Property unmortgageable due to regulated tenancy

dasherwo

Please can anyone offer me some advice. I bought a property at auction, which has a regulated tenancy, which means the tenant has the right to live there for life. I applied for a buy to let mortgage. I got an agreement in principle, subject to survey. The mortgage company knew the situation with the tenancy and said this wouldn't be a problem as it would be valued on potential rental income. The rent is £280 a month, I bought the house for £65K, and am putting a 25% deposit down.

I've had the survey done and they have said the property is unmortgageable due to the tenancy.

Does anyone know a company that would offer a mortgage? Or has anyone got any other ideas for raising the money?

TEDDYRUKSPIN

Hmmmmm. You have'nt actually mentioned what type of property it is? Is it one of these council houses? Some properties actually have a weird regulation in place. This applies to this building.

As you said, 'The tenants have the write to squat in this property for life!'

This means that in the worse case outcome, the mortgage company had to repossess this property, the property can not be sold on! The tenants will have the right to basically SQUAT! and claim the property after 20 yrs. LOL.

Not being funny. This is true!

No company will touch this unless the tenants sign their rights away upon moving out if the financial company had to repossess the property!

sdooley

Could you take a further advance on the mortgage on your own home, possibly also a personal loan as well if you don't have enough equity?

The tenant isn't squatting, they are occupying under the terms of a contract!

You have a 5% yield on the property, you will not be able to borrow that cheaply. Unless you can wriggle out of the contract, you will have to buy and then take the loss for years. On the upside, if the tenant dies without being able to pass on the protected tenancy or moves out voluntarily, you will make a huge windfall.

Some people try to bribe tenants to leave in this situation but it would have to be a fairly big bribe if they have advice...

ILW

I think the OP now knows why the property went at such a low price. If it seems to good etc etc etc.

Rick62

I don't understand why the mortgage company say they would take account of the potential rental income - we know the rental income and from the lenders point of view there is no security because they can't take possession of the property.

Clearly neither you nor the people you have been speaking to understand the situation.

dasherwo

Rick62 wrote: »

Clearly neither you nor the people you have been speaking to understand the situation.

I took advice from a Mortgage Adviser prior to the auction, he CLEARLY doesn't know what he's talking about! Don't worry, I wont be trusting any so called Mortgage Advisers again. No, I didn't know about Regulated Tenancies or Sitting Tenants, which is why I went to see the Mortgage Adviser!!!!

I will be pursuing this matter, but first I need to get together the money for the property.

If anyone has any advice on making a complaint against a mortgage adviser. He clearly didn't know what he was talking about otherwise the mortgage application wouldn't have been accepted and got to the stage of the survey. Surely it shouldn't have been up to the surveyor to point out the property was unmortgageable, surely when the mortgage adviser put the application through there was something about a sitting tenant / regulated tenancy????

silvercar

So you need to raise 50k.

First port of call would be another mortgage advisor. I would guess that there are some lenders who will consider secured tenancies, though they may not lend you the full amount.

Second option would be to look at what other assets you have that you could secure a loan against. Increase the mortgage on your main home possibly?

Then you look for unsecured loans, interest rate is higher but it still leaves a possibility.

Then you look to family and friends. Someone may have money in a savings account paying peanuts and be interested. Or try zopla for loans.

Worth also looking on singingpig.co.uk see if anyone on there has suggestions.

All presuming that, now you understand about sitting tenants, you still want to go ahead.

payless

Obviously no one else here knows what the adviser was told , but yes you would have thought it would have been picked up earlier.

AIPs are generally not property specific ( hence not tenancy speific) .. but if you told adviser about a particular property with a special tenancy type I would have expected them to advise you of its acceptablility - that said if you just said - property with existing tenants it might not have been so clear

( some lenders don't like any existing tenancy to be in place on purchase cases though )

I am not aware of any normal B2L lender that would take on a regulated tenancy knowingly.

SOme commercial lenders or bridging financers might , but that said the rest of the deal is not great numbers wise ... low value, not a get rental cover etc..

unsecured lending or lending against other property would be an option?

If you can't arrange finance could you flip it back out quickly ?

dunstonh

Surely it shouldn't have been up to the surveyor to point out the property was unmortgageable, surely when the mortgage adviser put the application through there was something about a sitting tenant / regulated tenancy????

Did you tell him the situation with the tenant? Your post suggests you didnt know. So, the mortgage adviser isnt going to know unless you tell them or they are made aware of it by some means.

dasherwo

Thanks all. Yes, the mortgage adviser did know about the tenancy, I specifically asked about this and gave them the specification where it clearly stated in black and white "Regulated Tenancy".

dasherwo

payless wrote: »

If you can't arrange finance could you flip it back out quickly ?

Apologies for my ignorance, can you explain this further, what do you mean by flip it?