Hi all, I have a 3 bed house in London with tenants on rolling AST since February 2020. I am very happy with them and we have a good relationship. I am days before compleating a buy to let remorgage deal and Building society has just asked me to sign declaration of adhereing to mortgage conditions which were stated in the booklet sent to me when I accepted their mortgage offer.
One of the terms is that the tenancy agreement must be for a fixed term no less then 6 months and no more then 12. My tenants are on rolling AST and they are not happy with signing the 6 months minimum as it precludes them from giving notice should they choose to do so within the next 4 months. It would mean creating new contracts on yearly basis - not ideal.
Is this a usual thing in current financial landscape that lenders insist on fixed term?
How do I play it?
I need to remortgage as otherwise i ll be on extortionate rate of 11.35% mortgage with current lender.
I would appreciate some advice.
Thank you
Check with the lender, but I think youll find they are happy to accept your periodic tenancy.
My bank requires me to let with a 12 month AST. I could be wrong but my understanding of this clause is to ensure you are letting using a standard AST as opposed to it being a short-term let like a holiday let or AirBnB which come with different conditions. I didn’t interpret it to mean that it was to be renewed when the fixed period ends. On one of my properties the fixed term has lapsed and has now become a monthly periodic. It is still under the same terms and conditions with the exception of the notice period.
I think the practice of renewing the tenancy every 6/12 months comes from agents who want to charge fees for setting up a new tenancy. Even if you need to raise the rent you can raise it without a new tenancy agreement and the other thing is all the extra admin as to start a brand new tenancy you have to serve all the prescribed info again. I just let them roll onto a monthly periodic.
My Broker called them and their rersponse was to get my solicitor to write to them " Tenancy agreement will be put in place for at least 6 months and no longer then12" so its a no from them
I ve had changes of lenders before and was always just rolling with periodic and never renewed contracts with rent increases agreed between us. I am still awaiting a response from my conveyancer if they are willing to send the statement suggested in conversation between lender and my broker. Its almost like lender may be shooting self in the foot by creating problems in continuation of tenacy as I cant force them to sign new contract nor do I want to
As I said in my previous post, I take the clause to mean that the lender wants to ensure you are letting using a standard AST which by law has to be a minimum of 6 months fixed term but more usually 12 months. This to me means no holiday lets which are a maximum let of 90 days. Lots of adverts out there telling landlords to switch to holiday lets as they generate more income and mortgage costs are still tax deductible.
I take your point on board. I ll call them directly tomorrow to clarify. It makes no sense to get rid of good long stay tenant who doesnt want new contract
As above, I think if challenged you can argue that you are already complying. The lender is not going to call in your mortgage if you have a perfectly valid periodic AST in place that began as a 6 or 12 month initial term.
I agree, however at this stage I am more concerned with them releasing the funds before 3rd August and the fact that the fixed period has now ended and its reverted to periodic so I am being economical with information. Doesn’t help my convayencer is now away till Monday too. I may call them directly though.
So good news after all. Building Society confirmed they will release the funds. Phew!..I was on tenderhooks.
Thank you guys for your responses , much appreciated.
Break clause two months notice
That would not satisfy tenants - if they wanted to move say next month they would not be able till 4 months minimum.
They reluctantly signed new contract now but I wont enforce it - Its only if lender wants to see it at any point.
The lenders will have to change their requirements because a fundamental provision of the Renters (Reform) Bill is the abolition of ASTs and the automatic conversion of all fixed term residential tenancies of less than 7 years to periodic.
Alternatively, if the lenders don’t change their requirements, we are going to see some bankrupt landlords who can’t roll over expiring mortgages and can’t sell their tenanted properties at a price which is sufficient to redeem the mortgages in full.
You make a very good point there. I was wondering about the implications of that Bill.
I know this is an old thread-
Kensington?
I having the same problem - they want new ASTs on other houses in the portfolio and won’t accept rolling.
Annoying because the one set of tenants wont like and the other I want to sell the house in 6-12 month and won’t be able to do that.
Was crazy surprised - I’ve never had that as an ask. I’ve just asked the broker to find a new lender but its an annoying delay and doesn’t seem of benefit to them either?
Especially as they’ve already done a val’n and a bunch of leg work and the fundamental financials still stand.
Thought initially it was maybe a new / over zealous underwriter but from your post perhaps not
All updates appreciated
Hi , It seems lenders want more security of rent enforcement. I also had to assign legal rights to them to pursue tenants for rent owed presumably if mortgage is not paid.
I d try to offer them new contract like I did but also gave them assurances in writing that the old contract is still valid . Depends on your tenants and relationship with them though.
The lenders are deluding themselves if they think fixed term tenancies will give more security.