Legal fears over rent move by banks

ATTEMPTS BY the State’s major banks to appoint rent receivers to collect money directly from the tenants of buy-to-let investors who are not servicing their loans may be illegal, a leading housing charity has warned.

It could also leave vulnerable people exposed to intimidation from multiple sources, Threshold has said.

Responding to reports that AIB and EBS were joining Bank of Ireland in stepping up pressure on buy-to-let investors by employing collection agencies to get rent directly from tenants, the housing charity said such moves could run contrary to legislation.

According to weekend reports, the two banks are seeking to bypass landlords to collect rent directly from tenants.

While the reports suggested such moves were new, it has been flagged and reported for months, most notably in April, when Bank of Ireland said it had appointed rent receivers in an effort to stop buy-to-let investors diverting rental income from investment properties away from the bank.

That move was a direct response to calls from Central Bank governor Patrick Honohan in March on banks to get tough with buy-to-let owners.

Rent receivers hired by the banks typically operate on a commission basis and get 20 per cent of the rental income. It is understood the banks are looking to property management companies to handle the process.

While none of the State’s main banks would comment on the record yesterday, a number were prepared to confirm the policy of taking rents was in place but stressed they would not be going after smaller investors.

“We are not going to be hounding those who have one or two properties,” one bank source said. “What we are looking at here is targeting major investors who have absconded and left the jurisdiction but are still living off the proceeds of rental income in Ireland.”

Threshold expressed concern that the rights of tenants could be violated.

“The banks need to soften their cough here,” the charity’s Bob Jordan said. “This could turn into a legal quagmire. Our understanding of the law is that a landlord has to nominate an agent to collect rent on their behalf and in the absence of that, any attempts by the banks to step in and take rent from tenants could be against the law.”

Legal experts have agreed there could be some confusion about the practice of appointing rent receivers but expressed confidence that the banks were within their rights to bring in receivers once a borrower defaulted on a loan.