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Lenders and brokers express concerns over B2L impact from landlord register

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Lenders and brokers are warning that a national register of landlords will push up buy-to-let mortgage rates and ultimately see rents increase.

Last week, Labour published a policy review of the private rented sector and recommended that all landlords should be registered to a national database.

Landlord accreditation already exists for Scottish local authorities and in certain English councils such as Newham, while the Welsh Assembly also plans to introduce a scheme by 2015. The Government is opposed to regulating the private rented sector.

For Scottish councils, landlords must pay £55 to every council where they have a property and an additional £11 per property in order to undergo a fit and proper person check.

Newham landlords must pay £500 for a five-year license and can face fines of up to £20,000 if they do not register.

Councils check criminal convictions for violence, drugs, dishonesty, fraud, sexual offences and firearms offences as well as whether the landlord has a record of discrimination or housing offences.

Labour says a national register would be designed to assist English and Welsh local authorities identify private landlords and communicate with them.

It would also significantly toughen sanctions against bad landlords, hand local authorities much greater powers of enforcement and set a minimum standard for privately rented housing.

In return the party says it will provide landlords with a range of incentives such as a supply of tenants from the local housing register.

The aim is to improve the quality of housing for tenants. The paper highlights the example of a mother in privately rented accommodation who was killed when a faulty heater fell into her bath.

Shadow housing minister Jack Dromey says: “The private rented sector has an important role in meeting housing need.

“But too many tenants are in poor and sometimes dangerous homes. That is why Labour has set out proposals to drive standards up and bad landlords out. Bad housing harms health and dangerous housing can kill.”

The party says a register could help tackle £500m worth of landlord tax evasion and will consult with HMRC on how a register can be used.

But lenders and brokers say the benefits of rolling out a register nationwide would be greatly outweighed by the costs.

They argue the extra checks required by lenders would increase mortgage rates while landlord fees paid to councils could affect rental calculations.

John Charcol senior technical manager Ray Boulger says: “If it was a national scheme then it would be logical for lenders to take account of the extra costs to landlords and therefore they would need to beef up rental requirements.”

The Buy to Let Business managing director Ying Tan says: “It would mean lenders doing more due diligence to see if landlords are on the register which will raise costs.

“Rental calculations may increase or rates may go up which will be passed on to landlords and then to higher rents.”

Lloyds Banking Group, which owns one of the biggest buy-to-let lenders BM Solutions, already accounts for agents fees, void periods, future rate increases and future rent increases when making rental calculations and says it would build any extra charges into a future review of its process.

The bank backs the idea that a register would lead to more responsible landlords and therefore better quality housing.

It believes better quality homes could receive higher rents which would then cancel out the impact of council fees for landlords but says it would need more details of the Labour plan.

The Business Mortgage Company managing director Andy Young says: “If there is more work and cost involved in assessing mortgages then the cost is transferred on to the borrower which is the landlord.

“It could mean mortgage rates go up but it is difficult to say how much until there are more details. At a time when we should be encouraging landlords to buy more stock to help the issues in housing it feels like another backwards step with negative implications for everyone.”

Buy-to-let lender CHL Mortgages managing director Bob Young says it is easy for politicians to take a kick at the private rented sector as there is little public empathy with landlords.

He says: “Councils are understaffed and do not have the budgets to do it so they will charge landlords. It is an additional tax and bar to entry that will put off existing landlords and put a brake on the private rented sector for no gain. Local authorities are not the best people to undertake a fit and proper person test.

“If lenders provide a loan to someone who is on the register and he is then taken off it means they have breached their mortgage conditions but a lender cannot just ask for the mortgage back. There are major implications to it and it could increase the mortgage cost to borrowers.”

Precise Mortgages managing director Alan Cleary says a national landlord register would lead lenders to re-assess many aspects of buy-to-let lending.

He says: “It could affect lending as we would need a new process in place, while in the event of a repossession we would have to consider what the liabilities would be to continue.

“If licence fees run into the thousands of pounds then it has to be put into the lending decision and could also cause lenders to lend less money.

“Ultimately more checks and more administration will lead to more costs for consumers as it will work its way down to higher rents.”

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  1. Yet again, a left wing socialist lifeblood-draining idea to raid a sector that has done well, creating a beaurocratic army of unproductive penpushing regulators…….

    …..just like the initial 1997 raid on pension dividend tax credits..pray they never get in power again!

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