NatWest relaxes restrictions on tenants in receipt of benefits

NatWest has ended its policy of refusing to lend to landlords who provide tenancies to people in receipt of social security benefits. The bank announced that this policy change followed an "extensive review" of its buy-to-let policies. Shelter and the Residential Landlords Association had assisted with this review. In addition to removing this restriction on tenants in receipt of benefits, NatWest has also extended the maximum length of tenancy from 12 months to 36 months, which will allow landlords to offer longer tenancies and improve security for tenants. 

Refusing to let to tenants in receipt of benefits has long been an issue of contention. Although this type of policy seems to be a clear act of indirect discrimination, landlords may have reasonable justification for this policy if it has been imposed upon them by their lender. As landlords grow increasingly concerned about delays, implicit consent and other complications of Universal Credit, they may become increasingly reluctant to rent a property to a tenant in receipt of benefits, particularly when there are other applicants for the same property who are in paid employment. Tenants in the Republic of Ireland were finding this such a barrier to accessing suitable housing that the Dail amended its equality legislation in 2015, to ensure that people cannot be discriminated against when renting because they are getting Rent Supplement or any other social welfare payment by adding a "housing assistance" ground to the protected grounds. One landlord was ordered to pay more than €42,000 to tenants for refusing to allow them to apply for a Housing Assistance Payment. 

The Minister for Housing and Homelessness for England has also announced plans to look at letting adverts which discriminate against would-be tenants on Housing Benefit and has said that such adverts should end. Additionally, the Work and Pensions Committee has opened an inquiry into discrimination against benefit claimants in the housing sector, and will hear evidence from tenants, landlords, lenders, property managers and their representative groups on 20 March. 

What happens if landlord is in breach of mortgage conditions?

It is possible, although unlikely, that a lender will call in a mortgage if it believes that the borrower is in breach of the terms and conditions of the loan. However, in our experience this issue more commonly comes to light when a buy-to-let property is repossessed. When a rented property is repossessed, the lender or receiver must generally honour the terms of the tenancy in place, as long as that tenant is authorised. 

A tenant will only be authorised if the landlord had permission to rent out his property or had a buy-to-let mortgage; but the terms of the tenancy must also comply with the terms and conditions imposed on the mortgage by the lender. In the past, we have advised tenants who have been offered 5 year fixed term tenancies by their landlords, who have later encountered financial difficulties leading to repossession. Normally, a tenant in this position whose landlord had a buy-to-let mortgage would enjoy some degree of security, knowing that there were another 3 years to run on a fixed-term tenancy. However, in a number of cases it transpired that the landlord was not authorised to offer a tenancy of any longer than 12 months, meaning the lender did not have to honour the agreement in place. 

Get advice on your options

If you are a tenant and your home is subject to possession proceedings, it is really important to get advice on your options. Call 028 9024 5640 to speak to our advisers. 

Landlords can get advice on housing and tenancy issues from Landlord Advice by calling 028 9024 5640 and choosing option 5.