Thinking of buying with BTL mortgage but there is a sitting tenant

by Readers Question

4 years ago

Thinking of buying with BTL mortgage but there is a sitting tenant

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Thinking of buying with BTL mortgage but there is a sitting tenant

A friend is thinking of buying a property where her sister is the sitting tenant.

She has one BTL and shares 2 others as joint leaseholder, but her income (salary) is low.

She needs advice on whether this is feasible, if she can get a BTL mortgage, if her sister as sitting tenant would be a problem, etc…

Thanks

Lousitting tenant



Comments

Neil Patterson

4 years ago

Hi Lou,

There are two issues here to consider.

First is that no BTL lender will consider a property with a sitting tenant as good security. It is very difficult to evict a sitting tenant. However as the tenant is the sister I am assuming it would be easy to get her to sign a new AST to make the lender happy.

The second consideration is that as a close family member is going to be living in the property and this makes it a regulated Buy to Let under the FCA. It would still be the same as a standard BTL mortgage, but you would have to go through the full regulated application procedure: Full Fact Find, KFI, Suitability letter etc.

The only real problem with this is because of the extra complication very few BTL lenders are willing to offer a regulated BTL mortgage so your options on criteria and product will be greatly restricted. Thus making the income issue more of a problem to find the lender that will fit.

If you friend decides to proceed and needs fully qualified and regulated assistance just let me know on info@property118.com 🙂

it all depends on whether you are using "sitting tenant" in the colloquial sense or in the Assured Tenancy Agreement sense.

Mark Alexander

4 years ago

Reply to the comment left by "All BankersAreBarstewards Smith" at "09/11/2014 - 11:17":

Spot on!

So many people refer to an existing tenant on an AST or periodic tenancy as a "sitting tenant" but a true "sitting tenant" is something very different, certainly almost impossible to get out whilst they are still alive and then, depending on what type of sitting tenant they are, there may even be right of occupation which pass on to siblings.
.

LVW4

4 years ago

I agree about the 'sitting tenant' issue. If my friend considers this,she would be seeking a new tenant after she completes.

Lou she needs to see the current tenancy agreement BEFORE she buys the property - if it is an Assured agreement her solicitor may well advise against the purchase.....

Jessie Jones

4 years ago

Lou,
I would be very hesitant to rent a property to a friend or family member again.
It sounds like an ideal solution. I bought a BTL for a friend and his partner to rent from me. I will save you the details of their financial woes, suffice it to say that I was left with the choice of either asking them to leave or taking a much reduced rent. They are friends so now I make a very substantial loss on this BTL.
If the house was let to another tenant then if they can't pay they would have had to leave. You can't do this to friends and family unless you are very hard nosed.
And HMRC rules mean that you can't offset such losses against profits on other properties in this situation.


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