Mortgage lender withholding consent to let?
The High Court case of Commercial First Business Ltd v Atkins  held that a mortgage lender is only entitled to withhold consent to a letting of a property if it is acting reasonably. This applies to commercial investment property as well as residential property with a buy-to-let mortgage.
Most lenders prohibit letting without their consent mainly to protect the lender’s security and ensure that the property is not burdened with a lease on unsatisfactory terms, such as at a low rent.
The case highlighted that a lender must consider certain factors when deciding whether it can withhold consent. These are as follows:-
- A lender should not refuse consent to a letting which has nothing to do with the relationship of the lender and borrower in relation to the mortgaged security and proposed letting.
- a lender can refuse to give its consent to a letting for reasons not contained in the mortgage documentation disclosed to the borrower the time the mortgage was taken out, subject to the reasons not being unreasonable.
- There may be exceptional cases where the lender may need to consider whether the detriment to the borrower is disproportionate to the benefit of the lender if consent is withheld.
- The lender does not need to show that refusing consent was justified as long as its decision might have been reached by a reasonable lender in the circumstances.
- In each case it is a question of fact however the onus is on the borrower to prove that consent has been unreasonably withheld.
Sabrina Umrani (Solicitor)
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