A trade magazine and a national newspaper are reporting anger amongst landlords, tenants and housing groups following the discovery of a mortgage firm’s contract clause requiring landlords to raise rents by “as much as can be reasonably achieved”.

Mortgage Strategy magazine and the Daily Telegraph says the wording has been buried in Santander’s contracts since 2011 but has only received attention now as a result of tax and duty changes affecting the profitability of the buy to let sector. 

One private landlord told Mortgage Strategy that she was “outraged” by the clause, saying: 

“The public views landlords as greedy, but how many people are aware that landlords are being forced to increase rents by banks such as Santander?”

The Telegraph, quoting the Santander contract, says it states that when rents are under review the landlord must “get written advice from a qualified valuer [as to] whether the market rent at the date of the review is likely to be higher than the rent currently payable.”

Santander demands a copy of the valuer’s advice in these circumstances and then goes on to say that: “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 take all steps to ensure that the review takes place and leads to the maximum increase in the rent which can reasonably be achieved.”

A Santander spokesman says: “The contract has been in place and remained unchanged since we entered the market in 2011. 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.

“Our interest is that the landlord ensures they can continue servicing the loan. Any potential to increase the rent is only that which can be ‘reasonably achieved’. 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.”