Buy to let mortgage with council tenant

katiana57 · 29 June 2007 at 1:38PM

Hello

I have comprehensively searched the internet for information about this but can find very little material.

If anyone has any experience or legal knowledge about this subject I would really appreciate hearing your advice.

I am looking at buying an ex council property as a buy to let investment. I have found a flat which is being sold WITH A COUNCIL TENANT. An agreement has been signed between the current owner and the Council which is a 3 year rental agreement (of which 6 months have already elapsed).

The rent which is being paid by the Council to the current owner more than adequately covers 125% of the mortgage interest payment required by most banks offering BTL mortgages. Since the rent is being paid by the Council and not by an individual tenant it seems possibly less risky than a normal BTL scenario.

Abbey have confirmed that they would lend on this property with the Council tenant inside (as many banks will not) but they require a tripartie agreement between us, the bank, and the Council.

It all seems to work well on paper, but my concerns are:-

2) If after 3 years, when the contract runs out, we decide to sell the property, could there be a difficulty in removing the tenant from the property?

1) If the tenant did not keep up their payments to the Council for the rent on the property (if they are required to make any at all) would the Council be likely to withhold their payment of rent to us?

If anyone could shed any light on any of this or offer any general insights at all I would be most grateful.

Kind regards

Katia

silvercar · 29 June 2007 at 1:58PM

when the contract runs out, the council would probably rehouse the tenant. If the tenant refused to move you would issue the appropriate notice and evict - via court if necessary.

Sounds like the council rents from you and sub-lets to the tenant. Any rent arrears would be between the tenant and the council not you. If the arrangement is that the tenant claims HB that the council pay to you, then the HB would still be paid to you, though there are circumstances in which the council can reclaim rent of the tenant was falsely claiming HB. All depends how the contract was set up.

All in all, this seems a good guarantee of rent, the problem could be the condition in which tthe council returns the property to you when the rental ends. Is there a deposit held by the current landlord?

chugalug · 29 June 2007 at 2:09PM

You'd have to check the type of tenancy agreement the tenant has. If its truly a 'council tenant' then they'd have a secure tenancy - very difficult to evict unless there are rent arrears or some other part of the agreement is broken by the tenant. Having said that, I don't think it can be cos only Local Authorities can grant secure tenancies.

It's more likely this is an AST - maybe the council is temporarily housing someone who is entitled to more permanent housing and they are receiving housing benefit.

Check the tenants position and their agreement with their landlord.

katiana57 · 29 June 2007 at 4:07PM

Thanks Silvercar

That's very helpful

The flat is not in especially brand new condition as it is now, so what condition it's left in is not a big worry.

Kind regards

Katia