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BTL mortgage clause demands landlords raise rents

Monday 06 February 2017



A clause in Santander BTL mortgage contracts stating landlords must increase rents by ‘as much as reasonably can be achieved’, is to be reviewed by the bank.
 
Under the bank's terms and conditions, BTL borrowers must get written advice from qualified valuers to check if the market rental value is higher than the current rent.
 
The clause states: "If the valuer advises that the market rent at the date of review is likely to be higher than the current rent, you will take all steps to ensure that the review takes place and leads to the maximum increase in rent which can reasonably be achieved."
 
The bank has now pledged to review the clause, which has been part of its mortgage terms and conditions since 2011, ‘now that we are aware that it can be misunderstood.’
 
A spokesperson said: "We recommend that landlords should set their rents at a prudent level that is fair for the tenant and based on market rates, ensuring that they are able to continue to service their mortgage.
 
"It is in no-one’s interest for a landlord to default on a loan (including the tenant).
 
“We recognise that it is for the landlord to set a rent that both they and the tenant agree upon.”
 
Borrowers for BTL mortgages are assessed on the rental income that a property is likely to generate.
 
Most BTL lenders require a 25 per cent deposit and for the rent to be 125 per cent of monthly interest payments - to ensure that the borrower can repay the loan.
 
While most BTL lenders do have conditions in their contracts determining that landlords should at least charge the rental market value of the property when the mortgage is originally taken out, it's then left to the landlord to decide if they wish to increase rents at a later date.

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