Ethics of Mortgage Company "rental fees"

londonlady_3

Can you tell me if mortgage company rental fees are legal and if they are, what is a 'reasonable' amount to charge?

Myself and my other half came into our relationship with each having our own property. We have decided to get married and, unsurprisingly, I would like to move in with my husband to be and rent out on of our properties for the short term.

We informed the mortgage company of my intention to rent out my flat and I received a letter back saying that as a 'valued customer' they'd be happy to let me carry on with my existing mortgage arrangements for one year for £2000 and that's reviewable on an annual basis!!! I had expected a small 'admin' fee but this is truly ridiculous. I know of others who have done this and haven't been charged a penny.

scrummy_mummy_2

It is certainly unreasonable....which is the test that would apply in court.
In this case, they would be ruled against....however, you'll probably have to pay first then sue or take recovery action via the ombudsman.

I had this situation with the Woolwich (come the revolution guys you are all at the top of my list!!!) and I took them to the building society ombudsman.
I had to pay their ludicrous fees to rent out my home because I was moving with work and didn't have the time to fight them. Besides the ombudsman told me to do this and then to claim them back.
I then had to exhaust their internal claims procedure before filing a claim with the ombudsman...I won all the stupid fees back but it took a few months and they didn't really put up much of a fight, they just dragged their heels. I think they bank on the fact that most people won't have the will to pursue them dilligently enough.

I suggest you embark on an information gathering exercise in the first instance. GET EVERYTHING IN WRITING>>>DO NOT SPEAK TO THEM otherwise any communication can be denied!
1. Ask them to justify in writing why (in their opinion) you should have to pay the fees with a detailed cost breakdown of how the money you are supposed to pay will be spent.
2. Ask building society/lender for a written copy of their internal complaints procedure.
3. Read your mortgage agreement and see what it says.
4. Ring and speak to the ombudsman...you should be able to find their contact details by asking your lender or it should be on your paperwork.
5. Keep detailed records of communications...you'll need to send them to the ombudsman if they don't back down before that point. Send all letters recorded delivery and copy the M.D/Chief Executive/Customer Services Manager on all correspondence.....that way, when you go the the ombudsman the chief exec is already involved!!!! They don't like it.

Once you have done this and you still want to rent the house, regroup and decide on your next course of action.

Go them them girl!

benood

If I were you, in the light of Scrummy Mummys excellent post, I would point out to the BS what you will be doing (in a letter bullet pointing the stages) so that they understand you're serious - there's a chance then that they would immediately come up with a reasonable offer saving you and them a load of hassle. Of course at the same time you should get going on the long route too.

Debt_Free_Chick

Perhaps the fee is so large as the BS is not insisting that the OP change to a BTL mortgage .... which has higher interest payments?

silvercar

they could tell you to take your business elsewhere. there have been cases recently where the threat of taking people to court has resulted in accounts being closed. last weeks Sunday (may have been Saturday) Times quoted banks saying their relationship with their customers had broken down if their customers felt the need to threaten to sue them to reclaim charges.

The lender would be within their rights to say that they offered the mortgage as a residential one, if you are not happy to accept the charges for running it as a BTL then they don't want your business. Not saying it would happen but it is a risk.

scrummy_mummy_2

It's a possibility but is corporate bullying in my book and as the odds begin to swing more in favour of their consumers I guess it's a route some of the lenders may choose to take...whereupon you (the indicidual has to decide to accept the bullying or move and probably take a financial 'punch in the face' as a result...personally my fight or flight response says take the punch to show them you're not up for being fleeced/bullied, but it is a very personal decision I guess depending on how much agro you are prepared to put up with...like switching banks, reclaiming charges, fighting ridiculous charges...so many people do it (take the mick!) sometimes you just want to give up, and accept it rather than spend your whole life letter writing and fighting people!

silvercar

scrummy_mummy wrote:

It's a possibility but is corporate bullying in my book and as the odds begin to swing more in favour of their consumers I guess it's a route some of the lenders may choose to take...whereupon you (the indicidual has to decide to accept the bullying or move and probably take a financial 'punch in the face' as a result...personally my fight or flight response says take the punch to show them you're not up for being fleeced/bullied, but it is a very personal decision I guess depending on how much agro you are prepared to put up with...like switching banks, reclaiming charges, fighting ridiculous charges...so many people do it (take the mick!) sometimes you just want to give up, and accept it rather than spend your whole life letter writing and fighting people!

Check your options first. A BTL mortgage is based on potential rental and having at least a 15%, check you will be able to get one before burning bridges.

myadvice

It could have been in the contract that you signed when you originally got your mortgage? Some companies require that you live in the house for a certain amount of time before renting it out. Other companies have different mortgages for people that are living in the house and others that are renting out the house. So i am sure that you are stuck in the middle of these companies.

Rick62

It's not really corporate bullying, the lender currently has a residential mortgage which the OP wants to change to a commercial mortgage which has a different risk profile. There is no obligation on the OP to take this, they could repay and get a new BTL mortgage.

Scrummy Mummy, I'm amazed you got your fees back through the FOS. This is not the same as bank charges or rising redemption fees, I would have thought that effectively it is a product fee for changing the product, and is your choice to take or not.

scrummy_mummy_2

If you are letting your home because you have to and not doing it as a BTL (I had to move because of work but didn't want to sell the house) you don't have to remortgage to a commercial loan agreement (or at least didn't used to, this was in 1995 so things may have changed) However, I do suspect that lenders may be telling half the truth and not the whole truth to people who apply to rent their homes in order to try to switch them to a BTL mortgage and thus more expensive product....I have several friends who have gone overseas for several years and rented out their homes whilst away, with the intention of returning, and have not been 'forced' or encouraged to remortgage to a BTL, or asked to pay preposterous and frankly fictional 'fees' in order to do so.

The Woolwich charged me ridiculous fees which they could not justify or substantiate and so I won it all back. Took me nearly a year but got there in the end, based on the fact that it was not a commercial activity. It was my personal residence where I lived that I had to rent out......

If you buy a property with a commercial intention and do not intend to live in it as your residence then surely that is what defines and differentiates a BTL property from a residential one????

It's an interesting point you make but I think one that could be debated rather than be clear cut....if the OP rents her house out because she is moving in with her boyfriend and wants to keep her options open, then, one day, she may move back in. In my opinion it is not a commercial operation.
Maybe there is a time limit operational whereby, after say 5 years of renting, it does become commercial???

Interesting point you raise though and I would love to actually know for a fact what defines a BTL property from a residential one that is being let out or indeed is there is a difference??

scrummy_mummy_2

Another important fact...I didn't go to the Financial Services Ombudsman, I went through the Building Society Ombudsman who (at the time) regulated the practices of the building societies...it was before Barclays bought the Woolwich and they were still a building society not a bank.
They were told that they could not reasonably withold permission for me to rent my property and this included levying high/prohibitive/repeat and unsubstantiable charges. They had tried to do this on all counts, they were ruled against and paid me all the charges back.
It was the closing shot in a 10 year saga between me and the Woolwich and was actually the second time I had rented my prime residence out whilst it had been mortgaged with them.....the first time they asked for no monies at all. Obviously, they had cottoned on to this 'market segment' and decided to try to milk it in the intervening years.
(my first husband was in the armed forces so we moved every couple of years)
Just adding some extra info......