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  • Mortgages & Finance

    Mortgage co insisting on fixed term ASTs only

    Hi Fellow Tribespeople,

    Has anyone had this issue / can they please advise?  We have our offer document for a remortgage of a small block of flats and it transpires that the mortgage company wants all the flats in the block we are remortgaging to have only fixed term tenancies ie no SPTs.

    Personally I prefer to allow default to SPTs, if all is well with the tenancy, for a variety of reasons.

    Am I missing a trick by defaulting into SPTs, and does anyone know why they prefer 'no SPTs' please?

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    I know our last mortgage stipulated the tenancies have to be ASTs of no more than 12 months, I think our current ones say that too.

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    I imagine lenders view them as higher risk than an AST because if tenants leave at short notice, there's more chance of void periods which could compromise the LL's ability to meet mortgage payments. 

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    Thanks Richard.  Arguably SPTs are safer as you can look to regain possession faster - via S21

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    I guess they weigh up the risks of each and view an AST as lower risk of going into arrears in the first place which is the most desirable outcome.


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    It is standard in mortgage contracts to require fixed-term tenancies, you will get this with the vast majority of lenders. You can talk to your mortgage adviser about other options, they should be able to find a more flexible lender. Though you will most likely find higher mortgage rates.
    On a separate note, can I ask why do you prefer SPT's ?

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    _________________________________________________________________________


    My posts are not financial advice, just a rambling guy passing time on a coffee break.
    The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance.

    _________________________________________________________________________


    Thanks Adam.  I still need to clarify the offer but it looks now as though that requirement is only where Common Law Tenancies have been used rather than ASTs.  I don't think it is a standard requirement otherwise, if at all, certainly never come across it before myself.  I prefer SPTs because there is less disruption all round, tenants may refuse a new fixed term and also there is risk of getting the renewal process wrong (so many things to ensure happen, precisely and in the right order) however much you try to systemise we are humans and humans make mistakes.  Also you can look to evict faster with an SPT or at least as fast, via S21.

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    Yes that's right Statutory Periodic Tenancies (SPT) have issues one of them for example, is that you become responsible for Council Tax even if the tenant is in the abode.
    Whereas Contractual Periodic Tenancy (CPT) does not have that problem, it's just a continuation of the tenancy.
    It has less distribution, continues if the tenant refuses new terms, less risk of the renewal process and can evict with S21.

    When you sign a tenant up with the RLA Tenancy (6/12 month) then rolls on to a Contractual Periodic Tenancy, if your tenancy does the same then im not sure the term applies.
    You can ask for clarification from the Broker/Lender/Conveyancer.

    Now you may find a lender not happy with CPT on application, they may want you to have a fixed tenancy. Though most should be happy with CPT.

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    _________________________________________________________________________


    My posts are not financial advice, just a rambling guy passing time on a coffee break.
    The team at Bespoke Finance offers advice, including Limited Company Buy-to-Let , HMO Conversion and Cheap Life Insurance.

    _________________________________________________________________________


    I ignore such requirements and look forward to any repo action in court.  Would make an interesting test case, no I don't care if it costs me £ks in legal fees...  Can't see it standing up as a fair term.

    Apart from anything else I have properties in Scotland where there are (with PRT..) no longer any fixed terms for new private tenancies anyway and a tenant may stay as long as they like (if complying with contract) and/or give notice after being in a mere 28 days.

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