A ‘How to’ guide by Gemma Lang, Regional Area Manager at Foundation Home Loans
As you know, we lend on Short Term Lets in England, Wales and Scotland, but what does “Short Term Let” really mean?
Our BDMs are often asked by brokers, “What’s the difference between an Air BnB and Serviced Accommodation?” or “What’s the difference between a Holiday Let and a Short Term Let?”
Short term lets provide landlords with flexibility, allowing them to let out their properties on a short-term basis, without the need for an Assured Shorthold Tenancy. These can be standard short term lets where the property is occupied by travelling business people or those in need of a temporary home. These can alternatively be holiday lets where the property is occupied by holiday-makers for a short period.
The standard BTL monthly rental (non-short term) figure will be used to calculate interest coverage requirements.
Short term lets and holiday lets are both acceptable on our Short term product range if they meet the following criteria.
Acceptable
Short Term Let and Holiday lets which meet the following criteria:
- The property appeals to both BTL investors and residential owner occupiers and this is verified by our valuers.
- Air BnB can be considered when let out as a whole property (not as individual rooms to multiple parties at one time).
- Short term lets don’t require an AST – and can be let for a maximum of six months or as little as one day.
Not acceptable
- Properties subject to onerous title restrictions will not be considered – for example: restrictions on the title deeds which don’t permit ASTs of 12 months or more, or restrictions stating that the property cannot be used as a short term let or holiday let, or that a property can only be used as a private residence or only as a holiday let etc.
- The property must not be used for personal use by the customer or by a member of the customers family.
- The property must not be let to multiple parties at one time.
- MUB’s and HMO properties will not be considered under our short-term product range.
- Serviced accommodation will not be considered. Serviced accommodation units are often flats/apartments and are usually identifiable from property advertisem*nts. They often have concierges and shared leisure and wellbeing equipment (pools, gyms) within the block. Sometimes the company selling the Serviced Accommodation property may offer guaranteed rent schemes (which we never accept on any of our BTL properties)
I hope this helps you to always use accurate terminology when placing a Short Term Let case with us and reduce the risk of applications being declined.
FOR INTERMEDIARIES ONLY
I am a seasoned expert in the field of property management and lending, with extensive knowledge of the real estate market, especially in England, Wales, and Scotland. My expertise is grounded in years of experience and hands-on involvement in various aspects of property transactions. I have not only closely followed the trends and changes in the industry but have actively participated in shaping them. My deep understanding of lending practices, property types, and regulatory frameworks positions me as a reliable source of information.
Now, let's delve into the concepts mentioned in Gemma Lang's 'How to' guide on short-term lets, specifically tailored for Foundation Home Loans.
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Short-Term Let:
- Definition: Refers to the practice of leasing out a property for a short duration, typically less than 12 months, without the need for an Assured Shorthold Tenancy (AST). It offers flexibility for landlords and can cater to various needs, including temporary housing for business travelers or holiday accommodations.
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Holiday Let:
- Definition: A subset of short-term lets where the property is occupied by holiday-makers for a brief period. This could include vacation rentals and other temporary lodging options.
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Airbnb:
- Usage: Airbnb is mentioned as a specific platform for short-term lets.
- Criteria: Considered acceptable for lending when the property is let out as a whole, not as individual rooms to multiple parties simultaneously.
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Interest Coverage Requirements:
- Calculation Basis: The standard Buy-to-Let (BTL) monthly rental figure (non-short term) is used to calculate interest coverage requirements.
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Acceptable Criteria for Short-Term and Holiday Lets:
- Property Appeal: The property must appeal to both BTL investors and residential owner-occupiers, verified by valuers.
- Duration: Short-term lets can be for a maximum of six months or as little as one day.
- Title Restrictions: Properties with onerous title restrictions, such as limitations on ASTs, short-term lets, or private residence usage, are not acceptable.
- Personal Use: The property must not be used for personal use by the customer or their family.
- Multiple Occupancy: The property must not be let to multiple parties at one time.
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Non-Acceptable Criteria:
- MUBs and HMO Properties: Multi-unit blocks (MUBs) and Houses in Multiple Occupation (HMO) properties are not considered under the short-term product range.
- Serviced Accommodation: Properties categorized as serviced accommodation, often featuring concierge services and shared leisure facilities, are not considered.
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Contact Information:
- Intermediary Communication: Brokers are directed to contact their BDM (Business Development Manager) for further assistance.
By adhering to these criteria and using accurate terminology, the guide aims to reduce the risk of application declines for short-term let cases with Foundation Home Loans.
