The other day, as a real estate agent, I was faced with the following: I had found a beautiful apartment for my clients to rent from the owner for a year. At the very last minute, the rental agent handed over documents that my clients had to sign from the bank and VvE in connection with pledging rental deposits. What!
I had not come across this before. Through some research on the Internet and inquiries with colleagues, the bank in question and a lawyer who deals with real estate and lease law, it became clear to me:
When an owner or landlord rents out his property, he signs a lease with the new tenants. A lease is a contract between tenant and landlord that sets forth certain agreements, such as the rent.
As long as the rent is transferred neatly every month, there is nothing to worry about. But what if the landlord cannot/will not meet his payment obligation to the mortgage lender for whatever reason? As a tenant, you are far from waiting for that. Yet this does occur.
Pledge is the mortgage of movable property. If you do not pay the principal or interest on your property, the bank has the right to demand it. Pledging rental payments to the bank creates the right for the bank to claim payment directly from the tenant. Not ideal for the landlord, who is now missing income from his rent.
Differences in liens
Lease receivables can be pledged in two ways; silent or public. If this happens quietly, the tenant is not aware of it. This happens in most cases. However, a deed of this must be known to the tax authorities.
In the case of public pledge, the tenant is aware of the pledge of rental payments, he/she has agreed to it by signing the pledge deed.
But what is the reason for a landlord to pledge his rent payments?
In many cases, a homeowner has a mortgage with a mortgage lender. Anyone wishing to rent out their property must obtain permission from the bank and (obviously only in the case of apartments) also permission from the Owners’ Association. By no means everyone does this and it can pose great risks. If the bank discovers that an owner is renting out their home without their permission, the bank can immediately demand the loan.
That just means you have to sell the property at that point. In fact; the bank can have the property auctioned off. In addition, there is a good chance that the bank will include the homeowner in both the Internal Referral Register and the External Referral Register for a period of eight years. That’s a fraud registry and it means you won’t get a mortgage anywhere for the next 8 years.
In addition, the bank may impose penalty interest on you. Those can add up considerably. Don’t! The tenant(s) in it are also directly entitled to rent protection. Thus, you will have to sell the property in a rented state. Not ideal.
So always make sure you ask the mortgage lender for permission to rent out the property in advance. Pledging rental payments can be silent. The tenant does not need to know about this. Only when the landlord stops paying the bank will it be converted into a public pledge and the loan will be collected directly from the tenant.
In short, the mortgage lender may require the homeowner to pledge the rental payments in order to obtain greater security that the loan will be repaid.
Concepts:
Pledge: to pledge an item as security for repayment.
Rent tokens: a rent token is another word for rent that a tenant must pay for the property to the landlord in order to live there.
Author: Kim van Straten (VK Makelaars & Taxateurs)