DRN-3430049
The complaint
Mr T complains Santander UK Plc unreasonably refused him consent to let the property
over which his residential mortgage is secured. He says this led to a loss of rental income.
What happened
In 2015 Santander offered Mr T a residential mortgage of around £615,000 with a term of 25
years and a fixed interest rate product for a period of five years.
In around July 2020 Mr T applied on-line for a new fixed term interest rate product. He
said no restriction on letting the property was mentioned when he applied. And when
Santander then refused consent to let, he complained.
Santander didn’t uphold his complaint. They said he’d indicated, when he applied on-line,
he wasn’t planning to move within the next six months, and the application process had
continued based on that answer. Mr T felt the question didn’t apply to him since he wasn’t
living in the property. Santander explained the deal Mr T was applying for was only
available on the basis he occupied the property, so the question was relevant to him. And
since he’d taken the deal, they wouldn’t agree to him letting the property initially.
Santander said he could reapply for consent to let when he was three months into the
product term. Santander later gave Mr T consent to let in November 2020.
Mr T wasn’t happy with Santander’s response to his complaint, so he brought it to this
service. Our investigator didn’t uphold the complaint. Broadly, she didn’t agree with Mr T
that Santander had failed to make clear in documents and on its website that taking out a
new fixed interest rate product would affect getting consent to let. And she said consent to
let was at Santander’s discretion under the terms of his mortgage in any event. Mr T felt
Santander had given conflicting information during the complaint. He wasn’t happy with our
investigator’s view. So, I considered everything afresh and recently issued a provisional
decision, an extract of which follows:
What I’ve provisionally decided – and why
I’ve considered all the available evidence and arguments to decide what’s fair and
reasonable in the circumstances of this complaint.
For the reasons I’ll explain, I don’t intend to uphold Mr T’s complaint. Since my reasons
differ in some respects to our investigator’s, I’m issuing a provisional decision to give the
parties the chance to comment before I come to a final decision.
I acknowledge Mr T’s strength of feeling about what’s happened. He’s made some detailed
arguments about the meaning of wording used in Santander’s on-line application process
for fixed term interest rate products and information published on their website. And he’s
raised issues about the legal construction of the mortgage contract. I haven’t set out all his
points here or everything Santander has said. I don’t intend to be discourteous. It simply
reflects the informal nature of this service. I’d like to reassure Mr T and Santander I’ve
reviewed everything they’ve told this service in reaching my provisional conclusions.
Mr T got a letter from Santander in July 2020 letting him know his current mortgage deal
was ending and explaining how to arrange a new interest rate product. The letter advised
Mr T to get in touch with Santander if he was planning to make any changes to his
mortgage, other than arranging a new interest rate, in case they impacted the rates
available to him.
By this time Mr T wasn’t living in the property and he’d been trying to sell it. In July 2020,
he decided to let the property for a year. I understand this was because of the impact the
coronavirus pandemic had had on the property market.
Before taking steps to let the property, Mr T went through Santander’s on-line process to
apply for a new interest rate deal. He didn’t think any of the changes to the mortgage
Santander had highlighted as potentially affecting the deal he might be eligible for – either
in the July 2020 letter or as part of the on-line application process - applied to him.
When Mr T then asked Santander for consent to let, they initially refused and said he could
apply again in three months’ time. They said if Mr T had told them before he’d applied for
the new deal that he was planning to let the property, they would have discussed offering
him other interest rates or moving to a buy to let mortgage. Mr T says Santander’s refusal
meant he had to decline an offer he’d received in August 2020 to let the property. He
calculates he’s lost £12,425 in rent as a result and thinks Santander should reimburse him
for that.
Mr T says Santander failed to tell him about their consent to let policy in a way that
was clear, fair and not misleading. He doesn’t accept Santander’s argument he should
have indicated during the on-line application that he was moving home or considering
moving home within the next six months. He says that question assumed he was living
at the property, which he wasn’t. Mr T felt the process was unclear.
Mr T relies on information on Santander’s website to support his arguments. For
example, he says consent to let is discussed as part of “managing” a mortgage rather
than as a “change” to the mortgage. And he says when he applied for the new product,
the website didn’t mention that consent to let would depend on a customer having
transferred to a new deal over three months ago.
Having thought carefully about what the parties have said, I think there are two main issues
I need to consider here:
1) Did Santander set out in a way that was clear, fair and not misleading, before
Mr T applied to switch his interest rate product, that they may not give consent
to let?
2) Did Santander unreasonably refuse to consider Mr T’s application for consent to
let in August 2020?
I’ll consider each issue in turn.
Did Santander set out in a way that was clear, fair and not misleading,
before Mr T applied to switch his interest rate product, that they may not
give consent to let?
The starting point here is the terms and conditions of Mr T’s mortgage.
The mortgage offer Santander made to Mr T in July 2015 was for a residential mortgage. It
set out at Part C, details of conditions that were a term of Mr T’s mortgage. In particular,
the offer said that:
The mortgage was provided on the basis at least 40% of the property would
be used…as …a dwelling by Mr T or a related person.
Mr T must occupy the whole of the property on completion and throughout the
mortgage, free from any tenancies or third party rights of occupation unless
Santander agreed otherwise elsewhere in the mortgage terms and conditions –
which they didn’t here - or separately in writing. If Mr T wanted to let the property,
he needed Santander’s written consent which they could give at their discretion on
terms they considered appropriate.
I think the offer was clear, fair and not misleading and Mr T should have understood from
it that he or a related person should occupy the property; he would need Santander’s
written consent if he wanted to let the property; and Santander had discretion about
whether or not to give their consent.
The letter Mr T received from Santander in July 2020 said he should ring them to discuss
his plans if he was thinking of making any changes to his mortgage. It set out a list of
possible changes – but not an exclusive list - that might impact the new deals available to
him. And it recommended he call Santander to discuss his plans so they could let him
know. Similar information appeared when Mr T made the on-line application.
I’ve thought about the information Mr T saw on Santander’s website when he made the
application for the interest rate product. Mr T says he took a screenshot when he was
putting his complaint together to bring to this service. At the time it said a customer may be
able to let their property if they’d had their mortgage for six months and weren’t in arrears.
Santander say the website changed in around 2019 to add that any new deal the
customer had taken out had to be over three months old.
Mr T’s provided detailed information about this issue and Santander have provided only a
brief explanation. On balance, I think it’s more likely than not that, when Mr T made his
application for the interest rate product, Santander’s website didn’t mention they’d only
consider a consent to let application after a customer had had a new deal for three
months.
However, I don’t think that makes a difference to Mr T’s position. He received Santander’s
interest rate offer after he’d been through the on-line application process. The offer
attached Santander’s general mortgage conditions. They contained similar information to
the terms set out in the 2015 offer. They said, amongst other things:
Mr T agreed to occupy the whole of the property as his main residence;
He must not let the property unless the offer allowed it – which it didn’t – or he
later let the property with Santander’s consent; and
Santander should not unreasonably refuse consent.
Again, I think the information was clear, fair and not misleading even though it wasn’t
as prominent as it had been in the 2015 offer.
I acknowledge the letter and the on-line process Mr T went through didn’t specifically
mention that letting the property might be a change that affected the interest rate deals
available to him. I accept the information on Santander’s website treats consent to let as
part of managing a mortgage rather than a change. And I’ve said Santander’s website
probably didn’t mention a customer might be able to let their property only after a new deal
had been in place for three months.
But, considering all the information available to Mr T, I think Santander did enough to put
him on notice that his plan to let the property out might not succeed, as it was always
subject to their consent. Mr T had been hoping to sell the property and, when that didn’t
happen, he planned to change its use by letting it. Mr T risked breaching the terms of his
mortgage if he or a related person didn’t occupy the property. I think he understood that.
Mr T knew he needed consent to let, as he applied for it shortly after taking out the new
interest rate product.
Arguably Mr T was already in breach of the mortgage conditions as he was no longer living
in the property. That was a change he ought to have notified Santander about even before
they wrote to him in July 2020. I think he ought to have realised when he got the letter, if
not before, that there had been a change in his circumstances that he should tell
Santander about, given the terms of the mortgage.
Bearing everything in mind, on balance, I would have expected Mr T to contact Santander
to discuss his plans with them. He could have done that by making a phone call.
Did Santander unreasonably refuse to consider Mr T’s application within
the three month period?
Mr T argues Santander failed to consider his application because their policy was not to
give consent to let within three months of taking a new fixed interest rate deal. He says
relying on the policy amounts to an unreasonable refusal to give consent in breach of the
terms of the mortgage.
Santander declined Mr T’s application on grounds he’d recently transferred to a new
product that was for residential mortgages. They said if he’d made them aware he was
intending to let the property when he was taking the new product, they would have offered
him products from their buy to let range.
Mr T argues Santander’s policy behind their decision was to disincentivise borrowers from
applying for a new fixed interest rate and then immediately applying for consent to let. But
since he didn’t know that was the policy when he applied, it wasn’t fair for Santander to
apply it.
I wouldn’t expect Santander to have published their policy on their website or as part of
the on-line application process, as it’s commercially sensitive information. But they’ve
explained it to this service, and I’m satisfied they haven’t applied it unfairly to Mr T. There’s
no evidence Santander have treated other customers in a similar position to Mr T’s
differently. And Mr T was aware from information Santander gave him, and which I
discussed above, that consent to let was at Santander’s discretion.
I don’t think Santander has breached the terms of Mr T’s mortgage contract. He argues
terms should be implied to that contract that Santander should use their discretion – that
is, actively consider consent to let applications - and act reasonably when doing so. I’ve
mentioned the offer for the new product said Santander shouldn’t unreasonably refuse
consent to let. Detailed consideration of how the mortgage contract should be interpreted
is more suited to the courts. But, looking at the facts and considering things on the basis
of what’s fair and reasonable, as I must, I think Santander did consider Mr T’s application
and acted reasonably at the time in declining it based on their policy.
Finally, I note the interest rate product Mr T took out was a tracker mortgage. There
weren’t any penalties for ending the deal early. Once Mr T knew he wouldn’t get consent
to let, it was open to him to discuss his plans to let the property with Santander and agree
suitable borrowing arrangements with them. In the end Santander gave him consent to let.
So, he’s benefiting from a lower rate than he might otherwise have been able to agree if
he’d spoken to them at the outset.
Bearing everything in mind, whilst I appreciate it will be disappointing for Mr T, I don’t
intend to uphold his complaint.
My provisional decision
Based on what I’ve seen so far, I don’t intend to uphold Mr T’s complaint.
Developments
Santander didn’t have any comments to make on my provisional decision. Mr T has provided
detailed comments which I’ll address below.
What I’ve decided – and why
I’ve considered all the available evidence and arguments to decide what’s fair and
reasonable in the circumstances of this complaint.
I understand Mr T would like me to respond to each of the comments he’s made. But the
Financial Ombudsman provides an informal dispute resolution service. And I won’t be
addressing the points Mr T’s made individually or in the format he’d prefer. I will, however,
comment more broadly, by reference to the headings Mr T has used, having thought
carefully about everything he’s said.
Comments on the Importance of the Change to the Santander Website
Mr T’s disputed what the website said when he made his application, although it’s not clear
he referred to the website at the time he made the application for the fixed rate product.
I’ve accepted it was more likely than not that, when Mr T applied for the product switch,
Santander’s website didn’t mention a customer might be able to let their property only after
a new deal had been in place for three months. So, whilst I understand Mr T feels
Santander misrepresented the position on their website, I don’t think it’s necessary to look
into that issue any further.
I thought about the website information in reaching my provisional decision as to whether it
was fair and reasonable for Santander not to agree Mr T’s application. Even though I think
the website probably didn’t mention the three months, it didn’t suggest either that an
application would be approved, just that it might be. So, even if Mr T had seen the
information at the time, it wouldn’t have given him any more certainty about whether an
application would succeed than he had already.
Mr T questioned my comment that I wouldn’t expect Santander to publish their policies on
grounds they are commercially sensitive. He said they had published their policy – albeit
incorrectly – in relation to when they’d consider consent to let applications.
To clarify, Santander - like other banks - have criteria sitting behind their policies which are
determined by their commercial and risk appetite and policy choices, as well as the
regulatory environment in which they operate. They are confidential and commercially
sensitive. Santander’s decisions about what they publish may differ from other lenders.
So, whilst Santander’s website sets out their broad policy, I wouldn’t expect the detail of how
they apply that policy to be publicly available. Just because Santander didn’t publish the
reasons behind their consent to let policy, or set out the policy in full, doesn’t mean it isn’t fair
for them to apply the policy. As I’ve said, what was available on-line did not say Santander
would give consent to let, just that they might.
Factual Corrections and Evidential Clarifications
Mr T’s unclear about whether he saw the terms and conditions of the mortgage attached to
the product switch offer. He says the offer he received from Santander after he’d made his
on-line application was an emailed, password-protected link to the Santander website and
the email itself didn’t attach terms and conditions. Santander’s provided a copy of the offer
which included the terms and conditions. The covering letter made clear they formed part of
the contract Mr T was entering into and said, “It’s very important that you and all other
parties to the mortgage read all of the information provided.” I think Mr T probably saw the
terms and conditions. But he could have asked for a copy if they weren’t made available to
him at the time.
Although the requirement for Mr T to occupy the property himself wasn’t set out in the offer
itself, as it had been in the 2015 mortgage offer - which is why I said it was less prominent in
2020 - it was clearly set out in the terms and conditions.
In any event, Mr T’s accepted consent to let was never certain and was aware Santander
might withhold consent to let if they had a reasonable reason to do so. That reinforces my
view that, knowing what he did, Mr T ought reasonably to have contacted Santander to
discuss his circumstances before going ahead with the product switch.
Mr T’s unhappy I mentioned possible breaches by him of the mortgage terms and conditions
since Santander hadn’t previously raised them. I acknowledge Mr T was trying to make the
best of his difficult situation. But I think it’s fair to point out that Mr T ought to have contacted
Santander to let them know about his situation given the terms and conditions of his
mortgage. It’s right for me to look at the whole picture in reaching a decision about what’s
fair and reasonable to both parties.
Mr T says he told Santander about his change of address and they ought to have realised
from that he was no longer living at the mortgaged property. He says the July 2020 letter
didn’t ask if his circumstances had changed.
Santander’s records suggest Mr T updated his contact details in October 2020. I
acknowledge Santander wrote to Mr T at an alternative address in July 2020 which supports
his evidence that he told them sooner. It’s not clear, though, whether Mr T told Santander he
was no longer using the mortgaged property as his residence. I don’t think they would
necessarily have known that, even if he’d asked them to write to a different address earlier
than October 2020.
I explained in my provisional decision why I think, bearing in mind all of the information Mr T
had available to him, he ought to have contacted Santander to discuss his circumstances by
phone – even if the July 2020 letter didn’t specifically ask if his circumstances had changed.
I don’t think the issue of when Santander knew or ought to have known Mr T was no longer
living in the mortgaged property affects that.
I acknowledge Mr T approached Santander to discuss his options to let the property after his
application was declined. I’ll address that below.
Comments on the Draft [Provisional] Decision
Mr T says I’ve misstated his complaint. He says it isn’t whether “Santander set out in a way
that was clear, fair and not misleading, before he applied to switch his interest rate product,
that they may not give consent to let”, but that the on-line process did not tell him that, by
accepting the new mortgage rate, his rights in relation to letting the property could be
affected. Mr T says the appropriate question to ask is, “Was Santander’s instruction to Mr T
to use the Santander telephone line, rather than the online service, clear, fair and not
misleading? And, if so, when was that message received by Mr T?”
I’ve considered Mr T’s arguments carefully. However the question is put, I think it’s
appropriate to look at the July 2020 letter and application process in context rather than
looking at them in isolation. Mr T’s acknowledged he needed consent to let. Although he’s
also said his “right” to consent to let was impacted by what happened, I don’t think that’s
correct, since consent to let was at Santander’s discretion – Mr T didn’t have a right to be
given consent to let. I still think, on balance, for the reasons I set out in my provisional
decision, that Mr T had enough clear information to put him on notice he should check things
with Santander before switching.
Mr T doesn’t agree with the second question I asked. He says there are two appropriate
questions: “Did Santander consider Mr T’s application for consent to let”; and, “If Santander
did consider Mr T’s application for consent to let, did Santander act unreasonably in
declining it?”
I addressed both those issues in my provisional decision.
Mr T’s questioned my conclusion that Santander “considered” his application. To clarify, they
considered it to the extent of deciding it fell outside their policy and he’d need to apply later.
I thought about whether Santander had applied their policy fairly and provisionally decided
they had. I’ve explained above the grounds on which Santander keep their criteria
confidential. And since they are confidential, I haven’t set them out in my decision.
Mr T says declining consent was unreasonable because, in summary, he suffered a loss of
income as a result, granting consent would have had no financial consequences for
Santander, he didn’t know about the policy and Santander failed to offer him a solution that
allowed him to accept the tenancy offer he’d received.
I acknowledge Mr T missed out on rental income. I’ve already considered Mr T’s argument
he didn’t know about the policy. And I’ll consider Mr T’s concern Santander failed to offer a
solution below.
As to the financial consequences of consent to let for Santander, where a borrower lets a
property, it increases the lender’s risk of enforcing its security should the need arise. If the
borrower fails to pay, and it becomes necessary to take possession, that becomes
potentially more difficult and more costly if the property is tenanted. It’s reasonable for
lenders to consider the basis on which and the price at which they will lend before agreeing
a property may be let. So, it’s fair that Santander has restrictions on when it will allow
consent to let and on what basis.
Mitigation
I acknowledge Mr T spoke to Santander about his options after they’d refused him consent
to let. He says they gave him no alternative but to apply for consent once three months had
passed and they wouldn’t consider switching his mortgage to buy to let (BTL) terms then.
He doesn’t remember the reason for that. And I acknowledge Mr T approached a broker to
see if he could get BTL terms with another lender but was told applications were taking
several months, due to backlogs resulting from the coronavirus pandemic.
It's unfortunate Mr T couldn’t find suitable borrowing arrangements with Santander or
elsewhere that allowed him to let the property straight away. But I don’t think that affects
the outcome of his complaint about whether Santander’s refusal to allow consent to let was
fair and reasonable.
I’ve carefully considered everything Mr T has said. Whilst I understand he’ll be
disappointed, I’m satisfied Santander provided information that was sufficiently clear to put
Mr T on notice he should discuss his situation with them before applying for the new rate,
and that they treated him fairly and reasonably in line with the terms of his mortgage and
their consent to let policy. Bearing everything in mind, I don’t uphold his complaint.
My final decision
For the reasons I’ve explained, I don’t uphold Mr T’s complaint.
Under the rules of the Financial Ombudsman Service, I’m required to ask Mr T to accept or
reject my decision before 25 May 2022.
Julia Wilkinson
Ombudsman
