unauthorised let?

*Diva*

Hi
A close family member of mine has been letting out a property for a long time and recently have recieved letter from the mortgage company asking if they are letting the property out or is it residential use?
They have received a 3rd letter from the mortgage company asking to confirm if it is residential-if so then they would like 3months named bills or alternatively if they do not hear anything they will automatically increase the rate by 1.5% and also class it as unauthorised let.


does anyone know the consequences of not declaring letting out a property? Can there be any legal action taken against them? My uncle is !!!!!!!! it a bit to be honest. He has always been an honest man but his wife wears the pant and he was under the impression the bank knew. His wife told him to ignore the letter and if they increased the rate so be it. but he wants to call them and tell them he is letting the property out.


Anyone been in this situation before or have any idea what they should do? They are also putting it on the market next month so would them not declaring letting the property out have any further impact once the property is sold?


any advice/info would be greatly appreciated as I am getting hounded by him nearly every day and being pregnant I just cany be asked.


thanks in advance

G_M

If the uncle has a normal residential property, but is letting the property, he is in breach of his mortgage agreement.

* The mortgage could be called in (he'll have to pay back whatever he owes).

* the interest rate could be increased (possibly retrospectively - I'm not sure).

* Admin charges associated with the above could be charged

etc

What other shortcuts has he taken with the letting. Is his house insurance a landlords policy? If it is normal domestic policy it will not be valid, so if the tenants burn the house down he'll get nothing.

Is he declaring the rent to HMRC? Or is he comiting tax fraud?

Read:

[FONT=&quot]New Landlords[/FONT][FONT=&quot] (information for new or prospective landlords)[/FONT]

*Diva*

I am not sure about the Insurance side of it however he is self employed and has an accountant that deals with his tax affairs.


Do you think he should call them and tell them he has been letting it out for 5years or just recently? Or alternatively ignore the letter and let them put the rate up by 1.5%

G_M

They clearly have a prety good idea he has let the property.

Contact them and discuss. Better to come clean late than not at all.

Same with HMRC. He may have an accountant, but has he told the accountant about this income? Again - come clean. HMRC are chasing 'under-the-radar' landlords, and getting caught is far worse than coming clean.

Read the link, and ensure he is doing ALL the things the law requires.

*Diva*

He isnt actually making any money on the mortgages, he actually has to put in approx £100 to cover it. Yeh his accountant knows whats coming in from the mortg etc.


Do you know if he doesnt contact them or if he waits untill he has the funds to the fees/admin costs will they take any legal action or just increase the rate on the assumption he is letting it out?


I know his wife will just say leave it etc..and he might get roped into it however I do not want him to end up being dragged to court or being forced to sell it etc..


I am looking at the link thank you.

Thrugelmir

*Diva* wrote: »

He isnt actually making any money on the mortgages, he actually has to put in approx £100 to cover it. .

Only the interest element is tax deductible.

If they apply for a mortgage at a later date issues may arise. Lenders share data on customers in instances such as this.

Guest101

Is he protecting the deposit of the tenants? If not he's opening himself to an expensive lesson.

Also gas safety certs every year?

eddddy

*Diva* wrote: »

does anyone know the consequences of not declaring letting out a property?

Hi Diva

Just looking at the worst case scenario...

Strictly speaking, it's mortgage fraud - which is a criminal offence. The borrower has acted dishonestly in order to obtain/retain a mortgage product which the borrower would not otherwise been entitled to.

It would be particularly serious if your uncle intended to let it from the outset, and lied on the application form.

Additionally, your uncle has breach his mortgage contract - so as G_M says, the lender could ask for their money back.

The lender may also record your uncle's name on a fraud prevention database, which might make getting a mortgage in future difficult.

But I must stress that all the above are things that could happen. I don't know how seriously lenders view this in reality.

TBH, if all they do is add 1.5% interest, that might be a good outcome.

If it where me, I would own up, apologise, and offer any mitigating circumstances (e.g. didn't realise, had to move away for new job, unable to sell house. Didn't do it purely for financial gain.)

theartfullodger

It is possible & has happened (very rare...) that if he fails to repay the mortgage (if mortgage company call it in) as & when asked it could be repossessed.

If that happened the selling & legal fees will hit him hard.

Seems to me when a landlord doesn't bother to stick to the contract they agreed (mortgage agreement - including the bit about living there & not letting it out..) then they have no moral right to expect their tenant to stick to their contract (tenancy agreement - eg about paying rent..).


Cheers!

GwylimT

He could be required to pay the out standing amount on his mortgage or lose his home, the increase in interest could be applied retrospectively.

You say they intend to sell the house, if they are wanting to buy another property with a mortgage they will likely find this difficult as it is very rare for a lender not to record the presence of a fraudulent mortgage.

Yorkie1

There is no criminal offence of fraud here IF, at the time of obtaining the residential mortgage, the person obtaining the mortgage intended to - and did - live in it personally. Subsequently changing the status of the property to 'let' rather than 'residential' does not create the offence of fraud nor make the mortgage fraudulent in the criminal sense.

He has however breached his contract with them and others have advised of the possible consequences.

If the intention from the outset was to rent the property out, then yes it is mortgage fraud at that point.