Tenants get savvy about let to buy rules

19 May 2012 Categories: News

Tenants get savvy about let to buy rules

Homeowners who choose to privately rent their property rather than chance selling in the current property market are increasingly being quizzed by prospective tenants regarding permission from mortgage lenders. ARLA, the Association of Residential Letting Agents, recently reported that around 1 in 10 tenants who look at ‘let to buy’ properties ask whether the landlord has a letter of confirmation from their mortgage lender stating that they can in fact legally let the property.

A lot of let to buy landlords fail to inform their mortgage lender of the change in residency because of the fees involved in amending contracts and the inevitable increase in interest rates, and as a result tenants who take on the property have no guarantee their tenancy will remain legal should the landlord default on the mortgage payments. In other words, the tenant could find themselves facing eviction if the property is repossessed during their tenancy.

A spokesman from ARLA commented on the new findings saying “Around 10% of tenants are asking for references on a potential landlord. The problem for the landlord is that by renting their home they are almost certainly in breach of the terms of their residential mortgage.

“Because of this breach of contract, in a worst case, the lender can demand immediate full repayment of the loan – although few would actually do this if the monthly payments were being made. Most will expect the homeowner to switch to a buy-to-let loan or at the very least pay a higher interest rate.”