A buy-to-let charter which sets industry-wide guidelines for lenders, investors and letting agents has been issued by the Association of Residential Letting Agents (ARLA) and its panel of lenders.
The charter is the first initiative of ARLA’s new buy-to-let panel of lenders which includes GMAC RFC, NatWest Mortgage Services and Paragon Mortgages. The panel aims to devote greater resources to conduct further research into future lending and letting issues in the buy-to-let market.
The charter falls into three sections. The first is concerned with potential investors, saying it is important professional advice is sought, to consider buy to let for the medium to long-term and to be objective and recognise the fluid nature of the rental market. It warns decisions on property purchases should be made based on the needs of the local market, rather than personal taste.
The second section is aimed at lenders and is concerned with affordability issues. The charter says rental incomes should be forecast by lenders as part of affordability assessments. It also demands lenders provide clear information on buy-to-let products and services as well as lenders’ obligations to the borrower. Lenders abiding by the charter will need to explain to borrowers what to do if they have difficulty meeting mortgage payments.
The final section asks letting agents to demonstrate a comprehensive understanding of the legalities, regulations and obligations which apply to landlords, tenants and agents. According to the charter, agents should provide ‘realistic and up-to-date guidance’ on supply and demand based on ‘detailed local knowledge’ of the market.
John Crossley, chairman of ARLA, said the charter should not affect current practices.
‘When the association launched buy to let, we stressed it is an investment that requires the investor to take professional advice and to have reasonable expectations,’ he said.
Roger Hillier, product develop manager at Mortgage Express, welcomed the move. ‘There has been a lot of hype about the gains to be made from investment, but there is no guarantee every client will make money from their property,’ he said.
• Copies of the charter are available from ARLA member letting agents, the ARLA panel of mortgage lenders, or can be downloaded from www.buytolet.co.uk