Refinancing with tenants in situ: what lenders check

Scope: England and Wales. Lending criteria are commercial rather than statutory and vary by lender — the legal items below are not optional either way. Verified against the legislation on 14 August 2026.

What this article covers, and what it does not. The mechanics of selling a tenanted property — vacant possession, Ground 1A and the twelve-month restriction — are covered elsewhere, as is what you inherit when you buy one. This one is about the moment your compliance file is read by somebody with money at stake: an underwriter, a valuer, or a buyer's solicitor.

The point that surprises landlords is how cheap compliance failures are to fix and how expensive they become at exactly this moment. A missing licence is a fine you might never receive. It is also a deal that does not complete.

What a buy-to-let underwriter actually looks at

• The tenancy type. An assured shorthold or a Welsh occupation contract is standard. A company let, a rent-to-rent arrangement, an FHL, a regulated tenancy or a lease over a set term will each restrict which lenders will look at it.
• The term remaining and the rent. Rental coverage against a stressed rate is the affordability test, and a rent below market from a long-standing tenant can fail it even when the property is otherwise fine.
• Licensing. Whether the property is licensable, and whether the licence exists. See do I need a licence and the selective licensing registry.
• Whether it is an HMO. An undeclared HMO on a standard buy-to-let mortgage is a breach of the mortgage conditions, not merely a paperwork issue.
• The EPC. Increasingly a lending criterion in its own right, separate from the legal minimum.
• The lease, on a flat — length, ground rent, and whether subletting is permitted at all.

What a buyer's solicitor will ask for

On a tenanted sale the enquiries go further than a vacant one, because the buyer is taking on your liabilities:

1. The tenancy agreement and any renewals.
2. Deposit protection evidence and the prescribed information, with dates. This is the most common failure found at this stage, and it is unfixable retrospectively for penalty purposes. The buyer inherits the exposure and will price it.
3. The gas record, EICR, EPC, and evidence they were served.
4. The Right to Rent check record.
5. Rent statements and any arrears history — see arrears.
6. Any correspondence about disrepair, and any notice from the council. An outstanding improvement notice is a charge on the property in practice, whatever the register says.
7. Disclosure of known issues — including knotweed, where a wrong answer is misrepresentation.

The four things that stop deals

1. An unprotected or late-protected deposit

It cannot be cured. It travels with the tenancy, and a buyer's solicitor who finds it will either require a retention or renegotiate. The honest answer is to disclose it and price it in, because concealment converts a known liability into a claim against you personally.

2. No licence where one is required

Unlicensed letting is a criminal offence and carries a civil penalty of up to £30,000 plus a rent repayment order. Applying does not retrospectively make the earlier period lawful, but a duly made application changes your position going forward — and a lender will want to see it made.

3. Section 21 already unavailable

Where the Renters' Rights Act commencement has not yet reached a tenancy, compliance failures that block a section 21 notice reduce what a buyer can do with the property. After abolition the equivalent question is which grounds are actually available, and the twelve-month restriction on Ground 1A is the one that catches sellers.

4. A gap between what the file says and what the property is

Three tenants in a two-bedroom flat let as a single household. A loft room that is not on the EPC. A valuer notices, and the mortgage offer is withdrawn on a misdescription rather than on the underlying issue.

Assemble this before you apply

• Tenancy agreement, renewals, and the current rent.
• Deposit certificate and prescribed information, with the service date.
• Gas record, EICR, EPC, alarm test record — and proof of service.
• Licence, application reference, or a written note of why none is required.
• Inventory and check-in evidence.
• Rent schedule and arrears position.
• The repair reporting trail — see record keeping.

A landlord who can produce that pack in an afternoon refinances at the rate they were quoted. One who cannot spends six weeks reconstructing it while the offer expires.

Run the free compliance check to find the gaps before an underwriter does.