Lenders and landlords have nothing to fear from long-term tenants

Lenders and landlords can resort easily to the Housing Act 1988 to evict unwanted tenants, which ought to make lenders more relaxed about longer-term tenancy agreements.

Longer-term tenancies are high on the government’s agenda as they may provide greater security for tenants, but current mortgage lending criteria and landlords favour one-year tenancy agreements.

The Council of mortgage lenders (CML’s) response in its latest News and Views states: ‘Although shorter-term tenancies are likely to remain the most popular choice for most of those renting, we are continuing to work with lenders to understand the risks posed by longer-term tenancies – and how they can be overcome.’

Most mortgage lenders only consider tenancies of up to 12 months, so a longer tenancy currently breaches mortgage terms and conditions.

Equally, longer-term tenancies are sometimes perceived to be a bind for both sides.

The Housing Act 1988 Schedule 2, Part I Grounds 1 and 2 provide mandatory grounds for recovering possession from the tenant and can be used if longer-term leases become commonplace.

Ground 1 relates to returning owner-occupiers (whose landlord gave notice to their tenants at the beginning of the tenancy about this ground) so they can recover possession on the basis that they intend that property to be their principal residence. Ground 2 is where a mortgagee in possession needs to exercise its power of sale.

Post Courtesy of Mortgage Solutions