When taking on a new instruction, even from an existing landlord, it is imperative that you do your basic due diligence checks. These should always include:
- that the landlord is the registered owner of the property
- that the landlord has the right to let out the property
This ensures that you are acting in accordance with legal obligations and can confidently represent the property to potential tenants.
Can the landlord legally let out the property?
The easiest way to check is to ask the landlord to provide evidence of ownership and their right to let out the property. If they have a buy-to-let mortgage there should be no issue, however if they have a residential mortgage then they will need to have ‘Consent to let’.
If the landlord struggles to provide the documentary evidence then you can easily download a copy of the property’s ‘Title register’ for just £3 here: https://www.gov.uk/search-property-information-land-registry. Under ‘Charges’ on the register it will list the name of the lender and the name and address of the owner. A buy-to-let mortgage should show the landlord’s address as different to the rental property.
Once you have established that the landlord is the legal owner and has a buy-to-let mortgage then you are good to go, however if they have a residential mortgage then ask them for a copy of their ‘Consent to let’ letter of authorisation from the lender, which details the dates that consent starts and ends.
If your landlord objects to provide this information then ask yourself why!
What is Consent to Let?
‘Consent to let’ is a short-term solution for a fixed amount of time which usually ranges between 6-24 months, depending on the owner’s requirements and the lender. It is the only legal way to rent out a property on a residential mortgage.
They are used in situations such as if the landlord is temporarily relocating for work, moving in with a partner whilst waiting to sell, or is a member of the armed forces away on a tour of duty.
If the landlord intends to rent out their property on a long-term basis they will need to convert their mortgage to a buy-to-let one.
Why is Consent to Let needed
Buy-to-let mortgage rates are typically higher than for residential mortgages and there are often stricter lending criteria because they are seen as a higher risk due to the possibility of void periods or non-payment by tenants. Because of this, home owners who decide to rent out their property are often tempted to go ahead without informing their lender. This is in breach of most mortgage agreements and is deemed as mortgage fraud.
Consequences of not obtaining the correct permission
Landlords letting out a property without the right mortgage or ‘consent to let’ could face the following penalties:
- a fine
- raised interest rate
- additional interest back payments
- buildings insurance may be invalidated. Specialist landlord’s insurance policy is required.
- In the worst-case scenario, the lender could demand the loan is repaid in full or make a possession order (the landlord would have to declare this to other potential lenders who then may not want to consider a loan to them).
The risks to the tenant where the landlord has not gained consent include:
- tenants would potentially become ‘unauthorised tenants’ without the same legal rights as an authorised tenant
- the terms of the tenancy may not be binding on the lender and they could get evicted
Obtaining Consent to Let
For new landlords, thorough guidance is crucial. While we covered this in our article “Guiding Novice Landlords on the Right Path“, let’s delve deeper into obtaining Consent to Let.
Initially, landlords should contact their mortgage provider. While most lenders accept such requests, approval isn’t guaranteed as each lender has unique criteria.
Your landlord’s lender may insist on some or all of the following criteria being met:
- to have no mortgage arrears or late payments
- agreement that the property will be let out on an acceptable tenancy, e.g. an AST (England)
- to comply with a maximum occupancy, and only offer the property on a single tenancy basis
- to have been with the lender for a minimum term, usually 6-12 months
- approval from the landlord’s insurance provider
- a minimum income level
- a minimum amount of equity in the property – for example, at least 25%.
There will be a fee payable, but this varies from lender to lender. While some charge one-off fees, others charge an increased rate of interest, and others don’t charge a fee at all.
As previously mentioned, Consent to Let is usually for a fixed period. After the consent period has ended, the landlord will need to approach their lender again to discuss their next steps. The lender may agree to extend the consent period or ask the landlord to change to a buy-to-let product.
What about ‘Help to Buy’ and ‘Shared Ownership Scheme’ properties?
Getting permission to sublet a property under a Help to Buy mortgage is highly unlikely, however there are, as always, exceptions which you can learn about on the government’s guidance page.
The Shared Ownership Scheme assists first time buyers by allowing them to purchase a ‘share’ of the property and pay ‘Rent’ to the Housing Association, which retains a superior interest. Subletting isn’t typically allowed, but exceptions may be granted by the Housing Association. (note – landlords might also require “Consent to Let” if they have a mortgage on the property). If your landlord is part of the Shared Ownership Scheme, request a copy of the Housing Association’s written consent.
In summary
Asking for proof of ownership and the right to let should be standard practice whenever taking on a new property and your landlords should take this as a sign of your professionalism and understanding of the business. If a landlord does not want to provide this information or objects then you should be asking yourself why.
Property fraud is a serious ongoing issue in the UK, with millions lost each year through a variety of scams. Don’t get caught out!
This article is intended as a guide only and does not constitute legal advice. If in doubt seek professional legal advice.
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