Santander under fire for insisting landlords raise rents
Posted 15 February 2017 by
Keith OsborneOne of the UK's leading lenders is under fire after it was revealed that a clause in their mortgage contract requires landlords to raise rents by “as much as can be reasonably achieved”.
Santander has been criticised by tenants and housing groups for forcing landlords to increase the cost of renting. Since 2011, Santander's buy-to-let mortgage contracts have contained a clause requiring landlords to achieve the maximum rent possible. The contract states that when rents are up for renewal, a 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 then 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”.
The landlord who brought the clause to the attention of trade magazine Mortgage Strategy 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 bank has been criticised by industry experts for its approach which seems to fly in the face of a 'treating customers fairly' approach.
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 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 defended the bank's approach. 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.”