A colleague is facing the prospect of going into an IVA (Individual Voluntary Arrangement) because she is having trouble selling one particular property that has been on the market for ages.
Under the IVA, she should be able to keep some of her properties, or at least sell them off over time, rather than under a "fire sale" if it were a bankruptcy process. She is going into the IVA because she now has run out of funds and her monthly outgoings exceed her rental and other incomes.
To make matters worse, she has tenants from hell in two properties (no rental income, eviction processes started), and now she has tenants giving notice because she cannot afford repairs. She says she has used the insurance based tenancy deposit scheme, but she doesn't think she will be able to pay back the deposit (and another is already owing from a recent departure, and it looks like another is about to leave too).
I tried reading through the T's & C's of that scheme, and it looks like they can terminate her membership if they discovered that she is going into an IVA. If that happened, then they would only cover the deposit for another 90 days, by which time she would have to protect the deposits in another scheme. That leads to three questions:
(1) For those tenants that have left (or are about to leave), she doesn't need to protect the deposits any longer - but what if she simply cannot repay the deposits to the tenants at all - does that make the scheme, or the tenant, one of the many creditors to be listed in her IVA?
(2) If she had to transfer her remaining tenant deposits into another scheme, then presumably that would have to be the custodial scheme, but how would she do that if she doesn't have the deposit money available any longer?
(3) She doesn't know I am writing this, but I feel I need to ask anyway: is there a risk that she could face fines or prison if she cannot repay the tenants (or the scheme)?
Many thanks for your help!
