Buy-to-let lending criteria for properties | Barclays Intermediaries

A House in Multiple Occupation (HMO) is acceptable provided it is not subject to any form of licensing by the Local Authority. Where there is any doubt as to the licensing requirement of a BTL property, written confirmation from the appropriate Local Authority will be requested. If your client would like more information on HMOs and licensing they can visit www.communities.gov.uk/housing or speak to their Local Authority.

Where an existing client applies for further borrowing on a property which now requires licensing, consideration may be given to the request providing that the monies are to be used for the following circumstances only:

• Fees to obtain a licence if one is now required
• Essential repairs/improvements to ensure the property complies with licence requirements (either to obtain or maintain the standard required for the licence)
• Essential Repairs to maintain the quality of the property. Please note that this does not include cosmetic improvements such as redecoration
  
  

A certified copy of the licence from the Local Authority must be submitted with the application where it is currently held or alternatively provided by the client once it has been obtained.

Local councils/authorities are also able to licence Buy to Let properties by way of selective or additional licensing. Such licenses are acceptable provided the property is not also an HMO. Such licensing is intended to protect the property from misuse and generally improve the locality.

The letting types must be to a single household with one tenancy and one tenancy agreement, eg an individual, a couple, family unit, a group of students or professionals – no more than 4 tenants under one agreement.

The minimum lease term we accept is 70 years at the point of application. Where the lease is under 70 years at the point of application these will only be considered where the lease is being extended within the mortgages transaction and any offer would include a condition to ensure the lease is extended by the legal representatives for the application.

Any of the following leases/letting types are ACCEPTABLE

• England and Wales: Assured Shorthold Tenancy (AST) / Occupation Contract (Wales) for a minimum term of 6 months and maximum term of 2 years. ASTs / Occupation Contracts (Wales) can continue to renew under a new contractual tenancy of the same or substantially the same terms until such time that it is brought to an end by the tenant or landlord.
• Scotland: Short Assured Tenancy for a minimum term of 6 months and maximum term of 2 years or of a type that allows vacant possession to be obtained on terms no less onerous than a standard Short Assured Tenancy.Private Residential Tenancy is also an acceptable tenancy type. Short Assured Tenancies can continue to renew under a new contractual tenancy of the same or substantially the same terms until such time that it is brought to an end by the tenant or landlord. All new tenancies must be Private Residential Tenancies.
• Northern Ireland: All Tenancy Agreements to be in a written form. There is no equivalent to an Assured Shorthold Tenancy which exists in England. Residential tenancies in Northern Ireland are governed by the Rent Order (NI) 1978 which provides certain basic rights to Tenants of privately rented properties whether or not these rights are expressly included in their Tenancy Agreements.
• Model Tenancy Agreements (MTA) can be used where the landlord wishes to allow a long term tenancy agreement to be put in place; this would generally be used for terms longer than 2 years. Care must be taken to ensure any tenancy agreements do not exceed the term of an Interest Only mortgage where sale of property is chosen as the repayment strategy.
• A single household with one tenancy and one tenancy agreement e.g. individual/couple/family unit/group of students or professionals (no more than 4 tenants under one agreement)
• A Company/Corporate Lets (for a minimum term of 6 months and maximum term of 3 years)
• Leaseback Arrangements to builders (minimum lease term of 6 months and a maximum lease term of 3 years). This is where a customer buys a new home, but leases it back for a period of time to the house builder to be used as a show home (cannot be used as the site’s official sales office – other than where the garage is to be used for such purpose. The developer’s Licence Agreement that the property will be returned to its original state must be evidenced). These letting types are acceptable, but please note that the case will be underwritten on the rental income achieved on an AST / Occupation Contract (Wales) basis in the local area as provided by the surveyor and not on the guaranteed rental figure which the builder agrees to pay
• College and/or University Head Tenancy Schemes (minimum term of 6 months and maximum term of 3 years).
• Lease to a registered Housing Association or Local Authority for a (minimum term of lease 6 months and maximum term of 3 years). If the initial term of the lease was 5 years but there is now only 3 years left to run on receipt of the application this will be acceptable.
• Letting to tenants in receipt of housing benefits is acceptable
• If the tenant fails to vacate at the end of the term of the AST / Occupation Contract (Wales)/PRT it rolls onto a Statutory Periodic Tenancy. This will occur where neither party wish to change the terms and it will roll on until either party gives notice. The minimum notice period for the landlord is 2 months (as it must be during the term of the AST / Occupation Contract (Wales) and for the tenant 1 month. This is acceptable to Barclays as long as the applicant provides a letter to confirm that the expired AST / Occupation Contract (Wales) is still in place, with all terms unchanged.

All of the following are UNACCEPTABLE as either “existing” or “proposed” lease/letting types

• Letting to a related person* of the applicant (see note below). Therefore, any application submitted with this type of tenant must be declined as a Buy to Let application, and should be treated as a residential regulated mortgage contract.
• Sale and lease back where the tenant is the previous owner of the property
• Letting to directors/shareholders/members of the SPV Limited Company/LLP which is our borrower or any associated SPV or LLP
• Letting to diplomatic tenants and/or embassies
• Direct letting to tenants from the local authority housing waiting list i.e. the tenancy agreement is between our borrower and the tenant, rather than our borrower and the local authority
• Holiday lets
• Regulated tenants
• Premium Leases where all rent is paid in advance at the start of the tenancy
• HMO requiring a licence from the local authority – Refer to HMO requirements
• Room by room letting with multiple tenancy agreements
• Assured Tenancies (Scotland)
• Protected Tenancies (Northern Ireland)

*A related person is defined as “The borrower’s spouse, parents, grandparents, siblings, children and grandchildren. An unmarried partner of the borrower whose relationship with the borrower has the characteristics of the relationship between a husband and wife is also included, which can include a person of the same sex as the borrower. Stepchildren are included”.

A property is classified as "mixed use" where there is any element of commercial use, i.e. it's not wholly residential because it is used in part for non-residential purposes e.g. such as a shop, office, doctor's/dentist's surgery or "live work" unit. We do not accept mixed use properties for BTL mortgages.

For BTL Lending purposes the definition of a new build is a property that was first registered fewer than two years ago. This also this also applies to newly converted properties. Lending for new builds is restricted to £500k for up to 75% LTV and £1m for 60% LTV and below. New builds requiring lending of above £1m are outside policy.

Builders deposits/incentive

There is no restriction on the amount of builder’s, vendors or developer’s gifted deposit/cashback that can be accepted provided that:

• The deposit/cashback does not have to be repaid and the builder does not intend to register a charge against the property
• The applicant is providing at least a 25% personal stake (based on the lower of valuation or discounted purchase price), i.e after accounting for any builder/vendor incentive/deposit
• For example, where the full purchase price and valuation is £100k and the builder/vendor is providing a £5,000 cash incentive, the applicant must provide a minimum of £23,750 from own resources towards the purchase based on 25% of the discounted purchase price; therefore, the maximum advance in this scenario would be £71,250

Note: The personal stake must be increased by the relevant amount in circumstances where loan to value restrictions apply.

Acceptable warranties include:

• ABC+
• Advantage/ Advantage Home Construction Insurance (AHCI) (Only warranties underwritten by CGICE)
• ARK 10 Year Structural Defects Insurance
• Build Assure (New Homes Structural Defects Insurance)
• Build-Zone Structural Warranty (including Build-Care)
• CADIS
• Checkmate Castle 10 New Home Warranty
• Global Home Warranties 10 Year Structural Defects Insurance
• Protek
• Home Proof (previously AEDIS Warranties Ltd) (Only warranties underwritten by Millenium, SCOR or Titanium Insurance Company)
• ICW (International Construction Warranties)
• LABC New Home Warranty
• NHBC
• One Guarantee
• Premier Guarantee
• Q Policy/ Q Assure

CRL (no longer trading): Policies backed by Casualty and General, or ARK are still acceptable.

BLP: Policies underwritten by AGCS for business accepted by BLP up to 27th November 2020 are acceptable

Where a PCC is being used in place of a warranty:

• The property must be built under the supervision of an Architectural Technologist or qualified Surveyor who has professional indemnity insurance and is employed solely by the applicant, a builder or a self-build group;
• The Certificate must be in in the exact words and format as set out in UK Finance Lender Handbook section 6.7.4;
• A retrospective PCC is not acceptable 
• The individual signatory to the PCC must meet the qualification criteria as set out.in UKF lender Handbook 6.7.4 & 6.7.5
• The development must be of a no more than 5 properties;
• Where, by exception, a high-quality small-scale development covering more than 5 properties (max 10) is presented, separate approval to proceed must be secured. Please contact the support team on 0345 073 3330
• PCC certification is not acceptable on individual properties in a large development scheme;
• A property with a PCC certificate, which is not complete at initial inspection, will require a final inspection prior to completion;
• A retrospective PCC is not acceptable
• A PCC from a warranty provider company that is not on the above approved list is not acceptable.
• PCC’S are not acceptable covering flat developments

BTL properties must be located in England, Wales, Scotland or Northern Ireland.

In order for Barclays to proactively manage the risk of over exposure in one location (i.e. on a particular development/estate, in an individual block, in the same road/street) an assessment of the property concentration we currently hold, will be carried out by our BTL Mortgage Processing Centre on receipt of the application based upon postcode concentration.

The maximum Barclays property concentration is 6 properties in any one postcode (eg AB1 2CD), the only exception is where there is high volumes of flats we will accept up to 10% of properties. Although all applications where there are more than 4 properties in any one postcode will be referred for review.

There are some property types which are not deemed suitable security for the Barclays Group and so in all cases lending will be declined on Buy to Let properties. These scenarios are listed below:

• Demolish and rebuilds
• Freehold flats and maisonettes (Scottish flats that are held in Absolute Ownership (former feu) are acceptable as long as a Deed of Conditions has been created to regulate the management and maintenance of the property as a whole.)
• Properties classed as ‘houses in multiple occupation’ where a licence from the Local Authority is required
• Live-work units
• Easiform cavity walled concrete
• Those where the client uses or proposes to use any part or whole of the security offered for owner occupation
• Those with multiple tenancy or licence agreements in place.
• Those that contain bed-sits.
• Flats that are not self-contained or without independent access
• Any property not recommended as suitable security by our surveyor or which falls outside our Lending Policy.
• Adjoining flats (granny annexe)
• Where there are any Agricultural Restrictions
• Mixed-use properties
• Section 106 properties

Some properties may have certain features which mean that extra care will have to be taken. In these cases please contact the Intermediary Support Team for further details on our lending policy:

• Japanese Knotweed – please see separate policy section
• Properties with deck area access can only be considered for good quality developments with no restriction whatsoever on mortgageability/saleability. 
• Contaminated land – Typically from previous industrial use of the site
• High-rise blocks of flats – properties with deck area access or properties that have non-decorative timber cladding will be looked at individually
• Modern methods of construction – Will require an individual assessment by a valuer
• Early steel frame construction - Will require an individual assessment by a valuer

The above lists are not exhaustive; please call our Intermediary Mortgage Experts on 0345 073 3330 -  Monday to Friday, 9am to 5pm for further details.

We recommend that a reputable qualified letting agent should be engaged to let and manage a BTL property. However, where a client can demonstrate relevant experience we'll allow them to undertake their own letting and management.

To be able to lend on a property, Barclays requires a valuation to be carried out. When you apply for a Barclays mortgage, the valuation type depends on whether your mortgage will be on a residential or Buy to Let basis.

The mortgage valuation is our standard report for all residential applications and includes a description of the property, an opinion of the market value of the property as at the date of inspection, and an estimate of the current cost to reinstate the property in its present form (where appropriate).

It’s important to remember that the mortgage valuation is a report which is primarily for Barclays’ purposes and confirms whether the property is suitable security for a mortgage – it is not a survey. As such, we ask that all clients consider instructing a separate survey to provide them with a more detailed assessment of the condition of the property.

Your client may wish to contact Countrywide Surveying Services on 0800 012 6995 *, e.surv on 0800 169 9661 *, or any other provider to discuss the different survey options available. More information on the types of survey available can be seen found on the ‘Home Surveys’ section of the Royal Institution of Chartered Surveyors website.

Please note that if your clients do instruct their own survey, this will be a separate contract between them and their chosen survey provider with separate fees applying. Barclays will always rely on the mortgage valuation for the purpose of agreeing the mortgage.

Automated valuation model (AVM)

For Buy to Let remortgages and further advances on properties up to £1m in value (up to £2m in London and South East), where the loan to value required is 65% (subject to product availability) or less, we use AVMs to assist with instant mortgage decisions. Whether you apply through MAX or via other online systems*, the use of AVMs will help speed up the decision and offer a better process for your customer.

AVMs are only suitable for further borrowing where the latest valuation was a physical one – i.e. not an AVM.

* For example, via MTE or Trigold.

Japanese knotweed

Japanese Knotweed is an invasive plant introduced into the UK and has no natural predators. The plant is known to exploit existing weaknesses in buildings. Applications where Japanese Knotweed is identified should be looked at in accordance with the following requirements:

CATEGORY 4
Japanese Knotweed is within 7 metres of the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding, either within the curtilage of the property or on neighbouring land;
and/or
Japanese Knotweed is causing serious damage to permanent outbuildings, associated structures, drains, paths, boundary walls and fences.

To be reported in the valuation report together with a valuation of the property. Further investigation is required. This is to be undertaken by a Property Care Association (PCA) registered or similarly qualified firm. All recommended remedial works must be covered by an insurance backed guarantee. The guarantee must be for a minimum of 10 years, be property specific and transferable to subsequent owners and any Mortgagee in Possession.

An insurance backed treatment plan must be confirmed prior to completion. It is not necessary for the recommended remedial works to be completed prior to the release of any mortgage monies.

CATEGORY 3
Japanese Knotweed is present within the curtilage but is more than 7 metres from the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding. 

Report this in the valuation together with a valuation of the property. No further investigation or action is required.

There is damage to outbuildings, associated structures, paths and boundary walls and fences and this is considered minor.

Report this in the valuation together with a valuation of the property. Further investigation is required. This is to be undertaken by a Property Care Association (PCA) registered firm. All recommended remedial works must be covered by an insurance-backed guarantee. The guarantee must be for a minimum of 10 years, be property specific and transferable to subsequent owners and any mortgage in possession.

An insurance-backed treatment plan must be confirmed prior to completion. It is not necessary for the recommended remedial works to be completed prior to the release of any mortgage monies.

CATEGORY 2
Japanese Knotweed is not seen within the boundaries of the property, but it is seen on a neighbouring property or land. It is within 7 metres of the curtilage of the subject property, but more than 7 metres away from the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding.
To be reported in the valuation report together with a valuation of the property. No further investigation or action required.

CATEGORY 1
Japanese Knotweed is not seen at the property, but it can be seen on neighbouring property or land where it is more than 7 metres away from the curtilage of the subject property.
To be reported in the valuation report together with a valuation of the property. No further investigation or action required

Valuation and rental assessment appeal

Customers can appeal against Valuations where the following apply

For remortgage and further advance cases, where there is more than a 25% variance between the customer’s estimated value and the actual valuation provided by the Bank’s nominated valuer.

For purchase cases, where there is a variance of more than 10% between the purchase price and the valuation.

This applies to both Residential and Buy to Let cases.

Appeals on rental valuation figures are not accepted.

Appeals can only be considered when submitted against a physical valuation (i.e. not an AVM).

If your customer wishes to appeal the valuation in line with the guidance above, you will need to contact your Barclays Support Team or email brokersupport@barclays.com. An appeals form will be issued, and you will be required to supply 3 comparable properties sold in the last 6 months.