Some private landlords with buy-to-let mortgages are being prevented by their lenders from letting to people on benefits.
BM Solutions, the buy-to-let brand of state-backed Lloyds Banking Group, is one lender, and Accord, a Yorkshire Building Society brand, is another.
Buy-to-let consultant David Lawrenson said he found it ‘incredible’.
Lawrenson said: “It seems interesting that the Government, who have an interest in getting vulnerably housed people housed in the private rented sector, have not picked up on this issue before, especially as one lender is a part state-owned bank.
“The most interesting thing about this is that from all the work we have done in this area, we have seen no statistical evidence to suggest that landlords who let to tenants on benefits are any more likely to default on their mortgages than landlords who avoid such tenants.”
Chris Maggs, Accord’s national account manager for buy-to-let, said: “We do not currently lend to DWP assisted tenants or tenants in receipt of housing benefit.
“We are a relatively new entrant into the buy-to-let market, and as a responsible lender have taken a cautious approach, with a focus on financially sound borrowers who already have some buy-to-let experience.
“Our range of mortgages and lending policy is continually evolving and we would not rule out changes in the future to satisfy requirements of the private rental sector, provided applicants meet our fundamental requirements of being experienced buy-to-let borrowers with a good financial track record.”
A spokeswoman for BM Solutions, said: “Through our buy-to-let criteria, we are actively managing the risk profile of this type of lending.
“Historically, this type of tenant has been of a higher risk, and this is reflected in our criteria. We are currently reviewing this aspect of our lending criteria, and will communicate the outcome of this review when appropriate.”
What Lawrenson says:
http://tinyurl.com/bsyuxqt
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Comments
Nationwide have been excluding insurance with DSS tenants for some while - I have it in writing and use this to my advantage. Prior to that an insurer for a block of flats I had an interest in changed the excess from £100 to £500 if there was a claim while there was a DSS tenant in occupation as a tenant on an AST. You try and get an extra £400 from a tenant and then if you do and there is a claim can you imagine them agreeing to it being used? No chance of them releasing their money from a protected scheme particularly if the fault lies with others as in the case of a flood from a floor above.
No need to be discriminatory as it is done for you. I have a block of flats where the head lease states no DSS no DWP no students. This may be something for managing agents to consider getting the freeholders to make a decision and amend the conditions for their leaseholders protection. That would be for the neighbours protection as I get questioned on is there DSS tenants in this building.
You have to be VERY careful about stating you cannot let to people on benefits as you are making a sweeping statment that could easily discriminate against the disabled, which would be a criminal offence under the Equality Act.
You can discriminate against HB claimants as that is a specific benefit, but you cannot make a "no benefit claimants" statement lawfully.
That is why all adverts stating "No DSS" is unlawful. I know the "DSS" does not exist and hasn't done for years yet the Luddite agents who still use the term haven't managed to correct this. It is the implication of the term that falls foul of the Equality Act.
Nobody I know has yet been prosecuted on this point but it is only a matter of time before somebody makes a formal complaint.
The stories I (and probably most other seasoned agents) could tell about local authorities handing over HB to tenants then, when the tenant fails to pay their rent advising them to stay in the property until the bailiff throws them out.
Also how HB is paid in arrears, (automatically putting the tenant in arrears) and is stopped, started and changed seeemingly on the whim of a council official.
Or threatening a landlord under HHSRS for not doing repairs, even though the landlord genuinely hasn't got any money thanks to the tenant being three or four months in arrears.
Then the council write to us to say they'd like to work more closely with letting agents and would we like to attend a forum to share ideas.
There is no mention of Students or Asylum seekers who are also barred in some Mortgage Conditions along with the majority of Insurers who also penalise Landlords by increasing premiums or again barring these tenants.
There is also no mention of restricting Landlords 6 month tenancies which are not allowed to roll on monthly.
Perhaps Shelter should be directing their attention in other directions.
the only good news is that some Mortgage Providers are insisting on properties being managed by a Regulated Agent. No need for legislation the Finance Sector could bring about change overnight by changing Conditions.
I have just learned that even Council Tenants are to receive their Housing Benefit and Council Tax Benefit paid in their Universal Credit payment from April. It's our money that pays these bills now so in effect we will be paying thrice. Once in taxes to provide the funds, again for those who choose to keep it for their own use and again in dearer taxes to cover the lost income to the Councils. Is it too late for the Government to do a U turn, see sense and make all payments of Housing Benefit directly to the Landlord/Agent? Why does Mr Cameron feel the need to want to educate the claimants in how to manage their own money in case they get a job, when available jobs are being reduced because more and more firms are closing. This has got to be the biggest mistake of any government in recent years.
There is risk if the benefit is paid to the tenant or to the landlord.
If the tenant get paid directly their is risk that money won't be passed to the landlord.
If the landlord gets paid directly there is risk of claw back by the local authorityl (going back several years) if the tenants claim has been calculated incorrectly or the tenants claim is proved to be fraudulent. Claw back is demanded from the person it's paid to. So if the landlord has received the rent directly, the landlord will have to come up with the money to pay it back. For this reason I prefer the tenants to receive the money and pass it onto me.
Lenders are aware of both risks. I understand their fears.
However as mentioned in another post the government are in support of benefit tenants finding homes. The government should offer both lender and landlord some security that the rent will be paid if a benefit tenant is accepted and payments go wrong.
At present the system is unfair as the landlord suffers (some to the point of loosing their property) because in either scenario the landlord looses financially.
Simple answer in my view:
The government should make benefit tenants more appealing to landlords and lenders by offering some security. After all its the private landlord who is helping the government to house benefit tenants.
Maybe an insurance policy to protect against claw back / arrears. They exist as I have them for my own properties where I have benefit tenants. I have had to claim for arrears and the policy has out. I've never had to claim for claw back as I don't receive rents directly from tenants.
If more landlords and lenders wanted benefit tenants wouldn't that solve a big issue?
How can you restrict the circumstances of a tenant ??? i.e. move into the tenancy working and financing the rent themselves them find themselves redundant and having to claim LHA
OI love the way that David Lawrenson has twisted that; that landlords haven't defaulted. Just because they are paying their mortgage, it doesn't follow that the tenant must have paid their rent. Is he deliberately missing the point I wonder?
It is not just the banks, I have landlords without mortgages who are similarly restricted by the Building Insurers!!
Easy Answer:
The buffoons running the housing benefit system have decided to pay the tenants (our tax paid money to be used specifically for HOUSING) directly to the tenants, even if they have arrears.
Everybody in the country (except Lord Freud and Ian Duncan Smith) know that these people will generally NOT pass the rent on as they have other priorities.
Result: Mass homelessness / evictions and repossessions.
Easy Option for the taxpayer/landlord/tenant =
Allow direct to landlord payment the LHA element of Universal Credit......
This is news! Most buy to let lenders have such restrictions.