Landlords face fury with Santander contract clause

AFS Team·8 February 2017·4 min read
Landlords face fury with Santander contract clause

Housing groups and tenants have reacted with fury after the revelation that landlords with a Santander buy to let mortgage must raise their rents by as much as they possibly can.

The revelation was made in a mortgage magazine and the landlord that uncovered the clause said she was perplexed by it.

She explained that with the general public seeing landlords as greedy people, they may not appreciate that landlords are being urged by banks, including Santander, to increase their rents.

Indeed, the buy to let mortgage contract from Santander makes clear that landlords need to get written proof from a qualified valuer about whether the rent currently payable should be higher.

If the valuer indicates that the market rent when the review falls due should be higher, the landlord should 'take all steps' to get the maximum increase that can be reasonably achieved.

‘Behaviour undermines the landlord and tenant relationship’

A spokesman for Generation Rent, the campaign group, said: “The behaviour undermines the landlord and tenant relationship since most landlords will not raise rents if they want to keep a reliable tenant. Being forced to increase rents will lead to unnecessary churn and destabilise the lives of tenants.”

Another campaign group Fairer Finance says the Santander clause is ethically questionable.

A spokesman said: “The market for rents needs to be competitive and landlords should have the freedom to set a rent that a tenant can afford and is willing to pay.”

In response to the growing criticism, a Santander spokesman said: “The contract is unchanged since 2011 when we entered the mortgage market and landlords should set a rent prudently that is based on market rates and fair for the tenant. This will ensure they can service the debt and it’s in our interest the landlord can service the loan.”

The spokesman added that there is 'discretion' for a landlord to set their rent at a level they and the tenant can agree upon and there's no 'obligation' being proposed by the bank that the rent being asked should be at the maximum possible level.

Stamp duty hike does not deter BTL investors

Meanwhile, the Council of Mortgage Lenders (CML) has revealed that the number of properties being bought in the UK that are eligible for paying stamp duty grew in the last quarter of 2016.

The CML says that the number of properties paying the stamp duty surcharge rose to 62,800 from 56,200 in the third quarter. The number in the second quarter was 30,400.

The organisation points out that the data indicates that investors still believe in the UK's buy to let sector is a strong area for investment.