The buy-to-let market has been extremely active over the past year and many private and professional landlords are looking to take advantage of the continuing opportunities.
Any landlords who are specifically going into buy-to-let with housing benefit tenants as their target market because they view the local council as a guarantee of rental income, need to understand that the lending policy of most lenders in the market excludes DSS-let properties. This is because the lenders are nervous that the property will not be looked after carefully or that the property might develop an unwanted stigma and both of these factors could affect resaleability.
Despite not wishing to attract this type of business, lenders appear to do little policing to stop this happening. Details of the tenant are seldom asked for on a mortgage application form or in the underwriting process. Typically, the only time the validity of the tenant is raised is when the surveyor reports the property currently has DSS tenants in the property or its vicinity. The mortgage offer itself tends to only ask if an Assured Shorthold Tenancy agreement will be in place after completion ‘ not who the tenants will be.
The lenders that are openly happy to accept this type of business presumably take the view that the benefit from the guaranteed rental payment made by the local council outweighs the resaleability argument. One such lender is Bristol & West, whose fixed rates are among the best in the market, but it, like other lenders, would not lend if the tenants had recently arrived in the UK.
In short, the choice of both lender and product will be severely restricted if the applicant sets out with the intention of targeting tenants in receipt of housing benefit.
Stuart Johnson
