Santander tells buy-to-let landlords to 'raise rents by the maximum'
02-02-2017
Telegraph Money Investing Buy-to-let
Santander tells buy-to-let landlords to 'raise rents by the maximum'
Controversial: terms hidden in Santander's buy-to-let loans demand that landlords push for the highest possible rents
Leah Milner Sam Barker
Santander is facing fury from tenants and housing groups for a clause in its buy-to-let mortgage contracts requiring landlords to raise rents by “as much as can be reasonably achieved”.
The wording has been buried in Santander's contracts since 2011. It has come to light only now, however, as buy-to-let investors face an unprecedented squeeze on their incomes due to tax changes applying from April.
Many borrowers are scrutinising mortgage documentation to assess their likely position if they cannot meet repayments.
One private landlord who spotted the clause and brought it to the attention of industry magazine Mortgage Strategy, where it was first reported, said she was "outraged" to discover it.
You will take all steps to ensure... the maximum increase in rent which can reasonably be achieved
Santander's buy-to-let mortgage contract
She 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?”
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."
Santander demands a copy of the valuer's advice in these circumstances and then goes on to say that:
"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."
Ray Boulger, one of Britain's leading mortgage commentators, was surprised by the existence of the clause and said it “does not square very well with the best interests of consumers.”
Mr Boulger said it should be up to the landlord, if they have good sitting tenants, to keep their rent affordable to enable them to stay and to prevent vacancy of the property.
At another broker, Vantage Finance, managing director Lucy Hodge says she had never encountered this type of clause. She said: “It feels excessive and disproportionate. I can’t see any sense in it whatsoever.”
Dan Wilson Craw of campaign group Generation Rent, which lobbies for tenants' rights, said: “This behaviour is undermining landlord-tenant relationships.
“Most of the time landlords won’t raise rent 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.”
James Daley, director of campaign group Fairer Finance and a regular contributing columnist for Telegraph Money, said: “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.”
A spokesman for Santander disagreed with the criticisms of the policy. He 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.
“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."
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