Risks (esp around letting without consent)

princeofpounds

I am very much against landlords letting without consent. I was caught out by it myself once when the landlord went bankrupt and the lender would have wanted me out (I left).

However, I have to say that the risk of being caught is very low. Historically lenders did not care as long as they got their money, in the main. These days they care a little more but I still haven't come across a situation where someone has suffered especially badly. The most I have come across is an example where the bank applied its BTL 'premium' to the interest rate as a result of the discovery. Maybe some other posters have some anecdotes?

Squirrel1980

ognum wrote: »

It is people who behave like you are planning to that give lpeople letting property in the correct way a bad name!

Sorry to be harsh but think carefully!

Thanks for that. Although I'm not giving anyone a bad name or done anything wrong. Lots of people appear to be letting without consent with absolutely no repercussions so you can understand how its perfectly natural to want to weigh up the pros and cons of a difficult situation.

You seem to have assumed that I've made up my mind to let without consent and I'm trying to validate that. I'm not, I'm just looking for a balanced view of the risk.

furndire

Before too long there are going to be a lot more problems with letting. I have a scenario where nice couple he has just lost his job, wife can't work, They can only get the rent for equivalent of 1 bedroomed flat - £30 per week short of the amount they pay rent for the house - they can't afford the rent - we are fortunate that we can afford to drop the rent & meet them half way - if this happened to you - would you still have a tenant. Next year rent allowances are due to fall even more.

HAMISH_MCTAVISH

Your options in terms of risk:

1. Least risky= Move into small room, let larger room to lodger. If need be, move spare stuff to parents, and crash at parents house a few nights a month for a bit of a respite from cramped conditions.

2. Medium risk = Let flat without consent. It could go badly wrong, it could be absolutely fine. You'd need to change insurance to allow for letting, you'd also need to get gas safety checks, etc done, and make sure flat is safe for tenants. Worst case scenario, your mortgage holder terminates mortgage and demands repayment in full. However as the flat is in negative equity and they'd make a loss, chances of them doing this are extremely low. A more likely scenario if they find out is they charge you an "unauthorised letting fee", or basically put you on a BTL rate.

3. Highest risk = Do nothing, your financial situation worsens, you lose the flat anyway.



Your best bet by far is option 1. Option 2 is not ideal and involves risk, but there's a possibility it could work out OK. Option 3 should be avoided at all costs.

G_M

I believe the risk of the mortgage lender finding out is higher than you and others suspect.

Are the mortgage lenders included as 'having an interest' on your buildings insurance? probobly. You are aware of course than your current policy will be null and void if you rent (so if your tenant burns the house down you receive nothing, have no property, and STILL owe the mortgage). So - you'll need to switch to landlord's insurance. Hmmm - might the mortgage lender find that strange......?

Tenant gets annoyed because ou take too long fixing the broken boiler because you are broke. Out of spite, phones mortgage lender......

There are a host of ways they can find out, and they'll not be best pleased, esp after your enquiry (deleted off your record? Nothing gets deleted, just marked as no further action.)

My vote gors with the lodger solution. Either drop your price (there's enough people with housing/finance problems around) or offer the bigger room - even for a few months at a time to boost your income.

Either way, this post might offer some further useful info.

Ulfar

As this is a part of the council affordable house scheme you will need to check you lease as I would lay money there is a clause that prohibits subletting. I know of someone who asked this very question and was turned down by the council.

Also without mortgage lenders consent you would be committing mortgage fraud.

Plus all you insurances would be null and void. your tenant would also have very littel in the way of secure tenure.

So what's the worst that can happen :

Council finds out revokes your lease and here is the kicker you still owe the money for the mortgage even though you no longer have a property. This has happened and it was discussed on these boards a year or so ago.

The bank may either change the rate or more likely if the lease has been revoked, foreclose on the mortgage now and sue you for every penny you have and then put an attachment of earnings on you.

HMRC decide its time to investigate as you haven't been declaring the income from the property, you did know that only mortgage interest and not capital can be set against taxable income.

You are then done as you didn't supply the gas safety certificate.

Tenant stops paying rent and trips up while moving out on something that is due to the lack of maintenance on the flats (a sticking up bit of carpet etc) and sues you.

I assume this flat is in a block with other owner occupiers, as such you have no chance of getting away with it as someone will grass you up. This will either be because your tenants are a pain in the !!!! or the neighbour is asserting their rights as you shouldn't be allowed to get away with it.

clutton_2

Taking in a lodger (if you use the small room) can be done via the Inland revenue lodger scheme (no doubt someone else will recall the exact name and you can then research it) - under which you can earn around £4,500 income from a lodger tax free. Could you stay part time at the flat and part time at your parents ??

BitterAndTwisted

It's called the Rent-A-Room scheme where income less than that £4.5k per annum (actually, I think that it's £4250 which equates to about £80 a week) and doesn't have to be declared.

I would definitely consider moving into the small room and find a lodger for the larger one. I've known people, when in extremis, to turn the sitting-room into another bedroom and have two lodgers. Not that I'd necessarily recommend that for sanity's-sake.

G_M

clutton wrote: »

Taking in a lodger (if you use the small room) can be done via the Inland revenue lodger scheme (no doubt someone else will recall the exact name and you can then research it) - under which you can earn around £4,500 income from a lodger tax free. Could you stay part time at the flat and part time at your parents ??

Best idea yet. Rent the big room to lodger and keep the small romm. Stay at parents in comfort every other week, or 4 days a week.

Rent a Room Scheme

Squirrel1980

Thankyou very much for all of your replies. This has been incredibly useful.

Ulfar wrote: »

As this is a part of the council affordable house scheme you will need to check you lease as I would lay money there is a clause that prohibits subletting. I know of someone who asked this very question and was turned down by the council.

I have done this and they have given me written consent.

Also without mortgage lenders consent you would be committing mortgage fraud.

Obviously this really worries me.

Plus all you insurances would be null and void. your tenant would also have very littel in the way of secure tenure.

This is the main thing thats worrying me, whilst I would see all the other types of risk as being legally wrong, not having insurance (especially if it invalidates the insurance for the entire block (is this the case??) is just down-right morally wrong.

I guess what I saying is, I can almost accept the financial risks but to put someones life in danger is something I could absolutely never live with.

Would getting a seperate buildings insurance make any difference?

So what's the worst that can happen :

Council finds out revokes your lease and here is the kicker you still owe the money for the mortgage even though you no longer have a property. This has happened and it was discussed on these boards a year or so ago.

Well this wont happen because they have given consent.

The bank may either change the rate or more likely if the lease has been revoked, foreclose on the mortgage now and sue you for every penny you have and then put an attachment of earnings on you.

Yes, this would be terrible... but what is the likelyhood of this happening in the next 2 years? I cannot find anyone on the internet who has spontaneously had their property repossesed if they have continued to make payments.

HMRC decide its time to investigate as you haven't been declaring the income from the property, you did know that only mortgage interest and not capital can be set against taxable income.

I will definitely declare the income. Do the mortgage company have contacts with the tax-man?

You are then done as you didn't supply the gas safety certificate.

I have a lettings agent who is ready and waiting to let the flat and manage it entirely. Infact, all the necessary checks have already been done, I had the gas safety check done a month ago in preparation for letting it out.

Tenant stops paying rent and trips up while moving out on something that is due to the lack of maintenance on the flats (a sticking up bit of carpet etc) and sues you.

The flat is 4 years old and the communual areas are being maintained by the management company (who have also given me consent to let).

My agent said he does a full check of the flat every 3 months for the first nine months and then every 6 months thereafter. My dad is a builder and is able to get to the flat and fix anything quickly. my parents are very aware of the situation I am in. Although I dont have much money they are wealthy and have said they will help me out if needed.

I assume this flat is in a block with other owner occupiers, as such you have no chance of getting away with it as someone will grass you up. This will either be because your tenants are a pain in the !!!! or the neighbour is asserting their rights as you shouldn't be allowed to get away with it.

I honestly think this is unlikely but yes, it is a very real possibility.

Thankyou very much for your reply. Its all of these things I want to think through to help me weigh up the risk. And so far its looking like a bad route to go down.

clutton wrote: »

Taking in a lodger (if you use the small room) can be done via the Inland revenue lodger scheme (no doubt someone else will recall the exact name and you can then research it) - under which you can earn around £4,500 income from a lodger tax free. Could you stay part time at the flat and part time at your parents ??

G_M wrote: »

Best idea yet. Rent the big room to lodger and keep the small romm. Stay at parents in comfort every other week, or 4 days a week.

Rent a Room Scheme

Yes, I really hadn't thought of this. And like you say, so long as I'm 'living there' i can stay with my parents as much as I like. The only drawback being having to pay for half the bills for services I'm barely using.