One of the big criticisms today of landlords is the fact that many won’t let to benefit claimants.
Tenants organisations have organised demos and marches and angry articles have appeared in the press, all condemning landlords and their agents for selfishly refusing to let to people on benefit.
However, maybe they are protesting in the wrong places. Maybe they should move from protesting in front of letting agents offices (as letting agents, after all, have to do what landlords tell them) and move over to the banks.
Maybe they should start demonstrating in front of TSB, Virgin and the Natwest, all of whom have policies which prevent their buy to let borrowers renting to tenants on benefit.
Anti benefit claimant borrowing criteria
Most landlords own their properties on a mortgage. And most of those mortgages contain conditions which landlords need to follow when renting their properties.
If they don’t – the mortgage lender could, technically, call in the loan.
For example, NatWest’s buy-to-let eligibility criteria notes:
We will not consider multiple tenancies, Homes of Multiple Occupancy, bedsits, DSS tenants or ‘Related Person’ tenancies.
Helena McAleer’s case
Helena McAleer is a landlord in Northern Ireland and is featured in a recent Guardian article. She rents to a tenant who happens to be on benefit.
Helen wanted to raise some extra funding from her property and approached her mortgage lender, NatWest. She was horrified to learn that the bank would only agree to this if she evicted her tenant.
A tenant, mind you, who is not in arrears, has paid her rent on time and who is in all respects a good tenant. But who, despite this, would struggle to find anywhere else to live were she to be evicted as NatWest asked.
Helen, to her enormous credit, refused and went to another lender. And set up a petition asking the government to take action to force banks to stop this practice.
But how many other landlords have had to comply with these demands? Particularly as most mortgage lenders ban benefit tenants. Some landlords may not be able to find a lender who will permit them.
A harsh and senseless ban
There are some 4.2 million benefit claimants in Britain. They all have to live somewhere and for many of them the only option will be the private rented sector.
But many landlords, who will be bound by the terms of their buy to let mortgage, have no option but to refuse to accept them. Simply because of their mortgage conditions.
As Patrick Collinson in his Guardian article points out
It’s not even clear how NatWest’s approach makes any commercial sense.
As a lender, its contract is with the landlord, not the tenant. If the tenant doesn’t pay, the bank shouldn’t care – it’s the landlord who is legally liable.
If the landlord goes into arrears, the bank can repossess safe in the knowledge that all buy-to-let mortgages have a maximum 75% loan-to-value. And what if a tenant goes on to benefits some time after occupying a property? Should the landlord meekly tell NatWest and accept that they must now throw them out?
There are other reasons why landlords are unhappy about accepting tenants on benefits, which I looked at in this post. However many landlords would be willing to take a chance on a good applicant – if their mortgage lender would let them.
There has been a lot of talk about landlords discriminating unlawfully against tenants on benefits – but if they are forced to discriminate by their mortgage lender, there is nothing else they can do.
Maybe someone should bring a discrimination claim against the banks?
When money is the measure
For banks and most other mortgage lenders, money is the measure of all things.
They work to formulas. Compassion, empathy and humanity have no place in their world.
Their staff, individually, may be nice and compassionate people, but the organisation they work for is not. And they will generally have no discretion.
There is no good expecting the banks and financial organisations to voluntarily change their policies. Even if they did bow down to pressure, they would probably bring them in again by some backdoor measure.
The only way this can be stopped is by government action.
Which is why we all ought to sign Helena McAleer’s petition and send a message to the government that this sort of thing is unacceptable.
The RLA are also on the case here and they suggest that the bank’s practices breach a number of principles within the FCA’s ‘Treating Customers Fairly’ agenda.
In which case maybe a test case should be brought – perhaps against NatWest, a bank which is part of RBS and which is supposed to be partly owned by us, the people.
After all, if a state-controlled bank is doing this, it is hard to see how the others can be stopped. The RBS banks should set an example and change their policies.
You will find the petition here.