The curious incident of the receiver and the apartment

I listened closely to playback yesterday.  It featured an item from Liveline during the week. The caller had recorded how bailiffs had entered his home to evict him, his wife and his child.  Nobody disputed that he hadn’t been a good tenant or paid his rent.  He was being evicted because his landlord was bankrupt and the liquidator was seizing the property with a view to putting someone else in. His belongings will end up on the side of the street.

And it brought back to me a most recent case here in Wexford. About a month ago a Bulgarian couple received a solicitors letter instructing them to leave within a week.  The couple have poor English and left it about a week before they came to me.

Their story was that they had rented their apartment in March 2015 through a Wexford town agency and it was owned by a man who was in severe financial difficulty. In February this year a liquidator ad contacted them and said that in future they were to pay rent to a new renting agency.  They’ve done this and have an exemplary record of never missing a date. They both work, not on great money, but they are triers.

In September they had a little boy.  And this is when the trouble started. First a letter from a Limerick based solicitor telling them to get out arrived. The couple didn’t understand the significance of so, they left it for 2 weeks before they contacted me. Their English is not great but when there’s a new arrival in the house your world is turned upside down. Priorities go out the window.

Under Irish law a landlord can only evict in the case of someone of that duration in private rented accommodation if there is anti-social behaviour or if they have a relative that needs the house.  Neither applies in this case. The receiver is by all accounts a heavy hitter. He was behind a major closure of a business premises in Dublin last year following a lightning move to shut. So I knew there was real trouble on the way.

I contacted my Labour colleague Aideen Hayden who heads up Threshold. Aideen told me that where as the law between a landlord and a tenant is clear that the position of a receiver is a grey area when it comes to tenants rights.  Having got good advice as to how to proceed we got an appeal into the PRTB in Clonakilty.  There is a term limit of 28 days on submitting an appeal. 

The couple called to other renting agencies.  Availability in Wexford was not good.  The best on offer was in Clonard Village and was about 20% more expensive.  And at the back of it all was a letter setting out no reason as to why they should go and one that showed no understanding of the reality that it was a family the receiver was dealing with and not a property.

Why is it that it seems to be non national families who get this type of treatment? Why is it that a revenue stream in rent wasn’t enough for the mortgage bank who were hell bent on getting their pound of flesh? Why is it that the law that applies to landlords is not the same as that applied to receivers?

If a landlord sent the type of letter I’ve seen he’d been strung up. But a receiver acting for a bank that we the taxpayers have bailed out seems to sail on regardless.  That is until an abrupt phonecall from the agent brought the matter to a rapid conclusion. 

The letter was all a misunderstanding. The solicitor got it wrong. You can continue to live there and yes of course, please send us the rent through the usual channels. Relief all round, a young family with a new born baby boy won’t be homeless in the run in to Christmas. But of course if they were, it wouldn’t have been the first time, would it?

When is a market not a market? When it is free!

The laws of economics in a free market are few.  Market sentiment usually reflects the confidence of the customer in the product.  If something is surplus, its price drops, if something is scarce its price increases.  However there’s a maximum price at the top of a market and the minimum price in a bloated market can theoretically be zero.  All resources are finite. 

Once something is second hand its price drops.  You’ll pay a premium if you want to buy brand new.  Products can be anything that a market will value.  I’ve often wondered where is the logic of the market, when it comes to property. 

Property seemed to defy the market logic until 2008.  Then it slumped back to 2003 levels in line with incomes in the public sector.  The explanation that made Ireland uncompetitive as an economy in the noughties was that wages rose to keep in line with property price increases.  Property was a huge contributor to tax take. 

Rent on the other hand fell slightly.  Section 23 loans drove speculative property investment.  Buy to let was a no brainer (remember that expression from the SSIA’s?).  At my very first conference as a councillor in 2005 I recall a presentation urging councillors to invest their representational allowance in buy to let properties.  The target tenant was a builder from Eastern Europe!  Renting was money in the bank for nothing. 

While many of the buy to let properties rapidly dragged the investor down, it’s not true to say that all landlords took a hit. More discerning land lords still had a good business.  While household incomes dropped significantly, rents dropped by low single digits between 2009 and 2014.

No sooner has the turn around come in the economy than rents are starting to race away again.  If you are on social welfare you can get a rent supplement in addition to your welfare allowance that will help pay rent.  If you are on a low wage there’s no such cushion.  When I was a councillor I recall when speaking on the issue of rent supplement querying the absence of a market in Wexford and questioning the role of landlords locally.  Foolishly I expected support from councillors who would consider themselves to the left of me.  In fact I can recall being shouted down and interrupted on one occasion.  Their simplistic analysis is that the government should dip into your pocket and increase rent subsidy. 

But why should you subsidise a market that is one in name only? Why is it that an average property in Wexford which was purchased most likely over 10 years ago should have an average rent of €629 a month?  What are the drivers in that price set by the landlord? Surely initial cost price, add in the cost of maintaining which the land lord may well carry, property tax and possibly service charges. The landlord may appoint an agent who earns a commission.  The rest of the running costs are usually carried by the tenant.  The landlord can offset costs under Section 23 of Bertie’s finance act.  But why is there no competition between landlords? 

When most of us were shopping around and looking for a better deal, prices stubbornly remained above the laws of economics.  As tenants left prices should have dropped by a greater amount than they did.  As I pointed out to councillors about a year ago;  almost half the home purchases in 2013 were straight cash deals.  So who still had cash by 2013? Few purchases were on the basis of first time mortgages in 2012-13, banks had been conspicuously slow at granting mortgages. Some people were obviously sitting on money and knew the property market was about to turn. Clearly some properties were bought by those wanting to get back into the rental market. 

But here’s the real problem into the future.  People who rent aspire to buy.  High rents affects their ability to save a deposit.  Without the 10% deposit for first time buyers, the tenant is stuck in a rut.  This may be the future for many relying on the private sector for housing.  There’s little that any shouting councillor can do about that until there is an intervention in the market to increase affordability.