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Skipton Building Society Pulls a Fast One on Mortgages. Will Other Lenders Follow Suit asks LettingFocus.com

I’m interested in the recent decision by Skipton BS to unilaterally change the way the Standard Variable rate (SVR) is applied on their variable rate mortgages.
It could set a precedent to other mortgage companies.
In their mortgage agreements it was apparently stated that the SVR would be at a set amount above Bank of England base rates but it seems there was also a clause which in the event of “exceptional circumstances” allowed them to alter this.
So they have now invoked this clause and bumped up their rates.
I guess they have checked that the mortgage agreements with their customers really allowed them to pull this trick but I wonder if this was made crystal clear within the main part of the original mortgage agreements when their customer signed.
If not, then how legal is this move?
Indeed I wonder if there is a case of an Unfair Contract term here.

In the Skipton case, I’m wondering if there is a parallel with the recent case of the Foxtons letting agency renewal fees.
Here, Foxtons got into trouble with a judge because the renewal fee (or repeat fee) it charged landlords when a landlord extended their tenancy was hidden away and not made clear to the landlords when they signed up with the letting agent.
The judge ruled that in cases where the possibility of repeat renewal fees on lettings was not made clear by Foxtons (and indeed any other letting agent) it acted as a kind of “trap” for consumers.
Indeed, the judge actually used the word “trap.”
The Foxtons ruling has opened the way for landlords to claim back years of overpaid renewal fees with letting agents. (We have commented extensively about the Foxtons case in other posts – click on the Categories at the bottom of this post for more on this.)
So far, I see no one in the main stream press has really bothered to question the action of Skipton Building Society in invoking an odd clause to up their SVR rate.
Perhaps they should.

I have to declare a particular interest here.
One of my buy to let mortgages is on a lifetime tracker of 0.69% above base for life; another is on 0.89% above base - also for life. Others mortgages have neatly defaulted to 1.5% above base for the rest of time.
I do hope the lender who issued those - in both cases for a one off mortgage fee of much less than £1,000 (ah the good old pre credit crunch days!) - will not be able to wriggle out of what is a great deal for me! And a duff one for the banks!
Many other people with mortgages which were taken out in the good times will be in the same boat as me and will be wondering if they could also get shafted by their lenders in the same way as Skipton has hit its borrowers.
Someone needs to look into this before the rest of the banks and building societies follow Skipton’s lead.


LettingFocus.com is the home of landlord information.
I’m David Lawrenson.
I have been a landlord and property investor myself for over 25 years and am author of “Successful Property Letting” – which has been the UK’s top selling commercially published property and buy to let book for the last 3 years.
At a corporate level, I provide consultancy for banks, local authorities and social housing providers – helping them with their landlord facing or buy to let product strategies.
I also write for property websites and am regularly quoted by the media.
I have written articles for numerous publications including The Independent, The Telegraph and quality landlord websites.

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Are Letting Agency Renewal Fees Fair asks David Lawrenson of Letting Focus. We look at the Foxtons case.

A reader of this blog recently contacted me with a query which I’m seeing all too often right now. She had rented out a flat for the last four years to a tenant who was found by a big London Letting Agency. The landlord managed the tenancy herself.
The landlady paid the agent 10% for the first year of the tenancy and unfortunately had signed a contract to pay 8% for each year of renewal thereafter. (As you will know from other blogs posts my advice is to pay a generous up front fee and strike out any clauses requiring you to pay renewal fees where the tenancy is simply extended to become a “monthly periodic” tenancy because in these cases the agent does no real work to extend the tenancy!)
In this particular case, the tenant is now buying the flat – a result of a private agreement between the landlady and the tenant.
However, when the landlady informed the agent of this, they pointed out a clause in the tenancy contract which says, “In the event that a tenant or a third party connected with the tenant introduced by us, subsequently purchases the property, we will be entitled to a fee of 1.5% of the purchase price plus VAT.”
The landlady wanted to know if there was any way she could get out of paying this fee, or at least some of it.
She was shocked that it’s so much when they have done nothing apart from securing the tenant four years ago.

The answer lies in litigation which is ongoing at present.
In the case of Foxtons Ltd v Pelkey Bicknell this year, the Court of Appeal said that it is not sufficient for an agent to introduce a purchaser to earn a sales commission. The agent has to be the effective cause of the sale.
The Office of Fair Trading (OFT) is also challenging, in the High Court, the agency, Foxtons' standard terms and conditions for letting properties.
The OFT believes that the Unfair Terms in Consumer Contract Regulations 1999 mean that some charges made by the agent are actually unlawful.
The case mainly involves the right for the agent to claim a renewal fee from the landlord if a tenant renews at end of the original letting period. But the challenge also covers commissions payable where a tenant buys the property.
This case seems to have been pending for ages and the outcome of the trial and any appeals may not be known for some time yet.
Some solicitors in the north west of England have issued county court claims for landlords for repayment of fees paid to agents in similar cases.
It may also be possible to issue proceedings in court for repayment of cash previously paid unlawfully on these grounds and claim interest from the agent too.
However, it may be better to wait until the result of the OFT case is known and don’t forget that you have up to six years to issue any claim in court.
According to my friend and legal expert Tessa Shepperson at the website LandlordLaw, another option could be to draw the letting agency’s attention to the Foxtons case and offer to pay any monies in dispute into a separate interest paying account to show good faith. Then, if Foxtons wins the test case then the money would then be paid out to them. If they lose, you get to keep it.
Please note we are not lawyers and this is a rough guide of the situation only and should not be relied on as definitive advice. We advise you to always take legal advice from a solicitor experienced in these matters.
Click here to read another short article by me about letting agency fees

I’m David Lawrenson of LettingFocus.com - the landlord experts.
I’m the author of “Successful Property Letting” which for the last 3 years has been the UK’s top selling property title - Buy Successful Property Letting - How to Make Money in Buy to Let.
The new edition is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on sale and rent back.
I’m an expert freelance property writer, property speaker and a well known buy to let blogger
I contribute to newspapers and a host of property websites, write a number of columns in the press and I provide general property letting advice for anyone looking to buy property for themselves or to let out.
In my work as a consultant I help private individuals with any aspect of buying property or buy to let. What’s unique about lettingfocus.com is that we are independent property mentors because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.
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Treat tenants softly softly sometimes says David Lawrenson of Letting Focus

Sometimes it pays to treat tenants softly softly says David Lawrenson of lettingfocus.com
I look after a couple of properties in Kent for people who live abroad ad let them out.
This has given me quite an insight into the mindset of other landlords
One of the things I always say, (and I have a good letting agent friend to thank for this) is, “Don’t sweat the small stuff.”
What do I mean by this?
This example will explain all….
About 6 months ago one of the landlords (despite my advice) came over rather heavy onto a rather prickly and potentially difficult tenant.
The tenant, who had been in occupation for a few years, said we was going to leave soon and to protect his position, decided to withhold the last months rent.
She had always paid the rent on time – for 3 years.
Her justification for withholding the last months rent was because there was no inventory when she moved in.
The landlord admits he was remiss not doing an inventory (not advised by me back then, I’m afraid!).

Tenant Concern
Well, to some extent, I can understand the tenant’s concern and I guess some other landlord may have withheld her deposit in the past. So, as a result, she’s not trusting landlords anymore
Having met the tenant and been inside the property a year after she moved in, it was my view that the property would probably be left in a good condition when she left.
So, no need for the landlord to get heavy.
But get heavy he did and immediately gave the tenant notice for non payment of rent along with a shirty letter.
That was a mistake.
The tenant got cross and left the place in a mess.
This could have been avoided by a polite letter requesting the rent. The tenant would have left in due course and I’m pretty sure in this case that the landlord would not have been left out of pocket.
The message is, sometimes it pays to take a deep breath.

Foxtons and the OFT
On another matter, I see the Office of Fair Trading are claiming against letting agent Foxtons under the Unfair Terms in Consumer Contracts Regulations 1999.
The OFT consider that their agency contract requiring landlords to pay a fee if the tenant continues in occupation, even if Foxtons is no longer managing the property, are unfair.
They are also objecting to a clause requiring the landlord to pay commission if the tenant purchases the property even where Foxtons play no part in negotiating the sale.
Foxtons claim that these clauses are fair and are continuing to use them.
The OFT have therefore issued proceedings in the High Court for an injunction to prevent them using them.
It will be interesting to see how this goes.
As I have said before, landlords should pay a fair up front finders’ fee to letting agents –which should be at least 10% plus VAT - and strike out any renewal fees unless the agency actually does some work to earn them.
In other words, don’t be mean. If you are, it will only tempt agents into trying to make a living by inflating other charges like renewal fees.
If you need more advice on property management or buy to let property in general please ask me.
I’m David Lawrenson from property investment advisors http://www.lettingfocus.com/
I’m the author of the buy to let book “Successful Property Letting - How to Make Money in Buy to Let” the UK’s top selling property title.
Buy the new edition here: http://www.amazon.co.uk/Successful-Property-Letting-Right-Plus/dp/0716030195/ref=sr_1_1?ie=UTF8&s=books&qid=1203933977&sr=1-1
It is fully up to date with all the recent changes to tenancy deposit schemes, HMOs, licensing, capital gains taxes and it has new sections on buying below market value. I’m an expert on property investing for profit and a well known property freelance writer and I contribute to newspapers and a host of property websites, write a property investment blog, a number of columns in the press and run a landlords advice service.
I also work as a consultant helping banks, building societies, housing associations and web portals with their buy to let and property products and services.
You can read more of my property investment blog and details of my networking, advice, buy to let networking programme at my website http://www.lettingfocus.com/

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What’s unique about lettingfocus.com is that we offer independent property mentoring because unlike most people in the buy to let and property “advice” business we are not linked to a property company, developer, agent or bridging loan financier and do not receive commissions from any of these sources.If a property investment is lousy – We’ll tell you straight and we will tell you all about buy to let and property investment - the good and the bad and we won’t make silly promises that you’ll become a millionaire overnight.
Copyright: David Lawrenson 2008. This blog is updated at least twice a week. Permission must be sought before using the material in the blog.

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