Risks (esp around letting without consent)

Squirrel1980

G_M wrote: »

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......?

So if I took out an independant, seperate buildings insurance that wasn't linked to the mortage would that resolve that issue? And do these types of policies even exist?

Thanks for your reply and other suggestions

sonastin

As I understand it (and this could be off the mark), if the building is insured by someone else, your lender not consenting to letting the property shouldn't have an effect on the building insurance policy. Unless the mgmt co have made their consent conditional on your lender agreeing too, the don't have anything material to declare to the insurance company and it is unlikely to invalidate the policy. If it was your insurance policy you would be expected to confirm you have consent from your lender so it would be an issue in that situation. Getting Landlords insurance to cover anything inside the flat that is your risk and any potential liability to your tenant will be a problem without consent to let.

pwg_blt

As previous poster stated your in a leasehold flat which means the risks of insurance being null and void are extremely low.

Your in a hard situation with the negative equity and at the end of the day no-body on here needs to pay your mortgage, bills, etc.

I know many landlords who rent out their property without lender consent. Some have 3-4 residential mortgages.

The reality is the only way your mortgagee will find out is if:
a) someone tells them - this requires a fair amount of spite as they would need to carry out land reg search to ascertain who your lender is followed by the will to contact them and spill the beans.
b) you get repossessed and on receiving consent to access the property, the tenants contest access and mortgagee finds out you were renting.
c) you change your address with your bank, council, etc and the mortgagee carries out a credit search without your approval and realises you have another linked address.

If they do find out (like has happened to small number of ppl I know) they will put a 20 something on the phone to give you a hard time and insist you revert to their buy to let rate. I'm assuming if your on a tracker/SVR pre rate drop which will make your flat cashflow negative thus the reason for my following advice.

My advice:
Tell your mortgagee you moving out and putting your property on the market and need to convert your repayment to interest only reducing your monthly outgoing by possibly over £100 per month. Most high street lenders will do this with a 6 monthly review. If they ask how your going to repay the mortgage on interest only your answer is from sale proceeds.

Don't change your address and pay post office for a 12 months redirect.

Is my advice "ethical"? Most will say no. Will it give you the freedom to move on with you life? Only you can answer that one.

Regards,
D B2L

Ulfar

Its not ethically right or legally right for that matter.

The chances of slipping up and getting caught are growing, not only can and do the banks check credit reference agencies but there is talk of them checking with HMRC under a new mortgage verification scheme.

This is specifically aimed at cutting out mortgage fraud.

Squirrel1980

Thankyou again, this has really been very helpful and I appreciate the balanced view from both options.

I feel in a better to position to weigh it all up now.

pwg_blt

Ulfar,
As I already stated: ethics was not included in my answer.
To scare the poster using the HRMC link up to detect mortgage fraud is incorrect. The link up is to verify income for new applications, not detect people renting out their home.
Lender's don't re-search CRA for no reason, they only upload account information. You generally only give them consent to "share" your information, not re-search at their will anytime.
If we are discussing the realistic threat of detection, which I believed we were, then please explain why my advice would not work?
Regards,
D B2L

HAMISH_MCTAVISH

Ulfar wrote: »

mortgage fraud.

Oh please....

Enough with the bad advice and pointless scare tactics.

It's not a criminal offence to let a flat after a genuine change of circumstances without consent to let from the mortgage lender.

The worst case scenario in theory is the lender can try to terminate the mortgage after following due process through the civil courts.

However in the real world, the chances of a mortgage company wanting to do that to a house in negative equity where the payments are up to date is vanishingly small. Like one in a million small.

What they'll actually do is have a snotty nosed kid call you from a call centre and demand more money.

G_M

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.

Please investigate carefully the distinction between lodgers and tenants if you decide on the "stay at parents mostly" approach.

The flat MUST remain your main residence for the occupiers to remain lodgers. So no, you cannot stay with my parents as much as I like. And the council tax and bills must remain in your name. The cost of utilities would need to be included in rent and you must hope the lodgers don't rack up huge bills. Think about it - in a genuine lodger scenario, you, the landlord would be living there, handling the bills etc, and letting a lodger stay with you.

Yes, by all means go visit your parents, stay over with your girl/boyfriend, go off on a holiday, but the flat is your home.

As soon as you put utilities in their name, stop sleeping there regularly etc you are back to creating a tenancy.

Squirrel1980

HAMISH_MCTAVISH wrote: »

Oh please....

Enough with the bad advice and pointless scare tactics.

It's not a criminal offence to let a flat after a genuine change of circumstances without consent to let from the mortgage lender.

The worst case scenario in theory is the lender can try to terminate the mortgage after following due process through the civil courts.

However in the real world, the chances of a mortgage company wanting to do that to a house in negative equity where the payments are up to date is vanishingly small. Like one in a million small.

What they'll actually do is have a snotty nosed kid call you from a call centre and demand more money.

pwg_blt wrote: »

Ulfar,
As I already stated: ethics was not included in my answer.
To scare the poster using the HRMC link up to detect mortgage fraud is incorrect. The link up is to verify income for new applications, not detect people renting out their home.
Lender's don't re-search CRA for no reason, they only upload account information. You generally only give them consent to "share" your information, not re-search at their will anytime.
If we are discussing the realistic threat of detection, which I believed we were, then please explain why my advice would not work?
Regards,
D B2L

Thankyou for these responses. That was precisely the sort of perspective I've been wanting. Of course I know the risks, I have read all the sticky's about it and, truth be known, I phoned my letting agent and told him to call it off a few weeks ago.

However, in the struggle to find any other viable solution I just wanted to know what the likelyhood or the odds are on a mortage company actually taking action in a case like mine.

I can appreciate that people on this forum want to lay down the law, afterall the repercussions are pretty massive and potentially at the cost of the taxpayer. And while it wasn't necessarily what I was looking for, I find it very reasurring that this forum gives legally sound advice.

The reason I'm even considering this option is because whatever I do, I will be taking a financial risk of some kind, its just that some are more likely to occur than others. For example, if I simply keep doing what I'm doing I will almost certainly be in £20k debt in a few years anyway.

Also, I know (and have heard about) plenty of people who let without consent and have gotten away with it for a long long time. I'm pretty certain that my landlord at uni who had about 10 houses and 6 tenants in each was doing some kind of 'fiddle' because he offered us a discount for cash and if we didnt pay in cash he asked for a cheque to be paid to his wife who's account was, for some reason, in her maiden name. This guy is still operating now, 6 years later.

I'm not saying that 2 wrongs make a right, but simply that it seems to me that the 'odds' of getting caught and anything really serious happening (ie immediate eviction) does appear pretty low.

Also, if there was a case of somebody getting spontaneously investigated by their MC dispite always making all of their payments with no-one outside of the MC raising suspiscion, wouldn't people be referring to that case on here to further prove the importance of getting consent?

Like I said before, I'm not trying to validate doing something illegal. I know the potential risks of letting without consent are massive and I think, on balance, I'm probably not the sort of person who can cope with having that hanging over my head.

However, I'm slowly starting to accept the fact that to avoid a financial crisis I will need to do something that will expose me to a certain amount of risk. I just need to work out what I am comfortable with.

This thread has been very helpful and really has helped me towards making a reasoned decision.

Thanks again!

Werdnal

As I said in my earlier post here, if you are already struggling financially, you should never even consider letting your property. Mortgage consent aside, you need a good financial contingency to cover things that can go wrong. You must insure the rental property, get gas safety certificate, energy performance certificate etc. You also need to ensure any furniture you provide is up to current fire regs, and electrical items should be PAT tested (not a legal requirement but well advised). You also should also base your annual income on 10 months rent, rather than 12, to cover any voids in letting, and you can only offset your mortgage interest payments against any tax you pay, not the whole mortgage amount.

I fear you cannot afford to let it, and should take one of the other initial options you suggested. The risk of not getting consent to let, can be far outweighed by all the other risks associated with letting, and you can quickly find the financial problems you already have will multiply and you will still be faced with selling it anyway!