If you do not own the freehold to the property and are a Leaseholder, you will need to check whether or not you need to ask the landlord for consent to let property. This information will be contained within the Terms of the Lease. If the consent of the landlord is required this should not be difficult to obtain as most leases will state that the landlord’s consent cannot be “unreasonably withheld”. The landlord may however set down a number of conditions:
It is essential that if the lease requires you to obtain the consent of the landlord to subletting, that you obtain that consent. Failure to obtain the consent of the landlord when it is required by the terms of the lease may result in the landlord taking court action against you and seeking to bring your lease of the property to an end.
It is common for the landlord to make a charge for their consent to subletting. It is also important to note that the landlord will hold you directly responsible for any breach of the terms of the lease even if the breach is carried out by your tenant. With this in mind it is important that you ensure that your tenant is fully aware of the terms of the lease; a prudent landlord will incorporate the terms of the lease within the assured short hold tenancy agreement.
Property Is Subject to a Mortgage
If your property is subject to a mortgage you will require the consent of the lender in order to let property to tenants. If you have purchased the property with a residential mortgage it will be a term of the mortgage that you obtain the written consent of the lender should you wish to sublet the property. Such consent must be obtained before letting the property and even if you are only going to let part only, of the property.
Lenders are generally reluctant to allow properties which are subject to a residential mortgage to be let to tenants and may only grant permission in extenuating circumstances for example, if the owner of the property is unable to afford the mortgage payments and cannot sell the property at a price which is sufficient to repay the mortgage.
When giving consent the lender is likely to impose strict restrictions and may increase the cost of the mortgage and change the terms. This may, in some circumstances mean that the mortgage is converted to a buy to let mortgage. The restrictions imposed may be similar to those by a landlord as set out above. It should be noted that it is very common for lenders to insist that the property is not let to tenants who are dependent on Government benefits.
It is common for residential mortgage to contain an absolute prohibition on letting the property and in cases such as these you will need to negotiate with the lender to change the terms of your existing mortgage. Changing the terms of the mortgage may involve you are having to go through the affordability tests as if you were applying for a new mortgage.
It is very unlikely that a lender will object to one room being rented to a lodger with the owner of the property being in occupation and sharing the facilities. However it is important to obtain the lender’s consent for any letting.
Not obtaining the consent of the lender to subletting the property may have very serious consequences; letting the property without the consent of the lender is a breach of the terms of mortgage may give the lender grounds for repossessing the property even though you may be able to meet the mortgage payments through the rents received for the property.
If the property is divided into flats such conversion would have required Planning Consent from the local authority may require licensing under the Houses of Multiple Occupation Regulations introduced in the Housing Act 2004. It is becoming increasingly common for local authorities to require all properties are going to let including the letting of the whole of the property to one family/or single household, to be a licensed by the local authority.
Our next article looks at licensing of Buy-to-Let properties by local authorities.