Any property owner who has a mortgage or is not a freeholder may need to secure the necessary permissions before they let the property.
If the owner is a leaseholder then the lease may contain a clause which states either that sub-letting is not permitted or that the freeholder’s permission must be obtained prior to sub-letting. It is very important that this permission is obtained, because if the property is let to tenants without it (even if permission is sought later) then the conditions of the lease will already have been breached and the freeholder can take legal proceedings against the leaseholder.
The freeholder’s permission will generally be a formality and this permission cannot be unreasonably withheld, but the freeholder may make a number of enquiries, for instance, if there have been complaints about noise from former tenants this might be discussed and the leaseholder might be required to satisfy the freeholder that they have addressed this issue this time around. It is usual for the freeholder to make a small charge for granting their permission. If the freeholder does refuse permission then read the lease carefully to find out what the lease says about granting permission and then seek the freeholder’s reasons for their refusal. It may be possible to address and satisfy any misgivings before there is a need to take further advice or make the threat of legal proceedings.
If there is a mortgage on the property, one of the terms of that agreement may be that the owner obtain the lender’s permission before the property is let, even if only one room is being let This is because the mortgage lender will be concerned to make sure that nothing is done that may affect the value of the investment and the lender’s ability to recover the loan that was made when the property was purchased.
It is important to check the terms of any mortgage. For many buy-to-let mortgages permission to rent the property may be automatic, but even in buy-to-let mortgages there may be conditions on the type of let permissible e.g. ‘assured shorthold tenancies only’ (see chapter 3 for the types of tenancy) or a restriction on welfare benefit tenants. If, as an owner, these requirements are not fully understood then seek advice from a solicitor – the one who assisted with the purchase should be able to help. If it is proposed to let the property as ‘rooms’ or bedsits which will create a House in Multiple Occupation (HMO) (see chapter 2) this must be made clear as special permission may need to be sought for this and conditions may be imposed that will need to be met.
If the property was purchased for an owner-occupier on a standard mortgage for home owners, then permission will need to be obtained to let the property to tenants. The lender may increase the cost of the mortgage or change its terms if permission to let the property to tenants is given. Usually a lender will not object to one room in an owner-occupier’s home being let to a lodger.