Buy-to-let landlords who take out owner-occupier mortgages are theoretically committing fraud and placing their tenants at a disadvantage.
Tenants are at risk if landlords take out owner-occupier mortgages, one industry organisation has warned.
The Council of Mortgage Lenders (CML) has said that landlords are potentially committing fraud by failing to take out an appropriate loan on a property. A specialist buy-to-let mortgage has a mechanism in place to accept tenants' rent in place of mortgage payments which negates the need for court action and the possibility of repossession.
An owner-occupier mortgage on a rented property can lead to problems for the tenant if the landlord fails to keep up repayments and also increases the risk for the lender, with the CML describing such behaviour as "irresponsible".
"Everyone sympathises with those tenants who are paying their rent, and fulfilling their obligations, but who find that their landlord has not been paying their mortgage and not told their lender that they are renting out the property," said director general Michael Coogan.
"Good tenants should not be disadvantaged, and nor should lenders, by the irresponsible behaviour of a small minority of landlords. We look forward to working with the government and advice agencies on effective measures to help the modest number of tenants affected."
Mr Coogan was speaking after charities Shelter and Citizens Advice joined with the Chartered Institute of Housing to voice concern over the number of tenants facing eviction due to mortgage defaults from landlords. The organisations are calling for a review of current legislation to ensure greater protection for renters, a move which has been backed by the CML.
