Buy-to-let mortgages

How we resolve buy-to-let complaints

• Arrears charges

  BTL borrowers are running a business. So we expect them to be more aware of potential charges – and the consequences of getting into financial difficulty – than ordinary consumers.

  A CBTL borrower, on the other hand, entered the buy-to-let market in a different way. But they’re still running a business for profit, rather than borrowing against their home. So, in practice our approach to arrears charges for BTL and CBTL borrowers is much the same.

  We’ll want to see an explanation from the borrower as to:

  • why they’re in arrears, and
  • what they plan to do to get back on track.

  BTL mortgages are unregulated loans and therefore don’t require lenders to give borrowers the same level of support they give to residential mortgage customers. But before you appoint receivers or take other recovery action, we’d still expect lenders to show that:

  • they’ve understood their customer's situation and offered appropriate forbearance, and
  • given the borrower a chance to get things back on track.

  As a lender, you’re entitled to recover the costs you’ve incurred dealing with arrears by charging them to the borrower. But repossession should still be a last resort.

  We’d expect you to have:

  • worked with the borrower to find ways they can get back on track with their payments
  • acted within the terms of the mortgage agreement and your policy, including by keeping any charges in line with the tariff.

  Some properties can’t be let, for example because they’re in a poor state of repair or unsuited to the local rental market. If this is the case, we’d expect the borrower to consider their options, for example by selling the property. It might still be reasonable to expect you to show forbearance while the customer makes these arrangements.

• The LPA receiver

  A lender is entitled to appoint a receiver to manage the property on the borrower’s behalf in certain circumstances. This is usually set out in the mortgage terms and conditions or the Law of Property Act (LPA).

  A receiver takes over from the borrower, collects rents – if the property is tenanted – and works with the lender to either:

  • get the mortgage back on track, or
  • bring it to an end, for example by handing the property over to the lender to sell.

  The decision to appoint a receiver is made by the lender. We can look at whether:

  • you made that decision fairly, or
  • the decision was premature, for example, because the borrower didn’t have a chance to get things back on track themselves.

  Once you appoint an LPA receiver, they act as the agent of the borrower – not the lender. This means we can’t usually consider a complaint about their decisions or charges.

  If the borrower is unhappy with the receiver’s actions, they should complain to the receiver.

  Sometimes, however, we have clear evidence the receiver is taking direct instruction from the lender – rather than simply working with them. In those circumstances, we’ll treat the case as a complaint against the lender, because the receiver has been acting as the lender’s agent, not the borrower’s.

  We also consider complaints about the receiver’s fees being added to the mortgage debt.

  If the terms and conditions allow recovery of costs – and we’re satisfied you appointed the receiver properly – we’ll usually say it was reasonable for you to recover these costs from the borrower.

• Repossession of the property

  We can’t overrule a court’s decision to repossess a property. However, we can look at complaints about events that led to court proceedings and whether you acted fairly when implementing the court’s decision.

  If your firm repossessed the property without a court order, we’ll look at whether:

  • the mortgage contract made provision for that, and
  • you acted fairly – for example, by appointing receivers who then handed the property back.

  We’d expect you to exercise reasonable forbearance before taking legal action or agreeing a sale with a receiver against a borrower’s wishes.

  But – with both CBTL and BTL mortgages – we’d expect you to find out what’s happening. If the borrower might be able to get the mortgage back on track, you should allow them reasonable time to do so.

  If that looks unlikely, we wouldn’t expect you to allow things to drag out and the debt to increase unnecessarily – bearing in mind that the property is not the customer’s home.

  If you’ve made a mistake, we’d usually ask you to:

  • cover the receiver’s costs
  • compensate the borrower.

  If your customer is complaining that you sold the property for too little, we’d follow the same course of action that we take with a residential mortgage complaint.

• Delays in the mortgage application

  The mortgage application and property-buying process involves many different parties, any of which could cause delays. Setbacks can occur at any point in the buying process and the application for a BTL mortgage or a remortgage.

  Complaints about delays sometimes concern something specific – which the borrower believes caused the delay – or they can be more general.

  We'll look at whether:

  • the borrower informed you they needed the application to go through especially quickly or that they had a deadline – and, if so, whether you agreed to that, or made clear in good time that you couldn’t
  • there was a delay and, if so, what caused it.

  We may need to ask you to explain anything that slowed the process down at your end – such as waiting for information from a third party or even the borrower. If the borrower is complaining you caused the delay by asking them for information unnecessarily, we'll ask you why you needed that information.

  If we believe that something you did held up the mortgage application, we'll look at the impact that had on the borrower to assess whether they lost out as a result.

  This might include compensation for distress and inconvenience. But it might also include compensation for financial loss – for example, where your delay led to the borrower missing out on a favourable interest rate.

• Advice and mis-selling

  A borrower may complain you shouldn’t have given them the mortgage because, for example, the rental income doesn’t outweigh the mortgage payments. In these cases, we’d need to see:

  • your firm’s lending criteria
  • the information your firm based the lending decision on, and
  • valuation and comparisons to local properties.

  If the complaint is about advice from a broker, we’d need to see:

  • why the broker thought the mortgage was suitable for the borrower and the property
  • the mortgage provider’s lending criteria.

  If the borrower is complaining because you declined their BTL mortgage application, we’d need to see:

  • your lending criteria
  • evidence – such as a surveyor’s report or affordability assessment – that backs up your decision.

  A borrower may believe they were sold the wrong product. If so, we’ll ask them why and what they believe they should have been sold instead. And we’ll ask you for your reasons not to sell it to them.