Brit living in NZ, stopping UK Mortgage payments

[slartibartfast11]

Hello, I am looking for some advice regarding a mortgage I have in the UK.

 

My wife and I emigrated to New Zealand in October 2009. We are British citizens with permanent NZ residency.

 

I have a 100% mortgage held by Northern Rock Asset Management. We are in negative equity and, although the flat is rented out, we are losing money on it every month and it's looking like it will be a bottomless pit. It's getting to the point where I'm considering not paying the mortgage any more and letting NRAM repossess the property.

 

If this happens NRAM will not gain enough through its sale to cover the mortgage. Our mortgage is about 175,000 UKP and the property is probably worth 160-165,000 now. With costs incurred through selling, I imagine the debt could be about 20,000 UKP... though that is pure speculation.

 

If I did decide to do this I'd write to NRAM giving them my NZ address in the hope this prevented DCAs hassling my wife's parents in the UK.

 

In October this year we will have been out of the UK for 3 years. I understand from these forums that after 3 years I cannot have a county court judgement or bankruptcy issued against me in the UK as I will be judged to be non resident.

 

My understanding is that because we won't be a part of the UK legal system the case could not be transfered to the NZ legal system under reciprocity agreements as the case has to be initiated through the UK courts - and because we're non residents this can't happen.

 

I did read this on a debt advice forum:

If you have property or any business interest in the UK it is still possible for them to bring an action there, otherwise because of reciprocal agreements between the UK & NZ they can bring an action against you in NZ.

 

I am a self employed web developer and I occasionally still work with UK clients. They pay into my UK bank account and I transfer it to NZ. Would this count as having 'business interest in the UK' and therefore leading to action against me initiated from the UK? Whilst I did do freelance development work when I was still in the UK I didn't have a company set up.

 

Now we are looking to buy a (very, very cheap) property in NZ. Would that affect a DCAs decision on whether to chase the debt (even if it would be, I assume, illegal for them to do that)?

 

Thanks, in advance, for any help.

[cerberusalert]

In October this year we will have been out of the UK for 3 years. I understand from these forums that after 3 years I cannot have a county court judgement or bankruptcy issued against me in the UK as I will be judged to be non resident.

The three year rule is the time limit in which a petition for bankruptcy can be applied for. A CCJ cannot be obtained legitimately against a non-UK resident, any action would have to be brought in a NZ court although it would be unlikely to accept jurisdiction and hear it.

Would this count as having 'business interest in the UK' and therefore leading to action against me initiated from the UK?

Highly doubtful unless it's a business a/c.

Now we are looking to buy a (very, very cheap) property in NZ. Would that affect a DCAs decision on whether to chase the debt

They would probably still try to recover any shortfall regardless of the fact that you have assets or not. In all probability the debt will be sold on to a DCA such as Creditcorp.

[marmaris30]

Careful with this. Whilst it might be true that a CCJ or Bankruptcy proceedings cannot be brought against a non-resident after 3 years (is there a source for these please, Cerburus?), that probably wouldn't preclude action in the High Court, where as you might be aware, non-residents routinely sue other non-residents with interests in the UK.

 

The various provisions that relate to unsecured debts (especially the Consumer Credit Acts) don't apply to mortgages, which are commercial contracts usually entered into under the witness and advice of a solicitor.

 

Also the statute bar on mortgage-related claims is 12 years. Notwithstanding any shorter limits, they essentially have 12 years from when you stop paying to bring an action against you, and they would almost certainly try, in addition to any repossession. Once they obtain judgement, they could attempt to have it enforced in NZ, depending on their arrangements for foreign judgements. Since NZ is so closely linked to Britain, it seems likely that there would be arrangements in place.

 

Regarding enforcement in the UK, the usual options (warrant of execution, attachment earnings, charging order) would be no use to them but if you still have any significant savings in the UK, they could apply for a Third Party Debt Order to seize them. These are rarely used because debtors don't usually have savings, and they only apply to a specific bank and the balance in the account at the time of the order, so they are of limited use (you could put £20k in an account at the same bank the next day and they'd know nothing about it).

 

While making a loss on the rental is clearly not good for you and possibly unsustainable, I think you should seek other avenues before going for repossession. If you can afford to keep it then eventually you'll no longer be in negative equity, either by repayment of mortgage or by appreciation of value (it will happen one day). Even an orderly sale now would be a better overall solution because you'd get a better price and have less shortfall. Also what about asking for a payment holiday, suspension of interest or extension of mortgage term (if you don't ask, you don't get)?

[cerberusalert]

(is there a source for these please, Cerburus?)

http://www.bankruptcy-explained.co.uk/overseas_bankruptcy.html

Also the statute bar on mortgage-related claims is 12 years.

Lenders who are members of the Council of Mortgage Lenders voluntarily agreed from 11 February 2000 to begin all recovery action for a shortfall within six years of the sale of a repossessed property. If your property was taken into possession and sold more than six years ago, and you have not been contacted by your lender to recover any outstanding debt, you will not now be asked to pay the shortfall. In Scotland, lenders will begin recovery action within five years. http://www.cml.org.uk/cml/consumers/guides/debt/

 

http://www.bdl.org.uk/images/14_mortgage_shortfalls_scot.pdf

 

https://docs.google.com/viewer?a=v&q=cache:IV_4glfMQD4J:www.parliament.uk/briefing-papers/SN04837.pdf+%E2%80%9CLenders+who+are+members+of+the+Council+of+Mortgage+Lenders+voluntarily+agreed+from+11+February+2000+to+begin+all+recovery+action+for+a+shortfall+within+six+years+of+the+sale+of+a+repossessed+property.&hl=en&gl=uk&pid=bl&srcid=ADGEESgrV5TFMblAR_CGSMIL5FIjiA3VzfnybPGyCoyHjnD2dXvc0B3RypIuyQslqoOQ1SNCCxEG06Vq0iQnO4RRefb6sO2NRm4JL00kLkl_jfxa-LWfYZ4heuha4NTzv9CRtUoFn4sw&sig=AHIEtbSMX1rB1AA1aHRx0Y9N1wTBv3bw3A

[slartibartfast11]

Thanks for the heads up. I hadn't considered the High Court.

[slartibartfast11]

Careful with this. Whilst it might be true that a CCJ or Bankruptcy proceedings cannot be brought against a non-resident after 3 years (is there a source for these please, Cerburus?), that probably wouldn't preclude action in the High Court, where as you might be aware, non-residents routinely sue other non-residents with interests in the UK.

 

The various provisions that relate to unsecured debts (especially the Consumer Credit Acts) don't apply to mortgages, which are commercial contracts usually entered into under the witness and advice of a solicitor.

 

 

Thanks for this. I've seen another post where this question was asked, and this was the reply:

 

Firstly, you are correct that any action the mortgage company may start has to begin in a UK County Court and the result of that would be a County Court Judgement or CCJ - which, as you have already observed, can't be made against you as you're not in the UK.

 

You are correct that as a non-CCA debt, a creditor could apply to have a CCJ taken to the High Court for enforcement - but without the starting point of a CCJ that's not going to happen.

 

What do you think?

[kj_NZ]

Can I ask if there have been any developments. I am in a similar situation.

Thanks

[slartibartfast11]

Can I ask if there have been any developments. I am in a similar situation.

Thanks

 

I spoke at length with National Debtline in the UK. They said that as I rent out my property in the UK the bank could argue I had business interests there and as a result could make me bankrupt and take my NZ assets. I wouldn't call being forced to rent my flat to cover the mortgage a business, but there you go.

 

So I am talking to the mortgage lender about taking a payment holiday instead.

[kj_NZ]

The co op don't have an international number or e-mail. Trying to sort things out. I got my friend to ring with my security details from the UK. I am in breach of contract since I am not living there. They did say that they would discuss a buy-to-let with me but the payments would be higher than what we could rent it out for and they want he rent to be 125% of mortgage. It has been on the market since March and is now in negative equity pretty stressful... and very time consuming. Am thinking about handing it back and coming to a deal with the shortfall.

[slartibartfast11]

I'm probably in breach of contract with NRAM too for renting without consent. But hopefully having the mortgage paid is more important. I think you should try to speak to them yourself. Write them a letter. There's also a lot of useful advice on this forum about dealing with mortgage providers.

 

I know about 10% of NRAM's customers are on customised payment plans so that is something else I might try. Maybe worth a shot with the Co-op too.

 

We're well in negative equity - buying a flat on a 100% mortgage at the height of the property market wasn't the best idea in hindsight :/

 

Good luck!

[kj_NZ]

Thanks, perhaps I should read a bit more rather than rushing into things! At least its not raining!

[unclebulgaria67]

When making the mortgage payments to NRAM out of rent, does this purely cover the interest only or make a dent in the outstanding mortgage ?

 

I think if the rent received is just covering interest and basic things like Buildings Insurance, you might decide to sell the property for the best price you can get. Better to sell the property yourself, rather than NRAM selling it for a massively reduced price, plus adding their costs. If by selling it yourself it leaves a shortfall, at least in won't be as much as if NRAM sold it. You can then look to deal with this shortfall as you wish. Difficult for NRAM to pursue you in NZ.

 

If the rent received is covering all your costs and making a dent in the mortgage outstanding, then I think I would continue to rent it out for as long as possible. There is a massive shortage of properties to rent, so you should be able to continue to rent it out. At some point house prices may start to recover, but probably not for a few years. I can't see NRAM stopping you renting the house out, if it is only way for you to pay the mortgage.

 

The other thing is how you are managing to cover any maintenance to the house. As you realise, as time goes by you will have maintenance issues you need to sort out. This may dictate how long you want to keep hold of the property, when the financial situation is tight.