EU threat to Accidental Landlord Let to Buy

by Neil Patterson

20:09 PM, 26th January 2015
About 4 years ago

EU threat to Accidental Landlord Let to Buy

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EU threat to Accidental Landlord Let to Buy

The Treasury has decided that to conform to the European Mortgage Credit Directive (compulsory by 2016) all Buy to Let contracts, where the mortgage was not entered into solely for business purposes, will be defined as “consumer” loans.Accidental Landlords

Hence all Let to Buy or accidental landlords will become regulated in a similar way to residential mortgages. The risk is that the increased complexity and paperwork involved in regulation will make Let to Buy less attractive for lenders to offer, and make it much more difficult and costly for potential Accidental Landlords.

Currently Buy to Let mortgages are treated as commercial loans and do not fall under regulated mortgage contracts. This is because the borrower is deemed to be more sophisticated and have a greater understanding of the risks involved. The exceptions are Buy to Let applications where the borrowers intends live in the property themselves at some point in the future, or have a close family member live in the property. These would then be regulated contracts and as in the current market there are very few Buy to Let lenders willing to offer mortgages on these types of loans due to the increased risk and cost.

The Treasury said “there are some situations where borrowers do not seem to be acting in a business capacity. Examples of this may be where the property has been inherited or where a borrower has previously lived in a property, but is unable to sell it so resorts to a buy-to-let arrangement. In these cases, the borrower is a landlord as a result of circumstance rather than through their own active business decision.”

The Council of Mortgage Lenders said “the regulation the Treasury now proposed is based not on any evidence of a need for additional consumer protection, but purely on ensuring that the European legal requirements are met.”

This could be the thin end of the wedge as the EU are really determined to force all Buy to Let mortgage contracts to be regulated in the long term, even if have been defeated so far!



Comments

Mark Alexander

20:23 PM, 26th January 2015
About 4 years ago

Hi Neil

It might not be a bad thing if all BTL mortgages are seen to be consumer contracts because it would mean that landlords could rely on consumer protection. However, as always the devil is in the detail and I would hope that lending criteria is not affected too badly.
.

David Lawrenson

14:03 PM, 27th January 2015
About 4 years ago

Hi Neil and Mark,

A part of me keeps thinking that this kind of thinking, i.e. about accidental landlords being somehow different, could find its way into the judges view on the West Brom case.

West Brom did, after all, only go after those they decided were professional landlords (arbitrarily 3+ properties) who they argued could not be protected under Unfair Contract Terms rules. (Of course, by doing so I always thought they had effectively admitted that their mortgage contract was inherently unfair).

LettingFocus.com

Mark Alexander

14:29 PM, 27th January 2015
About 4 years ago

Reply to the comment left by "David Lawrenson" at "27/01/2015 - 14:03":

That was indeed an interesting argument for the West Brom to bring up David as it wasn't a fundamental element of our case against them as you know.

However, the press heard what they had to say in terms of targeting people they considered to be most vulnerable in terms of lack of comsumer protection and that certainly earned them no favours.

Bit of an own goal on West Brom's part in my humble opinion LOL
.

David Lawrenson

16:10 PM, 27th January 2015
About 4 years ago

Reply to the comment left by "Mark Alexander" at "27/01/2015 - 14:29":

Yes, true

It's too late now, but I kind of wondered at the time whether our Mark Smith should have leapt on to that effective admission by West Brom (which I recall came very early on in the hearing)...

But I guess his reply would be that this admission would have no bearing on the merits or otherwise of our suit?

Gad to see the press has made much of it, though tbh I have not yet caught up with what they said on the case.

Kind regards
David Lawrenson
LettingFocus

Mark Alexander

16:55 PM, 27th January 2015
About 4 years ago

Reply to the comment left by "David Lawrenson" at "27/01/2015 - 16:10":

Hi David

]You will recall that Mark Smith didn't need to jump on this admission, the Judge did it for him.
.

David Lawrenson

17:30 PM, 27th January 2015
About 4 years ago

Reply to the comment left by "Mark Alexander" at "27/01/2015 - 16:55":

Ah, I respectfully submit you are right Mark
Hope Mr Justice Teare has it in his notes when he comes to make judgement 🙂
Kind regards D

Mark Alexander

18:16 PM, 27th January 2015
About 4 years ago

Reply to the comment left by "David Lawrenson" at "27/01/2015 - 17:30":

Me too!
.


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