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 and could leave vulnerable people exposed to intimidation from multiple sources, a leading housing charity has warned.
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, Threshold said such moves could run contrary to residential tenancy legislation.
According to the reports the banks are seeking to bypass landlords for rental income in order to collect it directly from tenants. While reports suggested such moves are 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 income from investment properties away from the bank.
The move, announced at the bank’s AGM by chief executive Richie Boucher, was a direct response to calls from Central Bank Governor Patrick Honohan in March on banks to get tough with the buy-to-let market.
Rent receivers hired by the banks typically operate on a commission basis and get 20 per cent of the rental income. It is understood that the banks are looking to property management companies to handle the process.
While the banks would not comment on the record today, they were prepared to confirm that the policy of taking rents was in place but stressed that they would not be going after small time 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.
“The banks need to soften their cough here,” Threshold’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 could be against the law."
Legal experts have agreed that there could be an element of 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 defaults on their loan.
There are two agreements in place – the mortgage agreement and the tenancy agreement. While investor mortgage agreements do allow banks to appoint rent receivers, when it comes to altering existing arrangements between landlords and tenants, the situation is less clear.
Mr Jordan warned that the policy could see tenants intimidated by both landlords and agents acting on behalf of banks to pay rent. “If the tenant pays the wrong person, they may end up in arrears and could end up losing their home despite never having missed a payment,” he said.
He also said clarity was needed on what role a bank would play if it were to get rent directly from tenants and he questioned whether they also be responsible for the upkeep of properties.
The banks are of the opinion that they have no legal obligation to maintain properties but are using property management companies to collect the rent so that they can carry out that role, if required.
