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UK Council of Mortgage Lenders May Change Buy To Let T's & C's

UK Council of Mortgage Lenders May Change Buy To Let T’s & C’s

Lenders may have to change their terms and conditions on buy to let mortgages and rethink their attitudes towards standard tenancies, according to the UK Council of Mortgage Lenders (CML).

The Council of Mortgage Lenders (CML) was responding to calls by Labour leader Ed Miliband for longer-term tenancies in the private sector after he said he wanted to see greater security offered to households in rental accommodation. Similar calls have also been mounted by Shelter, and longer tenancies were also discussed in Parliament at the end of January.

But the CML acknowledges that lenders are nervous about extended tenancy agreements because of the risk of a build-up of rental arrears leading to buy to let mortgage arrears, affecting lenders’ ability to repossess the property if a long-term tenant is in place.

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70% Rise in Tenant Evictions over last 3 years

70% rise in Tenant Evictions over 3 years

The Residential Landlords Association (RLA) and homless charity Crisis say that UK court orders to evict defaulting tenants in the Private Rental Sector have risen by more than 70% over the past 3 years.

Homeless charity Crisis analysed Ministry of Justice figures to reveal that within the last 12 months some 36,211 landlords have been granted a court order to evict bad tenants, an increase of 12% on the previous year and 70% higher than the 21,351 court orders granted in 2009.

Duncan Shrubsole, director of policy at Crisis, said: “Sadly it is no surprise that we are seeing thousands of private tenants facing eviction. They face a dreadful combination of high unemployment and underemployment, draconian cuts to housing benefit and soaring rents. Our concern is that many of these people will have nowhere to turn, and end up falling victim to homelessness. In fact the Government’s own statistics point to this already happening. We are calling on the Government to rethink cuts to housing benefit that will inevitably leave increasing numbers of people unable to pay the rent. We are also in desperate need of more social and affordable housing in order to rein in the soaring rental market.”

The RLA want more done to prevent tenants getting into rent arrears and are currently lobbying the Government to change the way that the housing element of the new Universal credit system will be paid.

Latest Government figures show that between 2009 and 2011, the number of people approaching their local authorities as homeless due to the end of an Assured Shorthold Tenancy or due to rent arrears increased by 42% to almost 10,000 households.

Sim Sekhon spokesman for the UK’s leading Tenant Eviction specialists, Legal 4 Landlords, said “Landlords who do not have specialist insurance in place to protect rental incomes face the prospect of rent default by tenants as they in turn face increasing financial pressures. At Legal 4 Landlords we provide the complete tenant eviction service for landlords with a success record that speaks for itself, that’s why we are the UK’s leading tenant eviction company”.

Jeremy Corbyn, the Labour MP for Islington North has said that he plans to introduce a Private Member’s Bill in order to help regulate the Private Rented Sector (PRS), which he called an ‘utter disaster’.

Speaking in an adjournment debate in the Commons, the labour MP said in his own constituency, 30% of residents live in private rented accommodation and his proposed Bill would also introduce rent controls.

Mr Corbyn stated: “I wish to draw to the House’s attention the huge problems facing people living in the private rented sector in this country. This has to be seen in the context of the overall problems of housing supply and need in Britain. In 2010, 102,000 new properties were provided in this country, but every year approximately 230,000 new households are created. There are 2.8 Million people on the waiting list for council housing in the whole country and 3 Million people living in the private rented sector. I want to talk about the private rented sector because it has been the fastest-growing sector. Even if all the council housing I would like built, was built quickly, an enormous number of people would still be living in the private rented sector. Private rents have risen at double the rate of wages over the past ten years, while people living in the private rented sector are ten times more likely to move than owner occupiers. Furthermore, rents are rising fast despite the low level of wage rises at the moment and the relatively low levels of inflation. In other words, it costs more to live in private rented accommodation.”

He went on: “The terms of tenancies and conditions for people living in private rented accommodation tell a very sorry story indeed. We have a system of Assured Shorthold Tenancies (ASTs) – which give tenants a guaranteed tenancy of only six months and, after that, a two-month notice period – along with very high rents. In my constituency it is quite normal to find people living in private rented accommodation who are paying over half their take-home pay, if they are in work, on their rent. We also have a housing benefit system that militates strongly against people in the private rented sector. The Government have introduced the rent cap, which has limited the levels of housing benefit being paid. I am now facing the trauma – and it is a trauma – of seeing large numbers of tenants in my constituency who were or are in receipt of housing benefit being forced to move out, because their housing benefit has been cut and their rents have gone up, and because they cannot afford to meet the difference from other benefits, if they are on them, or their wages. There is, in effect, a social cleansing of inner London going on because of the imposition of the housing benefit cap. I stress the point that a large number of people in receipt of housing benefit are working – albeit on low wages, but they are in work. The current situation is an utter disaster, but it does not have to be like this, and I hope that things can change. Germany, for example, has 60% of its housing provided by the private rented sector. Germany has permanent tenancies and rent controls provided, and a tax regime that encourages good rather than bad management. Germany has a much more stable community and society as a result. I hope to introduce a Private Member’s Bill to bring about regulation, rent controls, decency and, above all, security in good-quality homes for those living in private rented accommodation. This is a serious issue that must be faced for a large number of people in this country.”

 

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