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Question Title: Mortgage permission
| Question: 39 |
| A landlord asked me today what would happen if he didn't tell his lenders that he was going to let the house and if they found out. Can you tell me ? I think in this case I persuaded him that it would not be a good idea, but we don't have a policy of checking whether landlords HAVE obtained permission. Should we? Would there be any consequences to us as agents if they omitted to tell their lenders?
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| Answer: |
| In summary it is essential that you as agent ensure that the landlord has permission to let the property from mortgage companies, freeholders etc. This is for several important reasons. Firstly it is an offence under the Accommodation Agencies Act for you, as agent, to advertise a property as available to let, without a lawful instruction. This caught an agent out a few years ago when a council tenant said he had bought the property and asked his agent to let it out. It transpired that the "landlord" was a council tenant and the agent was taken to court and it cost them about £1500 (London Borough of Islington v Winkworth). The judge said he thought agents should do searches to verify ownership. Secondly, if the landlord is not 'lawfully' letting the property then there is every chance the contract is not a lawful and therefore there is no redress if the rent is not paid by the tenant (tell that to the landlord to motivate them into getting the necessary permission). Thirdly, in law, Housing Benefit is only payable where there is a legal obligation to 'pay charges in respect of the dwelling'. If you consider two above, then you will realise that if the rent is not really due, because there is not lawful contract, then any Housing Benefit is overpaid. Technically the Housing Benefit Department could recover up to six years worth of back payments. In this case I think they would have a very good cause for going for the agent or landlord since under regulations 101(a) they can recover from anyone who fails "to disclose a material fact (in either case whether fraudulent or otherwise)". There is no requirement under this provision for you to have been in receipt of direct payment of Housing Benefit. This is a huge liability. Since one of the most common times for this to come out in the wash is when the property is repossessed. There may be little chance of recovering from the landlord and since the agent is guilty of an offence under the Accommodation Agencies Act the agent is an obvious target. Even a £400 pcm property, let for six years on Housing Benefit amounts to a significant recovery (£28,800!). Fourthly the landlord could technically have the house repossessed for a breach of the mortgage terms! Prohibition on subletting without permission is a virtually universal mortgage condition. In essence we would suggest you insist on seeing permission from the lenders. If they say that there is no mortgage, then consider searches (land registry - only about £8.50) and this will show if there is a charge on the land, and confirm their ownership.
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References:
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Pages:
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Hyperlinks:
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Letting Update Journal |
July 2001 page 25 |
letting-update-journal.html
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For more information, discuss on the Forum
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