Regulation threat for “accidental landlords”

The Government has set out plans to regulate loans made to so-called “accidental landlords” in order to comply with European rules.

Since 2011, the European Commission has been drafting a set of regulations called the EU mortgage credit directive. The idea is to bring in minimum standards to protect borrowers taking out loans across Europe.

The UK mortgage industry lobbied hard to ensure that buy-to-let mortgages would not be covered by the new rules, and was led to believe buy-to-let would be out of scope.

But earlier this month the Government changed its mind, saying it would need to introduce regulation for part of the buy-to-let market after all.

Borrowers will be affected where they have not actively decided to become a landlord and are not acting in a business capacity. Examples of affected borrowers include those who have inherited a property, or find themselves unable to sell their property and forced to let it out.

The Government is consulting on the plans, but expects them to come into effect in March 2016. The financial regulator, the Financial Conduct Authority, is also expected to put out its own paper on the rules.

The Council of Mortgage Lenders says it is disappointed with the U-turn, and that regulation of some landlords but not others could be “potentially problematic.”

The National Landlords Association has also hit out the plans, saying they are “confusing” and “unnecessarily costly to implement.”

NLA chief executive Richard Lambert says: “All private landlords should have access to the same range of financial products and lending criteria. In practice this framework is likely to exclude new landlords and those requiring the most flexibility from the buy-to-let market.

“While the industry pushes on with efforts to professionalise landlords and the wider sector, we’re disappointed that the Government instead seems intent in this instance to infantilise the business of providing homes.”