Santander has come under fire for a clause in its buy-to-let mortgage contracts that asks the landlord to increase rents by “as much as can be reasonably achieved” whenever possible.
Mortgage Strategy was contacted by a private landlord who had spotted the clause in her mortgage contract and was concerned about the effect this would have on tenants.
Other industry figures and consumer rights campaigners have strongly criticised the lender’s inclusion of the clause.
The landlord, who did not want to be named, says “I, and many landlords, believe it is an outrageous clause and, if consistently enacted, would have a significant increase on rents across the country, thus further worsening the housing crisis.
“The media paints landlords as greedy but I wonder if they are aware that we are being contractually obliged to increase rents due to companies such as Santander?”
The landlord’s contract states:
“a) …a reasonable time before any opportunity arises for a review of the rent payable under the lease, you will get written advice from a qualified valuer who is a member of the Rics whether the market rent at the date of the review is likely to be higher than the rent currently payable under the lease;
b) You will provide us with a copy of the valuer’s advice;
c) If the valuer advises that the market rent at the date of the review is likely to be higher than the current rent, you will promptly take all steps which it is open to you to take under the lease to ensure that the review takes place and leads to the maximum increase in the rent which can reasonably be achieved;
d) You will notify us promptly of the result of the review.”
John Charcol senior technical director Ray Boulger says: “This doesn’t square very well with the best interests of consumers.”
Boulger says it is the landlord’s prerogative, if they have good sitting tenants, to keep their rent affordable to enable them to stay and to prevent a void.
He adds: “As long as the rental cover is sufficient to meet the lender’s requirements – which clearly it would be, otherwise they wouldn’t offer the mortgage – that’s the key thing.”
Vantage Finance managing director Lucy Hodge says she has never encountered this type of clause. She says: “It feels excessive and disproportionate to what [the lender] is trying to achieve, and therefore I can’t see any sense in it whatsoever.”
Tenant campaign group Generation Rent director Dan Wilson Craw says: “This behaviour is undermining landlord-tenant relationships.
“Most of the time landlords won’t raise rent because they want to keep reliable tenants, and being forced to maximise returns will result in unnecessary churn in the market and the destabilisation of tenants’ lives.”
Fairer Finance managing director James Daley says: “Ethically, it’s absolutely the wrong thing to do. The market for rents should be competitive, and the price point should be at a reasonable point where people can afford to pay and are willing to pay.”
A spokesman for Santander says: “The contract has been in place and remained unchanged since we entered the market in 2011. We’ve had no concerns expressed over the clause in this time.
“Landlords should set their rents at a prudent level that is fair for the tenant (based on market rates) and that ensures they can continue to service the debt. I would also say we do not agree with the sentiment expressed in the comments. Our interest is that the landlord ensures they can continue servicing the loan – as it is in no one’s interest for a landlord to default on a loan (including the tenant).
“Any potential to increase the rent [subsection c)] is only that which can be ‘reasonably achieved’. Therefore we feel there is plenty of discretion for the landlord to set a rent that they and the tenant agree, and no direct obligation imposed by us that the rent should be the maximum possible.
“Aside from that, our terms and conditions provide an option for the landlord to seek our consent not to apply this condition.”