Building Society charges for right to rent

BobProperty

moneysavinmonkey wrote: »

Now say they have given you permission to let and you have given a 12 month lease to a tenant... for whatever reasons you stop paying the mortgage but the tenant is still paying the rent. The mortgage company now repossess your house but they can not evict the tenant until the end of their 12 month lease, meaning they can't sell the house and get their money back

For that added risk factor alone I would have said £225 was a bargain.

I, like another poster don't think this is true. The lender needs to know this because of the additional risk (as they see it). It would not stop them repossessing the house and evicting whoever was in there, borrower or tenant. Think about it, if what you said were true, I could borrow money for a property, put a tenant in on a 3 year agreement then not pay the mortgage for 3 years but collect the rent during that time. At the end of the 3 years, I just give the sitting tenat another 3 year tenancy. (Rinse, repeat as they say).

silvercar

if the lender has given permission to lease (or BTL mortgage) they have to acknowledge the tenancy. The minute they repossess the rent becomes payable to the mortgagee in repossession not the tenant, so no chance the landlord can still collect rent for 3 years.

If you look at the property auction sites there are many properties listed with tenants on short term ASTs; the auction details are sometimes changed to show that the property is now vacant.

As a tenant, if you know the landlord had the correct mortgage, you can expect the tenancy to end when the current AST expires ie no extension possible. If the landlord had a residential mortgage, the mortgagee in repossession does not have to acknowledge you and you can be evicted at short notice.

BobProperty

silvercar wrote: »

if the lender has given permission to lease (or BTL mortgage) they have to acknowledge the tenancy. The minute they repossess the rent becomes payable to the mortgagee in repossession not the tenant, so no chance the landlord can still collect rent for 3 years.

Acknowledging the tenancy doesn't mean they will always let it stand. Would a lender, for instance, allow a 3 year tenancy to go to the end of the term? Equally, they could be in a sticky legal situation if they sold the place with a tenant on the balance of a 3 year tenancy.

silvercar wrote: »

If you look at the property auction sites there are many properties listed with tenants on short term ASTs; the auction details are sometimes changed to show that the property is now vacant.

But the mortgagee in possession isn't going to tell you if the ex-borrower had declared the tenancy to them or not, so we will never know what proportion of the above is acknowledged by the lender.

silvercar wrote: »

As a tenant, if you know the landlord had the correct mortgage, you can expect the tenancy to end when the current AST expires ie no extension possible. If the landlord had a residential mortgage, the mortgagee in repossession does not have to acknowledge you and you can be evicted at short notice.

Surely the mortgagee can obtain possession anyway, declared tenancy or not? OK it's not nice for the tenant but my argument would be that the agreement is between landlord and tenant and the tenant should take action against the landlord for breaching their agreement. Take into account my first point above. If there is a significant price difference between empty property and tenanted, then the lender has to take action to remove the tenant to obtain the best price. I suspect that acknowledging the tenancy is no more than lenders being nice (c.f. not pursuing mortgage debt over 6 years) and isn't what the law actually allows. I wonder if some "sub-prime" lenders would be as lenient.

moneysavinmonkey

BobProperty:

Where are you getting your information from?

Shelter website sets it out fairly clearly the conditions under which a tenant can stay on in a repossessed property:
http://england.shelter.org.uk/advice/advice-8911.cfm#wipLive-34753-5

Is my tenancy binding on the landlord's lender?

1) you were already living in the property at the time the mortgage was granted (eg as a sitting tenant or when the landlord took out a second mortgage), or
2) the lender specifically agreed to the tenancy, or
3) the landlord's lender has recognised the tenancy in some way (eg by asking you to pay rent direct to them or by accepting rent from you). Most lenders will avoid doing this or will call the payment something other than 'rent'.

It appears that condition 2 would apply in this instance. I would have actually thought conditions 1 and 2 were fairly common due to remortgaging or the number of people with residential mortgages with permission to let.

Further down shelter also detail a ways that a tenant can stop a repossession even when it isn't legally binding = all more hassle and risk for the lender hence the charge seems reasonable.

Also note from that link that if the landlord didn't get permission to let then the tenant could sue the landlord.

I don't know as I'm a tenant not a landlord but I suspect that within a BTL mortgage terms and conditions or permission to let there is some clause that limits the landlord from granting tenancies longer than say 12 months to prevent the kind of scenario you imagine.

moneysavinmonkey

niallmitch wrote: »

This isnt strictly true - I had a 6 month lease in a rented property and three months in the bailiffs turned up at the door and said they had an eviction order as the house was being repossessed 1 week later. We were out no matter our lease terms - got a council house out of it so eventually turned out ok but wasnt pleasant

Hi, you don't say whether you landlord had a residential mortgage or a residential mortgage with permission to let.. that is the crux of the matter so if you know please share! If they didn't have permission to let then it prooves my point.

JCR

I also had to rent my house out which was on a residential mortgage. I informed the bank who said it would be £495 to gain permission etc. I rang and said that I appreciated them giving me permission to rent but that I thought that was a bit steep, the person at the bank, said o.k make it £195. I said don't you need to check that that is o.k. with someone, and he said no. So I paid £195 but if I hadn't queried it would have paid £300 more. So obviously there is a large amount of profit being made on these charges - even if they are perhaps taking a greater risk for a rented property than an owner/occupied one.

People like the op wouldn't want to lose their home and I'm sure they would do all they could to make sure payments were made, the same as if they were living in the house.

BobProperty

moneysavinmonkey wrote: »

.....Is my tenancy binding on the landlord's lender?

1) you were already living in the property at the time the mortgage was granted (eg as a sitting tenant or when the landlord took out a second mortgage), or
2) the lender specifically agreed to the tenancy, or
3) the landlord's lender has recognised the tenancy in some way (eg by asking you to pay rent direct to them or by accepting rent from you). Most lenders will avoid doing this or will call the payment something other than 'rent'.

It appears that condition 2 would apply in this instance.

Does it though? The LL has sent a copy of the tenancy agreement to the lender and they have agreed that they are happy with it? Unlikely. What does "specifically" mean in this situation? It could come down to how good your barrister is.
You also didn't quote another part of that article:
Most tenancies are not binding on the lender,....

moneysavinmonkey wrote: »

Further down shelter also detail a ways that a tenant can stop a repossession even when it isn't legally binding = all more hassle and risk for the lender hence the charge seems reasonable.

I'm sure tenants can do a number of things to stop or delay the repossession. The lender will just add the costs to the borrowers bill.

moneysavinmonkey wrote: »

Also note from that link that if the landlord didn't get permission to let then the tenant could sue the landlord.

Which I agree with and have already said.

moneysavinmonkey wrote: »

I don't know as I'm a tenant not a landlord but I suspect that within a BTL mortgage terms and conditions or permission to let there is some clause that limits the landlord from granting tenancies longer than say 12 months to prevent the kind of scenario you imagine.

Maybe, but IIRC you can grant an AST of up to 3 years. Also, if the borrower breaches that clause it may do nothing for the tenant's rights. Suppose the lender is OK with letting up to 12 month tenancies run their course, but thinks it can get out of anything longer by going to court and thinks it needs to, to get the best price. Tenant in this situation is the one that suffers in the short term.

Overthehilary

So, this has turned into an interesting discussion. Thanks again everyone.
Now I need to ask - what exactly is the increased risk for the lender of having tenants in a property, compared to simply having a defaulting owner-occupier? I am presuming that the costs would incur more legal work, to reposess?

MissMoneypenny

Vaux-Hall wrote: »

Actually that's the last thing you want to do, as you are potentially alerting them to the fact you don't live there any more. You can get the Post Office to forward your post for around £34/year, and ask the tenant to let you know if anything erroneously turns up for you, so you can pick it up.

While looking for a property to rent, any potential tenants can easily get a copy of the land registry details online, to see where the LL is acknowledged by the lender, to be living.

If you don't tell the lender, it could cost you a tenant. Plus that missed tenant could also tell the lender and the tax man.

mystic_trev

Overthehilary wrote: »

I am aware that the charges were probably detailed in the mortgage contract, but then, so were the redemption fees etc. and bank charges for bank accounts, some of which have been found to be excessive.
Am I adrift?

BTL Mortgages carry a higher risk, hence higher charges. Now is not a time to try getting 'smart' with Lenders. They could 'call in' your Mortgage as the Terms of your Contract with them have changed.You'd then be in the position of having to get a BTL mortgage in a hurry, and (unless you've got a good LTV) they're becoming about as rare as rocking horse !!!!!!.