Santander BTL contract clause stipulates Landlords increase rents by as much as can be reasonably achieved

by Property 118

13:35 PM, 1st February 2017
About 2 years ago

Santander BTL contract clause stipulates Landlords increase rents by as much as can be reasonably achieved

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Santander BTL contract clause stipulates Landlords increase rents by as much as can be reasonably achieved

Since 2011 Santander Buy to Let mortgage contracts have stated the following:max profit

“a) …a reasonable time before any opportunity arises for a review of the rent payable under the lease, you will get written advice from a qualified valuer who is a member of the Rics whether the market rent at the date of the review is likely to be higher than the rent currently payable under the lease;
b) You will provide us with a copy of the valuer’s advice;
c) If the valuer advises that the market rent at the date of the review is likely to be higher than the current rent, you will promptly take all steps which it is open to you to take under the lease to ensure that the review takes place and leads to the maximum increase in the rent which can reasonably be achieved;
d) You will notify us promptly of the result of the review.”

A Santander spokesman said “The contract has been in place and remained unchanged since we entered the market in 2011. We’ve had no concerns expressed over the clause in this time.

“Landlords should set their rents at a prudent level that is fair for the tenant (based on market rates) and that ensures they can continue to service the debt. I would also say we do not agree with the sentiment expressed in the comments. Our interest is that the landlord ensures they can continue servicing the loan – as it is in no one’s interest for a landlord to default on a loan (including the tenant).

“Any potential to increase the rent [subsection c)] is only that which can be ‘reasonably achieved’. Therefore we feel there is plenty of discretion for the landlord to set a rent that they and the tenant agree, and no direct obligation imposed by us that the rent should be the maximum possible.

“Aside from that, our terms and conditions provide an option for the landlord to seek our consent not to apply this condition.”

However, this has now sparked controversy within the housing and finance market.

A landlord who brought this to the attention of Mortgage Strategy this week said ”

I, and many landlords, believe it is an outrageous clause and, if consistently enacted, would have a significant increase on rents across the country, thus further worsening the housing crisis.

“The media paints landlords as greedy but I wonder if they are aware that we are being contractually obliged to increase rents due to companies such as Santander?”

Ray Boulger, senior technical director of John Charcol mortgage brokers, told Mortgage Strategy “This doesn’t square very well with the best interests of consumers. It is the landlord’s prerogative, if they have good sitting tenants, to keep their rent affordable to enable them to stay and to prevent a void.

“As long as the rental cover is sufficient to meet the lender’s requirements, which clearly it would be, otherwise they wouldn’t offer the mortgage that’s the key thing.”

 



Comments

Rob Crawford

15:42 PM, 4th February 2017
About 2 years ago

I really have an issue with mortgagee and insurance providers that dictate how you should run your business! This goes beyond the lenders self interest. I suspect it's been written by a legal idiot that does not actually understand BTL and how landlords have to weigh up increases in rent against the risk of upsetting and loosing good tenants. I wonder how many landlords with one of these mortgages has actually received the rent advice from RICS?

Romain Garcin

15:50 PM, 4th February 2017
About 2 years ago

The terms state that you should pay a RICS surveyor every year and provide a copy of his report to Santander.

How many landlords do that? How many have been contacted by Santander for failing to provide a copy of the report?

Nick Pope

11:25 AM, 5th February 2017
About 2 years ago

I'm not a lawyer but I suspect that the clause would not stand up in court. No landlord can be forced to let his property at a specific rent and in many cases continuing to let to a long term tenant and a lower figure makes business sense. If the mortgage gets paid then it's none of their damn business. I wonder if they would try to force a letting if the house was left intentionally unoccupied?
I also suspect that the stipulation might fall foul of consumer legislation in one form or another.
On the other hand you could use this to justify a rent rise - "not my fault, blame Santander!".

Heather G.

17:11 PM, 9th February 2017
About 2 years ago

The issue I'm more concerned with is that by taking on the mortgage, one agrees to all the terms therein, including that if the landlord is in breach of ANY of the mortgage terms, the mortgage company have the right to take our property! I realise it's unlikely, but legally, the landlord has agreed to these terms.
How many landlords read ALL the mortgage documentation? When I queried various items with my broker, he told me I'm the first person in his 20 -year history as a broker to have read everything front to back.

Gromit

17:42 PM, 9th February 2017
About 2 years ago

I don't have a Santander mortgage, but I suspect most Landlords (myself incuded) didn't read the small print but relied on their solicitors to make sure that there wasn't anything untoward, or point out things like this.

I can see the potential for some PI claims.

Heather G.

18:16 PM, 9th February 2017
About 2 years ago

My broker wouldn't/couldn't answer the questions and told me our conveyancer needed to deal with them. I sent the same set of questions to our conveyancer who told me; that no one ever asks about these, no one reads them, they've never heard of anyone being prosecuted for these clauses and that I was being far too pedantic. She basically told me she didn't have time to deal with all my queries! If I'm spending a quarter of a million pounds on a property, which could potential be taken from us, I'm absolutely going to read the contract.


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