15:29 PM, 9th May 2012, About 10 years ago
Let to buy landlords who move and rent out their home because they cannot sell the property are finding more tenants want to confirm they have a mortgage lender’s permission to rent.
More letting agents are demanding sight of written confirmation of permission to let from banks and building societies – especially if corporate tenants are involved in the agreement.
They want to know that tenants on a long term lease are protected from eviction if the landlord defaults on the mortgage.
If the landlord has no permission to let, the tenants could face eviction as the lender is likely to want vacant possession for selling the property.
The Association of Residential Letting Agents (ARLA) reckons 1 in 10 tenants are requesting the confirmation letter.
For many reluctant landlords who are only letting because they cannot sell, this means a big increase in costs.
Consent to let comes with a hike in mortgage interest rates as buy to let borrowing is typically more expensive than a comparable residential loan.
Some lenders charge fees for switching the loans.
Failing to tell insurers that the property is rented out also voids standard residential home insurance policies, which could mean an expensive claim for damage to the building, like a fire, flood or storm damage, is rejected.
“Around 10% of tenants are asking for references on a potential landlord,” said an ARLA spokesman. “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.”