New Bill would curb banks' powers to possess homes

A Bill which aims to curb banks 'ability to exploit the ability to have a marital home as security against small business and buy-to-let loans, is to get a third reading.

The Federation of Small Businesses is among those supporting The Secured Lending Reform Bill, tabled by George Eustice MP.

The Bill had its second reading last Friday, and was passed by a vote of 309 to 242.

The Bill aims to close a legal loophole by which banks can seize marital properties without having to get a court order first.

Its aim is to ensure that small businesses and home owners are treated alike by their banks.

The Federation of Small Businesses says this would protect economic recovery and make it easier for budding entrepreneurs who need access to affordable capital.



Banks are currently exploiting a legal loophole allowing them to aggressively enforce security over a business’s property, including the marital home.

In some instances, home owners have been deemed trespassers on their own land because banks have entered properties which have been put down as security against a small business loan. 



John Walker, national chairman of the Federation of Small Businesses, said: “The most commonly expressed concern from our members over the past few years has been that of their relationship with their bank. Viable small businesses have been refused loans and overdrafts and have increasingly been asked by their banks for more security, including the marital homes.

“In the face of high levels of public sector unemployment, the Government needs to do what it can to encourage entrepreneurs to start up their own businesses without having to put at risk the family home. This Bill will not cost the Government a penny but will help small businesses who are being treated unfairly as a result of the banks exploiting loopholes.”

George Eustice said: “If we want to rebalance our economy, then first we must rebalance the law in favour of enterprise. The Secured Lending Reform Bill would protect the economic recovery and safeguard the buy-to-let market by preventing sharp practice in the banking industry.

“It would give small businesses the same rights currently enjoyed by home owners and it would return the role of receivers to that envisaged in the original 1925 Law of Property Act. 

“At the moment, banks can and do send in receivers to seize and sell the property of hard-working entrepreneurs without even having to obtain a possession order from the courts. That must change.

“Under these proposals, banks will not be entitled to take possession of a business property unless they have a possession order from the courts first, and the courts will not grant such an order until other counter-claims or disputes between the borrower and lender have been resolved. This improvement to the law is long overdue.”
 
David Salusbury, chairman of the National Landlords Association, said he supported the Bill, adding: “We are concerned by suggestions that receivers, acting for lenders, are engaged in sharp practice.”