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News - 13 March 2012

Accidental landlords: - the situation

Britain is fast becoming a nation of "accidental landlords" as home owners let out properties they cannot sell. However, lenders are toughening up on the "let-to-buy" market, which could leave unwary landlords vulnerable.

Figures from the National Landlords Association (NLA) show that the number of its members who had been forced into letting because they could not sell a property had risen from 5pc to 7pc by the third quarter of last year. This figure is expected to have risen since, as people struggle to sell and rents rise.

The NLA statistics are supported by figures from the Co-operative Bank last week, which showed that a fifth of its recent buy-to-let business was from accidental landlords.

These accidental landlords are being helped by record rent levels in many parts of the country. However, David Salusbury, chairman of the NLA, said a large number of these people "do not even accept that they are landlords", which can lead to problems with tenants, mortgage companies and insurance claims. "They don't realise that letting out a property is strewn with pitfalls and they do need to get it right," he said. "People need to look into the implications more carefully."

Many lenders will force you to change your mortgage if you are letting out your former residence and some will not allow you to do so, meaning that you will need to find another deal. Borrowers require a ”consent to let" or a new mortgage before letting their home and that these were not always granted. Even if they are, the mortgage may be very expensive.

Many people who move out of their homes and rent them out do not realise that they need to inform their mortgage lender and take out specialist insurance. However, if you do not inform your lender you are in breach of your mortgage terms and conditions. What is more, lenders are beginning to get tough on those they suspect of letting out their property without the lender's consent. Halifax, Britain's biggest mortgage lender and part of state-backed Lloyds Banking Group, has been writing to some borrowers it suspects of letting their properties. The letters warn that if borrowers do not reply promptly, Halifax will assume that the property is being let out and impose a higher rate on their loan.

If you need any help and advice on this or any other aspect of Property and Letting contact Lavinia Newman, Stuart Coleman or Tonmoy Kumar to discuss how ABDS can help.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

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