Tuesday, 2 July 2013

BTL Lenders set out new Tenancy Requirements via CML Handbook P2 changes

One might expect a simple ‘Yes/No’  answer to the following question within the CML Handbook Part 2 : Does the lender require counterpart/certified copy tenancy agreement to be sent to you? 

In recent years lenders have shoehorned in all sorts of obligations into their Part 2 requirements and last night’s changes are a good example of how lenders utilise Part 2’s to expand their legal conditions to conveyancers.

Investec and The Mortgage Works in answering question 6.6.3 as to whether they require a copy of the tenancy state as follows:

No,not required for properties let under a standard Assured Shorthold Tenancy within the meaning of section 20 of the Housing Act 1988 as amended by the Housing Act 1996 and subject to a maximum tenancy term of up to 36 months. If the AST is of 13-36 months duration please notify TMW/Investec accordingly but there is no requirement to send in the tenancy agreement.

Where the tenancy is not in the standard form(non AST)and let to a Local Authority,Housing Association, Government Department or Corporate Company we will require a copy of the agreement to be sent to us to verify the suitability of the tenant. In such cases you must confirm that the tenancy agreement meets the following requirements:

1)the tenant must be letting the property to a current employee of its organisation (if NHS, government department or limited company).
2)the tenant must use the property to provide accommodation for homeless persons under the Housing Act 1996 or similar legislation (if local authority or housing association).
3)the tenant must not use the property for business or create any business tenancy.
4)there must be no security of tenure afforded to the occupier or tenant.
5)the agreement recognises the existence of a mortgage and the potential for the mortgagee`s right to repossess.
6)the agreement provides for rent to be diverted to the mortgage lender or their representatives.
7)the tenancy is no more than 3 years in duration.
8)the agreement must contain no other provisions which adversely affect the lender`s security or its right to enforce its remedies under the mortgage deed executed by the borrower.
Tenancy agreements or tenants that do not meet the above requirements are not acceptable and TMW/Investec  must be informed immediately.

Ivestec and The Mortgage Works panel solicitors can see full details of the change here.

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