Commercial and Residential properties are still being repossessed by Banks and Building Societies at an alarming rate. In many instances, properties are then being sold at figures well below true open market value without adequate marketing, in some cases up to 50% less under the old pals act. This should not be allowed to continue says UKIP West Midlands MEP Mike Nattrass.
Commercial repossessions are running at record levels and residential repossessions show no signs of abating, although a slight fall of 9% has been recorded in the second quarter of the year due to the impact of falling interest rates and changes to the way cases are handled by Courts and lenders.
Lenders repossessed 13,610 homes from April to the end of June compared to 14,884 in the previous quarter, but the figure is still 23% up on the second quarter of 2008. (Source of information Financial Services Authority).
Up to 900,000 home owners have negative equity as a consequence of the dramatic falls seen in house prices. The problem varies from region to region and the percentage of home owners suffering negative equity is highest in the North (9.2%). Yorkshire and Humberside (6.7%) and the East Midlands (5.4%) compared to the national average of 4.8%. (Source of information Council of Mortgage Lenders).
Repossessed properties are sometimes in poor condition as occupiers abandon the properties and return the keys. Leaving the lender to try to dispose of the property at a figure which covers the outstanding mortgage debt. However the lender has little interest in maximising the price achievable to cover any outstanding amount on a second charge or to pay a dividend to the owner. Therefore prices achieved on disposal by Banks and Building Societies where properties have been repossessed are frequently sold well below market value.
The Banks and Building Societies should be under a legal obligation to obtain market value for properties says UKIP MEP Mike Nattrass, but this is clearly being blatantly ignored to the detriment of former owners.
This situation was addressed to some extent by the Court of appeal in the Skipton Building Society -v- Stott case. This related to the sale of a warehouse in The Wirral at an alleged undervalue by the Building Society through Barclays Bank, who were appointed receivers of the owners’ business.
Once there is evidence that a property has been sold at an undervalue, the Courts should no longer assume that a forced sale excuse reduces the price. Agents used to sell the property must show that they marketed with full exposure to the market and not just a quick sale to old pals on the books. This will increase the price obtained.
The circumstances in the Skipton building Society -v- Stott case resulted in the Court of Appeal finding against the Building Society and their entire claim was subsequently disallowed.
UKIP MEP Mike Nattrass a Chartered Surveyor, would like to see more people like John Stott standing up to Banks and Building Societies through the Courts if necessary, in order to put an end to sales at less than market value.
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