A new client contacted us recently as she wanted to purchase a property below market value as it had a regulated tenant in situ. Surprisingly, she told us that a number of mortgage brokers and solicitors did not know what a regulated tenant was and so could not help her.
A tenant is regulated if:
They moved into their property before 15 January 1989 and:
- pay rent to a private landlord
- do not receive services such as cleaning or meals
- do not share any facilities such as a kitchen or bathroom
Regulated tenants have considerable security of tenure and protection under the 1977 Rent Act.
In brief this means:
- they cannot be evicted unless the landlord can prove to the courts there is a strong reason
- they have the right to have a fair rent set by a rent assessment committee
- they have succession rights- a family member or partner can take over the tenancy on death
All of this means that it is difficult to secure finance on a property which is occupied by a regulated tenant.
Since 1998 The Assured Shorthold Tenancy (AST) Agreement has been the default type of agreement for residential tenants. This lead to the emergence of buy to let mortgages as lenders had greater rights for repossession than before.
In respect of our client, we are hoping to secure commercial finance for her property purchase as the loan to value is quite low.