Bank rent collection may be illegal

The decision by leading banks to “walk in the shoes” of defaulting buy-to-rent landlords and collect rent directly from tenants could be illegal and risks trampling on tenant rights.

Housing charity Threshold made the warning after it emerged AIB, Bank of Ireland, and EBS are involved in the measure.

Under the policy, the lenders have chosen to circumvent buy-to-rent property owners who are failing to pass on rental payments to the institutions.

In these circumstances, which it is alleged are mainly because landlords are keeping the money to pay off other loans such as mortgages on properties where they live, banks are increasingly appointing specialist “rent collectors” to return the missing income.

These individuals are tasked with going around the defaulting landlord, instead contacting tenants to inform them they should pay the bank directly — although tenants can refuse to comply.

The rent collectors are reported to receive 20% of any income they ensure for the banks.

While EBS has yet to comment, Bank of Ireland has in recent months confirmed it is involved in the practice on a case-by-case basis. AIB — which has seen its buy-to-rent portfolio arrears hit 37%, three times higher than homeowner rates — has also confirmed it is involved.

The bank said the move is only taken in “a small number of cases” involving landlords who have “a potential lack of co-operation”.

A spokesperson said the practice is confined to cases where the arrears are in excess of €1m, such as individuals who own a number of buy-to-rent properties.

Threshold director Bob Jordan told Morning Ireland the policy risks trampling on the long-held rights of tenants.

“Tenants have lots of reasons to be worried about this. They are being caught in the crossfire, without any regard for their rights,” Mr Jordan said.

He said it remains unclear whether a tenant’s deposit would be safely returned or who is responsible for the upkeep of the property.

Other factors such as an “overnight” increase in rent costs could also pose a danger, as both the bank and the rent collector acting on their behalf seek to guarantee income returns.

“Banks must be very clear to a tenant on why they should stop paying a landlord and start paying someone else. Otherwise they could be in a position of paying rent twice,” said Mr Jordan.