Tenants outraged by Santander contract clause

Tenants and housing groups have vented fury towards Santander, after the lender included a clause in its buy-to-let mortgage contracts that requires landlords to raise rents by, ‘as much as can be reasonably achieved.’

Despite the wording appearing in Santander’s contracts since 2011, it has only just come to light, as buy-to-let investors continue to feel the pressure of the raft of recent tax changes.

Outrage

A private landlord who spotted this clause in her contract, subsequently contacted industry Mortgage Strategy.

Talking to the magazine, the landlord said: ‘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?’[1]

The Santander contract states that when rents are up for renewal 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,’ she added.[1]

Santander requires a copy of the valuer’s advice in these circumstances and goes on to say: ‘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.’[1]

Reaction

One of the UK’s leading mortgage commentators, Ray Boulger, believes the clause, ‘does not square very well with the best interests of consumers.’[1]

Dan Wilson Craw of campaign group Generation Rent, noted: ‘This behaviour is undermining landlord-tenants relationships. Most of the time landlords won’t raise because they want to keep reliable tenants. Being forced to maximise returns will result in unnecessary churn in the market and the destabilisation of tenants’ lives.’[1]

James Daley, director of campaign group Fairer Finance, observed that the clause is: ‘Ethically, it’s absolutely the wrong thing to do. The market for rents should be competitive, and landlords should have the freedom to set rents that tenants can afford to pay and are willing to pay.’[1]

Tenants outraged by Santander contract clause

Disagreement

Responding to the criticism, a spokesman for Santander said: ‘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.’[1]

‘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,’ they added.[1]

[1] http://www.telegraph.co.uk/investing/buy-to-let/santander-tells-buy-to-let-landlords-raise-rents-maximum/