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Definition of a UK accidental landlords has been decided by the treasury
The Treasury has settled on the definition of an accidental landlord as it works towards implementing the EU’s Mortgage Credit Directive.
Publishing draft legislation last week, the Treasury defined consumer buy-to-let contracts, known as accidental landlords, as any contract the borrower has not entered “wholly or predominantly” for business purposes.
The Treasury launched its initial consultation on the directive in September, when it said accidental landlords would be brought under regulatory scrutiny, but it did not settle on a definition.
Where a property has been inherited or purchased as a residential dwelling before a change in circumstance has led to it being rented, such transactions will be captured under the new regime and treated as a regulated mortgage contract under MCOB rules.
Any buy-to-let contract where the borrower has clearly stated the property is to be used for rental purposes will remain unregulated as long as the lender believes the borrower is telling the truth.
The new rules will not be applied to loan applications submitted before 21 March 2016.
Additionally, the Treasury has confirmed that responsibility for ensuring regulatory compliance regarding buy-to-let contracts lies with the broker firm rather than the individual adviser.
Ami chief executive Robert Sinclair says: “The clarification on what comprises regulated consumer buy-to-let is positive.”
Building Societies Association head of mortgage policy Paul Broadhead says: “The BSA is still of the view that the directive will offer little or no benefit to UK consumers but will add cost, complexity and confusion to the mortgage process.
“However, we welcome the Government’s approach to implementation, putting in place the minimum requirements to meet European law.
“The introduction of an appropriate framework for consumer buy-to-let will keep the majority of buy-to-let lending outside the scope of regulation, minimising the disruption to the market.”