Misery of the 'two-mortgage' trap

Have you recently bought a new house but failed to find a buyer for the old one? If it’s any consolation, thanks to the credit crunch there are quite a lot of other people in that position just now.To enable them to service two mortgages, most of these folks have no alternative but to rent out one of the properties, hoping that a buyer will come along when the market improves. But unlike the recession of the mid-1990’s – when this type of thing was also quite common – ordinary, law-abiding people now have jump through costly and time-consuming government hoops which, somewhat incongruously, come under “anti social” legislation.

It’s all because of the Anti-Social Behaviour etc (Scotland) Act 2004, part of which was designed to protect householders from “problem” neighbours. Nothing wrong in that, of course, but rather than come down hard on those individuals whose drunken (and sometimes drug fuelled) behaviour makes life a misery for others, it put the onus on landlords instead – by penalising owners for the actions of their tenants.

Yet the legislation was flawed from the start. The problem involved people dubiously buying up cheap former council properties and then letting them out without asking too many questions. It was never a big issue in the conventional rental market, where no decent landlord wants to hand over his investment to the care of anti-social types. I’m not saying there are not problems with loud music and late night parties in private rentals, but these are known to occur in overwhelmingly owner-occupied neighbourhoods too. If the legislation was extended to cover the owner-occupied market then, by implication, the Halifax, Nationwide and other High Street lenders would be held responsible for neighbourhood anti-social behaviour on the part of people to whom they had given mortgages.

If my own firm’s returns are anything to go by, around 50 per cent of properties currently coming onto the residential rental market are owned not by investment-driven landlords but by ordinary couples and families who find themselves the reluctant owner of two properties.

The last thing they need at this moment is to potentially fall foul of “anti social” legislation when all they are trying to do is keep their heads above water financially.

However, even attempting to let out a house or flat puts the individual on the local authority radar. Recently one client put an East Lothian property on the rental market for the very reason described above – a perfectly innocent thing to do, one would have thought. Within days, however, an official of the local council informed him that just advertising a property to rent meant he had to register – and promptly had a late application fee levied. In fact, it could have been worse because, the owner was warned, advertising the property without applying for landlord registration was “an offence”.

Private rented housing, especially of the “family type” variety, will have a big role to play in putting a decent roof over peoples’ heads until credit restrictions are eased and the mortgage taps are turned on again yet the current legislation is, at best, most unhelpful in encouraging an increase in supply.

Prominent Scottish lawyers recently described the controversial Home Reports as “dead or fatally wounded” and called for their abandonment or, at the very least, suspension. There is an equal case to be made for anti-social legislation related to the private residential rented sector.

David Alexander is proprietor of the Edinburgh- and Glasgow-based residential letting company, D J Alexander.

THE SCOTSMAN, 16 April, 2009