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Clause calling for landlords to increase rents to be removed from Santander terms

Faye Lipson
Faye Lipson
17 February 2017

Santander has vowed to remove a controversial clause from its buy-to-let mortgage terms that states that landlords must increase rents by "as much as reasonably can be achieved".

The clause means landlords are contractually obliged to seek advice from qualified valuers to find out if their property's market rental value is more than the rent they get from their tenants.

In force since 2011, the clause states: "If the valuer advises that the market rent at the date of 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 rent which can reasonably be achieved."

Yet Santander now insists it's never enforced the clause and says it will remove it from mortgage contracts. A spokesperson for the bank told "We have never invoked the clause and having reviewed the wording, we are in the process of removing it from our terms and conditions."

For more information on your rights as a tenant, check out our Renting a Property guide.

So can my landlord just raise my rent?

Most tenancy agreements are assured tenancies, or assured shorthold tenancies, which means you must pay the rent agreed on the contract.

The landlord can't raise your rent unless the tenancy agreement allows it. In cases where the agreement does allow the landlord to increase rent, it should contain information about how the rent can be increased, and the amount of notice you should be given before it happens.

Who should determine the rent?

Unlike a residential mortgage, borrowers looking for buy-to-let funding are assessed on the rental income that a property is likely to generate. Most lenders require the borrower to have a minimum of a 25% deposit and for the rent charged to be 125% of monthly interest payments – to ensure that the borrower can pay the money back.

Earlier this month we contacted a number of buy-to-let providers to determine whether it was an industry standard to include continuous reviews of rental charges in terms and conditions.

A spokesperson for Barclays said: "The terms of the mortgage conditions require the initial letting to be at full market rental value. The conditions are silent on whether landlords are required to increase rent at rent review to reflect an increase in market rental value.

"So while there may be an expectation that landlords would maintain rents at market value, the terms and conditions of the mortgage do not expressly require this."

A spokesperson for Virgin Money said: "Virgin Money's buy-to-let loan conditions contain no restrictions or obligations around providing updated property values or setting levels of rent at a rent review."

When asked if buy-to-let customers were required to charge market value at the beginning of the contract they added that it "isn't a requirement of the contract".

Royal Bank of Scotland also confirmed it doesn't have anything in its T&Cs that dictates landlords should increase rents throughout the course of the mortgage term.

MSE Email 16 July 2024

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