Yahoo Finance ‘I was a landlord with 57 homes – then the banks repossessed them all’
David Northrop was once a landlord with a portfolio of 57 homes – but 10 years ago the banks repossessed them all.
His properties, which were rented out to social tenants, were confiscated by the banks, transferred into the hands of property debt collectors – known as LPA receivers – and sold off at auction.
Altogether, Mr Northrop lost around £11m in assets – or £25m in today’s value.
The reason for his undoing was three-fold. It started with the HBOS Reading scandal in the early 2000s, in which innocent business owners fell victim to a £250m loans scam run by corrupt staff and consultants. Overnight, the bank, now part of Lloyds, deemed landlords like Mr Northrop as ‘risky’.
HBOS took their properties, sold them at a discount, paid off the mortgages on them and put the remainder towards ‘consultancy fees’. These fees were shared with senior bankers, who reportedly spent them on trips to Barbados, Rolex watches, drugs and prostitutes.
Then in 2009, Gordon Brown’s government decided to start paying housing benefit directly to council tenants – throwing landlords like Mr Northrop into rent arrears.
Arrears would build up for two or three months at a time, Mr Northrop said, before he would try to pay them down by making alternative arrangements with individual tenants – many of them single mothers.
But once the banks began to appoint LPA receivers he could no longer access his properties, collect any rent or negotiate selling some homes to clear the arrears.
LPA receivers have never had to be licensed insolvency practitioners, and buy-to-let borrowing is still largely unregulated by the Financial Conduct Authority – unlike residential mortgages.
This, victims of LPA receivership say, is why so many property owners lost what were essentially their pensions after 2008 – and the banks’ shift in appetite from asset-building to cash flow only exacerbated their losses.
Now, history could be about to repeat itself.
Rent arrears are on the rise once again and more and more landlords are falling into the red.
In the first three months of 2024, 600 buy-to-let mortgaged properties were repossessed – a 20pc quarterly increase, according to banking trade body UK Finance.
Richard Harrison at Homeowner Management Services, a repossession-prevention agency, has seen a rise in the number of landlords seeking advice on LPA receiverships in recent months.
“We’re getting a couple of calls a week on this now. We had one gentleman who fell into two months of arrears by mistake. He offered to make six months-worth of mortgage repayments upfront to remedy it, but the lender told him to speak to the receiver – the receivers, of course, won’t give his houses back,” Mr Harrison said.
“Another client went on a family holiday to Spain. He had a house full of students. While he was away, he fell into arrears. The property was turning a £2,500 profit, but the bank appointed receivers who racked up £3,000 in fees in the first week. He now has to raise £8,000 or sell the property.
“You can lose your portfolio overnight, and homeowners are powerless once the receiver is instructed. It’s legalised criminality. We had a case a couple of months ago where a receiver sold a property with tenants in situ. It went for £250,000 at auction, when it was worth £450,000.”
MP calls for law to be strengthened
Back in 2010, MP George Eustice wrote for Conservative Home that “one of the most shameful things” about the insolvency industry was “the way receivers ‘cook up’ bills”.
“Too often,” he said, “it is just a cosy stitch-up between the bank and the receiver and because the whole process is so demoralising for the victims in such scenarios, such conduct often goes unchallenged.”
Today, Mr Eustice stands by this sentiment.
The MP for Camborne and Redruth told the Telegraph: “The law needs to be strengthened so that there is more court supervision of the powers exercised by receivers appointed under the Law of Property Act.
“If lenders needed to get a possession order from the courts before being permitted to appoint a receiver, it would bring integrity to the sector.”
‘All the banks wanted to do was call in receivers’
After losing all his properties by 2014, Mr Northrop started up a new company providing scaffold boards and furniture in Kent.
Now 58, the businessman – who has put his skin condition, vitiligo, down to stress – is trying to get back onto the buy-to-let ladder.
Unsurprisingly, however, lenders don’t want to touch him because of his past.
He said: “It haunts me. I lost everything. It was my lowest point. I had to rely on food banks. ‘Rich landlords, who cares’ is what we’re often told. But people have committed suicide over this. Others have died, having given up after being made bankrupt. I know one gentleman who lost 137 properties in Manchester and became a taxi driver.
“If I was given the option, I could have sold some of my properties to reduce the loans. My loan-to-value across the portfolio was only 50pc. But all the banks wanted to do was call in receivers to take control and sit on them doing nothing – which made the whole thing a lot worse.
“Tenants were on the dole so they stopped paying rent. It took years for the banks to evict them. I had to pay a £30,000 council tax bill during the LPA receivership period too. It was a total free-for-all.”
Mr Northrop had one property with Mortgage Trust, now part of Paragon Bank, three with Mortgage Works, 10 with the state-owned Mortgage Express, 21 with Birmingham & Midshires – part of Bank of Scotland – and the rest with HBOS.
He had tried to propose selling 10 properties to clear the arrears and reduce the mortgages, but every property was confiscated and later sold by LPA receivers. One of the properties HBOS sold was valued at £575,000, he said, but only fetched £90,000 at auction.
A spokesman for Bank of Scotland said: “We understand that the failure of any business is upsetting and can continue to be for many years afterwards.
“Where administrators or receivers are appointed, it is always an action of last resort and will typically be as a result of the customer failing to adhere to the terms of the borrowing they signed up to.”
Mr Northrop is still waiting for an outcome from the Financial Ombudsman Service for his case.
‘My homes were worth £1.5m - now I live in a council flat’
Joan Keeley used to own eight properties with her then-partner. The mortgages were with Kent Reliance, now owned by One Savings Bank.
She said her properties were worth around £1.5m in 2010 and the outstanding mortgages totalled just £90,000. At today’s values, she reckons the properties would be worth around £3m.
Ms Keeley said: “The financial damage and personal damage the bank has caused is immeasurable. I don’t even have money for my funeral and my children and grandchildren have been denied an inheritance.”
Once living in a five-bedroom detached house, Ms Keeley now rents a small one-bedroom flat on benefits.
After the financial crash, Ms Keeley said she was in contact with “hundreds” of people who had experienced similar – or far greater – losses. Now, she says, many have died, given up fighting or, in some cases, taken their own lives.
Back in 2008, Ms Keeley’s lender offered her and her partner a three-month payment holiday which they took. But she said they later discovered it didn’t show up on their statements
“We kept asking for a breakdown of the accounts. Eventually, we refused to pay the mortgage until they showed us the accounts. We were only in arrears for two months. They never gave us those accounts.”
Once the couple went into arrears, the bank said they owed a collective £18,500 – despite part of that amount relating to a pre-arranged mortgage holiday.
After appointing receivers, Kent Reliance sold the properties between 2012 and 2014.
Ms Keeley took the receivers to court after she lost her properties. She won, but then it went to an appeal and she lost – meaning a further £26,000 bill was added to her mortgage accounts.
A spokesman for Kent Reliance said: “This customer’s rental property portfolio fell into substantial mortgage arrears over a number of years.
“Despite assistance and extensive forbearance being provided to the customer the arrears persisted, ultimately leading the bank to appoint LPA receivers.
“The case has been reviewed by the regulator and the Financial Ombudsman Service, and at every stage the bank’s position has been upheld.”
