems ludicrous that tenants should rely on easily mislaid unnamed mail from a bank, when a landlord has their full contact details and can easily get in touch. Not to mention the need for a dose of humanity towards the people who have been paying their rent.
 
Fourth – government should encourage banks and other lenders to keep tenants where possible. Evictions deprive a family of a home, and a lender of rental income. Government should make clear the presumption that tenants stay put, unless the lender can show a compelling need for an eviction.
 
Lastly, given the scale of the problem, government should invest in an awareness raising campaign. Tenants need to understand what will happen if the owner gets into difficulties, to be aware of their rights and who to contact for help if the worst happens.

Britain’s biggest buy-to-let lender, Bradford and Bingley, was an early casualty of the credit crunch. Many of the victims of its over-zealous lending have yet to receive a knock at the door. If it comes, let’s make sure that those tenants are properly protected.