Owning a property does not necessarily mean a landlord is free to let it on whatever basis they choose.
Mortgage conditions, lease restrictions and insurance terms can all affect whether a property may be rented, how it may be occupied and what must be disclosed.
That is why landlords should regularly check that the way a property is being used still matches the permissions and cover they actually have.
Check the mortgage first
A standard residential mortgage is generally intended for a property occupied by the borrower as their home.
If circumstances change and the owner wants to let the property, they may need permission from their lender.
This is often referred to as consent to let.
The lender may:
- grant temporary consent;
- impose conditions;
- charge a fee or different interest rate;
- require a change of mortgage product; or
- require the borrower to move onto an appropriate buy-to-let mortgage.
Landlords should never simply assume that because mortgage payments are up to date, letting the property is permitted.
If a property is already financed on a buy-to-let basis, check that the particular type of letting is allowed. Some mortgage products may contain restrictions relating to Houses in Multiple Occupation, holiday lets, company lets or other specialist arrangements.
Do not forget the lease
Leasehold landlords have another document to consider: the superior lease.
The lease may contain restrictions or conditions covering:
- subletting;
- the type of tenancy that may be granted;
- short-term or holiday letting;
- Houses in Multiple Occupation;
- pets;
- alterations;
- nuisance; and
- obtaining consent before letting.
Mortgage consent does not override the lease.
A landlord could therefore have a mortgage that permits letting but still be in breach of their lease if the required freeholder or managing-agent permission has not been obtained.
Keep copies of any written consent with the property records.
Make sure the insurance reflects the actual use
Insurance also needs to match what is really happening at the property.
A normal owner-occupier home-insurance policy is not automatically suitable once a property is rented to tenants.
Landlord insurance can provide cover designed for rented property, but policies vary significantly.
The important issue is accurate disclosure.
An insurer may need to know about matters such as:
- whether the property is tenanted;
- the type of tenants or occupancy;
- whether it is an HMO;
- periods when the property is unoccupied;
- renovations or building work;
- previous claims;
- changes in property use; and
- any other circumstances specifically requested by the insurer.
Providing inaccurate information or failing to disclose a relevant change can affect the way a future claim is handled.
Review the position when circumstances change
Permissions should not be treated as a one-off check carried out when a property is first purchased.
Review them whenever there is a significant change.
Examples include:
Moving out of your former home and letting it
Check whether the existing residential lender will permit this and whether the insurance needs changing.
Changing from a single household to an HMO
Mortgage and insurance terms may both need reviewing, alongside licensing and planning requirements.
Moving from long-term renting to short-term accommodation
A mortgage or lease that allows an ordinary residential tenancy may not allow holiday or short-term letting.
Leaving the property empty during refurbishment
Insurance policies often contain conditions relating to prolonged periods of unoccupancy.
Changing the legal ownership of the property
Transferring property to a company or another owner can have implications for finance, insurance and tax.
Using an agent does not remove these responsibilities
A letting agent may help manage the tenancy, but the landlord remains responsible for making sure they have the appropriate authority to let the property.
An agent cannot give mortgage consent on behalf of a lender or override restrictions contained in a lease.
Landlords should therefore avoid assuming that because an agent has accepted a property onto its books, every underlying permission has automatically been checked.
Keep a simple permissions file
For each property, consider maintaining one file containing:
- mortgage offer and current mortgage conditions;
- written consent to let, where required;
- superior lease;
- freeholder or managing-agent consent;
- current landlord insurance schedule;
- important endorsements or exclusions; and
- correspondence concerning changes in occupation or use.
This can make it much easier to demonstrate what was checked and when.
The position across the UK
Mortgage and insurance conditions are contractual matters and can affect landlords throughout England, Wales, Scotland and Northern Ireland.
However, the underlying tenancy, licensing and property-law rules differ between the four nations.
For example, a letting arrangement that is legally structured correctly in England may require different tenancy documentation or registration procedures in Scotland, Wales or Northern Ireland.
Permissions from a lender or insurer therefore sit alongside — rather than replace — the landlord’s wider legal responsibilities.
When did you last check?
Landlords often concentrate on tenancy legislation while overlooking the contracts that sit behind the property itself.
But a property can be legally let to a tenant while still creating problems if the landlord has breached mortgage conditions, ignored a lease restriction or failed to tell an insurer about an important change.
If you have not reviewed your mortgage or landlord insurance recently, now is a sensible time to do so.
NetRent supports landlords throughout the UK with landlord insurance and mortgage services, as well as rental-property sales.
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Important information
NetRent does not provide legal advice. The articles represent our understanding of rental property law and are for general information only.