KBC want to force sale on BTL

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Mortimer

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A few things have changed since my recent post here – http://www.askaboutmoney.com/showthread.php?t=185602

My wife has got a pay rise which will mean another 200 euro per month after tax. Also, we’ve been approved for Family Income Support of 50 euro per week. However, we'll probably need to tell FIS about her pay rise which will negate one of them.

Most pertinently, I got a call from KBC yesterday about our BTL – basically they want to force a sale on it but cannot say what will happen to shortfall. Here’s our updated details with all income and expenditure given on a recent standard financial statement to them (but updated to include wife’s wage rise and FIS).


Income details: Wife to get 2730 euro after tax. My JSB ended in November and was not eligible for JSA due to her salary. Just been awarded FIS of 50 euro per week. Other income is 390 euro Childrens Allowance and 700 rent from rental property.
Total income (not including rent) – 3320 euro.



2 adult family
Do you need a car for work or do you use public transport? One car which is needed for work, we have a second one which is essential as we live in a rural area but it's been broken down since pre-Christmas but tax and insurance has been pre-paid on it until may. Got a loan this week of an old banger from father-in-law with tax and insurance in it until May.
Number of children 0- 2 years old: 1
Number of 12 - 18 years old: 2
Monthly childcare costs: 65 euro per day if I have a job interview or something like that. Average of two days per week or 4 half days depending on job hunt.

Home loan (FAMILY HOME)
Lender: bank of Scotland
Amount outstanding: 290,000
Value of home: No idea. Maybe 200,000
Interest rate: Not sure but is pretty low
Monthly repayment - 993 euro approx
Amount in arrears - a few hundred arrears. We've gone on reduced payments of 380 euro for six months. We will not be seeking to extend this so I've included full payments in expenditure list below.

KBC RENTAL Property:
Oustanding: 248,000
Arrears: 12,000
House worth: 125,000 (an estate agent I know said this increased from 110k last year and he predicts it will rise to 140k in Autumn.
Monthly interest only payments: 903 euro
Rental income: 700 euro


Monthly Outgoings (not including KBC mortgage payment)
Electricity 150
Kerosene 100
Broadband/TV 75
Refuse Charges 25
Mobile Phones x 2 80
TV Licence 13
Bank Charges 20
Food/Housekeeping/Personal Care 700
Clothing & Footwear 60
Household repairs/maintenance 50
Childcare 130
Petrol 350
Motor Insurance/Tax/NCT 235
Car Maintenenace/Repairs 50
Car Parking & Tolls 10
House Insurance 58
School Books 20
Uniforms 10
Extra Curricular (school outings etc) 20
Medical Expenses (incl. contanct lenses 57.5
Lifestyle expenses 30
Life Assurance 53
PPR Mortgage 983







3279.5

I met and followed up with a PIP late last year but she was of no use really and just keeps saying to ring back in a couple of months when they’ve more idea of how system will work.

Basically, we’ve been asking since 2009 if we could sell house and do a deal on shortfall. It was worth around 190k then.

I want advice on:
• What are KBC likely to do with shortfall of around 120-130k as we clearly can’t afford it. We’d be willing to pay around 200 euro per month for 5 years if the rest is written off after that time.
• We have not paid Second Home tax or Property tax on the rental property as, to be honest, we could never afford it. It is not registered with PTRB (or whatever they’re called) as we were accidental landlords in 2008).I know the house cannot be sold until these are paid but we will not be able to afford the 4-5k I estimate they’ll cost
• We do not want to go bankrupt or lose our family home. However, can KBC put a lien on our family home if it’s ever sold? The guy I spoke to in KBC yesterday said he’d never been involved in a case where this happened.
-If KBC do agree on monthly payments after house has been sold, can they increase these if I get a job eventually? If so, is there any motivation for me to actually get a job and pay a childminder if anything I make goes straight to them?
-They suggested getting advice on this when we receive letter. But from whom? PIP again? Irish Mortgage Holders Organisation? Solicitor? Any contacts would be appreciated.

All advice, experience and feedback gratefully accepted. We're in a bit of a mess, as you can see.
 
Mortimer said:
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• We have not paid Second Home tax or Property tax on the rental property as, to be honest, we could never afford it. It is not registered with PTRB (or whatever they’re called) as we were accidental landlords in 2008).I know the house cannot be sold until these are paid but we will not be able to afford the 4-5k I estimate they’ll cost
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Don't worry about this, you mean the NPPR and household charge, and probably property tax as well, they will all have to be paid out of the sale proceeds, the banks are well aware, but no purchaser's solicitor will allow the sale to proceed until these have been paid and receipts given. As you've no money, and the bank wants the house sold, the bank will have to sort it.

In relation to the shortfall of 120K (what about auctioneer and solicitor?) hopefully KBC will write it off, but won't agree to it in writing.

They may decide to put a judgement mortgage on your home, but that's just a waste as you're in NE, but it doesn't mean they won't do it. I wouldn't offer any money to them, I'd concentrate on keeping your head above water. Your home loan must be your priority.

As for that lovely guy in the bank telling you that he's never heard of a bank putting a JM on a house, lovely stuff that. How do banks hire people to peddle such stuff.

Not sure if you are liable for tax on rental, I'd worry about this coming back to bit you. That's why an insolvency/bankruptcy might be important.

Get a new PIP, one of the poster on here. Have you payed your current one any money?

You are right that sometimes a job isn't worth it, depends on the circumstances.
 
Bronte said:
Don't worry about this, you mean the NPPR and household charge, and probably property tax as well, they will all have to be paid out of the sale proceeds, the banks are well aware, but no purchaser's solicitor will allow the sale to proceed until these have been paid and receipts given. As you've no money, and the bank wants the house sold, the bank will have to sort it.

In relation to the shortfall of 120K (what about auctioneer and solicitor?) hopefully KBC will write it off, but won't agree to it in writing.

They may decide to put a judgement mortgage on your home, but that's just a waste as you're in NE, but it doesn't mean they won't do it. I wouldn't offer any money to them, I'd concentrate on keeping your head above water. Your home loan must be your priority.

As for that lovely guy in the bank telling you that he's never heard of a bank putting a JM on a house, lovely stuff that. How do banks hire people to peddle such stuff.

Not sure if you are liable for tax on rental, I'd worry about this coming back to bit you. That's why an insolvency/bankruptcy might be important.

Get a new PIP, one of the poster on here. Have you payed your current one any money?

You are right that sometimes a job isn't worth it, depends on the circumstances.
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Thanks Bronte.

We've never paid tax on rental income as we were already throwing 200-400 euro pm on top of rent to pay interest only since April 2008. Do they tax on rental income with no regard for monthly outlay?

Spoke to PIP again since my post this morning. Much more helpful and said they're starting to do deals - either a set sum pw for 6 years or a lump sum of 8--10k to wash you off their hands.
 
Sorry, not paid PIP anything yet. Would cost us 1500 & vat to proceed with them. Haven't taken solicitor or estate agent fees into account, bank can worry about that.
 
Mortimer said:
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We've never paid tax on rental income as we were already throwing 200-400 euro pm on top of rent to pay interest only since April 2008. Do they tax on rental income with no regard for monthly outlay?

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Oh dear, yes they do, depends on the so called 'profits'. Plenty running at a loss paying tax. I haven't looked at your figures, do a separate thread on this as it would only mess this one up, that's if you want to off course.

Thanks for the info on the PIP. Good to know. 8K borrowed from relative to end the nightmare sounds not too bad. I'd want it in writing though.
 
Mortimer said:
Haven't taken solicitor or estate agent fees into account, bank can worry about that.
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You'd want to be very careful with this, you are liable for these fees if you engage the professionals, I'd only agree to a forced sale with the bank, if I were broke, if these fees were to come out of net proceeds before bank takes remainder.

And if I were a solicitor acting for a broke person, I'd only agree to act if the bank agreed it.
 
How would Revenue find out house was rented out for this period? It's been an average of 700pm since April 2008 with a few months missed between tenants.
 
Bronte said:
You'd want to be very careful with this, you are liable for these fees if you engage the professionals, I'd only agree to a forced sale with the bank, if I were broke, if these fees were to come out of net proceeds before bank takes remainder.

And if I were a solicitor acting for a broke person, I'd only agree to act if the bank agreed it.
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Well the bank wants to sell and we've no money to pay professionals so they'll HAVE to agree.
 
Oh dear me, time for bankruptcy for sure methinks. Look at any number of posts I've done on here in relation to revenue and landlords. Plenty of ways to get caught, and revenue are in no hurry. It would be terrible to have yourself back on track and be facing a bill of thousands.

I don't want to scare you Mortimor, but this is a money website so I have to point out to you that your potential revenue bill is hugh. I know people can now backdate the PRTB, but can you even remember your tenants from 2008.

I think you need good financial advice from someone who is competant in banks, insolvency, landlords and taxation.
 
Thanks Bronte. We really don't want to go down the bankruptcy route. Would the Personal Insolvency process deal with issues arising from back-dated rental income?
 
Hi Mortimer

This seems very simple to me. You have Buy to Let which is losing money. It will probably never make money. Until there is a doubling of house prices, you won't be out of negative equity.

You are currently unemployed and your family home is in negative equity.

This is the perfect time to sell the house and do a deal on the shortfall. If you hang about and find yourself with a well paying job, you will get no deal on the shortfall or a much less favourable one.

Unfortunately KBC won't do a deal until after the house is sold, so you are shooting a bit blind.

I suggest the following course of action

Write to KBC as follows. You may telephone the guy in advance to tell him what you have decided.

"We agree in principle to the sale of the property subject to your agreement in advance to write off the shortfall. Pending the sale of the property, we will pay the rent in full to you as we receive it and do everything to maximise the sales proceeds and minimise the shortfall.

We have no means whatsoever to make any contribution towards this shortfall, so you are losing nothing by not agreeing to writing it off.

If you are not prepared to agree to this, we must reserve our position and take financial advice from an insolvency practitioner. As we have no means to pay the fees of an insolvency practitioner and the costs of a Debt Settlement Arrangement or bankruptcy, we will be putting the rent aside to fund these costs."

I don't think that they will agree, so stop paying the mortgage but do save the rental income in a separate account. If they do eventually agree to the sale and write-off, then you can pay over the "back rent" to them.

There is a small risk that they might appoint a rent receiver, but I think it's unlikely and is a risk worth taking.

If they refuse to budge, sell the property and apply for a Debt Settlement Arrangement on the unsecured debt.

Brendan
 
Thanks Brendan. Do you advise we deal with them direct then before pulling out the PIP option?
 
Mortimer said:
Thanks Brendan. Do you advise we deal with them direct then before pulling out the PIP option?
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Yes that's what he said, try and do a deal before going the PIP option. He puts it really succinctly. It's good advice.
 
Bronte, just a quick Google suggests allowable deductions against rental income include 75% of interest paid. This would probably roughly equate to rental income. Does this sound correct?

Thanks again to you both for your time in replying
 
Mortimer said:
Bronte, just a quick Google suggests allowable deductions against rental income include 75% of interest paid. This would probably roughly equate to rental income. Does this sound correct?
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1. You've not paid the PRTB so zero interest is allowable.
2. I doubt if you are able to back date PRTB now as you won't remember your tenants and won't have their PRSI no's (no doubt there are ways and means around this too)
3. How are you going to pay the PRTB for 6 years
4. If you owe tax, any amount, since 2008, there will be penalties and interest
5. You might think you made no money, you might still owe tax.
6. Part of the mortgage payment includes capital, this is not tax deductable
7. Have you all your receives since 2008?

I suggest, on this alone, do a separate thread on the landlord tax forum as it will only complicate matters on here.
 
Hi Mortimer

Am in the same situation as yourself with kbc and my advice to you is to get in contact with the IMHO they are now providing free financial advice and will negotiate with the KBC for any residual balance and i think their record and who started the company speaks for itself - i am surprised none of the other learned posters advised you of this - there was a press release at the beginning of last week regarding it.
 
Thank you Julie. Will the IMHO deal with BTLs though or just family homes?

I did send the IMHO a message on their contact form on Thursday last outlining the situation and am awaiting a response. I am sure they are inundated with cases at present.

How quickly did they get back to you and what assistance were they able to provide?
 
Ok, KBC have said there will not be a full write-down on the shortfall when the property is sold. They've asked for a number of items (affidavits, bank statements etc) but also "make a proposal to KBC for repayment of the residual balance."

I worked our income and reasonable living expenses from the ISI website. I've taken their figures rather than our true figures, which are sometimes higher (e.g. car insurance etc). Plus, their living expenses don't include property tax and impending water charges, should these also be included. Anyway, as you can see there is no surplus every month based on their figures. Therefore, how can KBC expect any monthly payment from us? We don't really have any social life to speak of so the social inclusion costs are probably way too high.

Income Amount
FIS 216.66
Wife salary 2730

Reasonable living expenses:
Adults Primary school x 2§ Infant Total
Food 283.21 324.86 135.44 743.51
Clothing 66.73 59.8 71.99 198.52
Personal Care 64.9 23.48 11.74 100.12
Health 45.17 37.2 35.98 118.35
Household Goods 67.63 26.34 45.58 139.55
Household Services 27.54 27.54
Communications 61.56 61.56
Social Inclusion & Participation 158.02 99.16 7.72 264.9
Education 10.34 58.32 68.66
Transport(Private) 250.5 250.5
Household Electricity 112.39 6.3 118.69
Home Heating 114.46 114.46
Personal Costs 1.91 1.7 1.05 4.66
Home Insurance 17.59 17.59
Car Insurance 46.7 46.7
Savings & Contingencies 78.85 43.38 21.69 143.92
Total before deductions 1407.5 674.24 337.49 2419.23
LE S S child benefit 0 260 130 390
Total monthly s et cos t 1407.5 414.24 207.49 2029.23
MORTGAGE 993


TOTAL 3022.23
 
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