Avoid Being a Victim of a Sub-letting Scam
You may have read in the national news that a growing number of landlords have been the victim of illegal sub-letting scams.
The scams can be difficult to spot as the ‘tenant’ appears normal and signs the rental agreements with a landlord or letting agent in the usual way, however they never move in. The ‘tenant’ is only interested in sub-letting the property, quite often to multiple occupants, or advertising the property as a holiday let.
This is why we perform regular inspections of properties. A scheduled visit every quarter should pick up irregular behaviour, such as a reception room being used as a bedroom. Landlords can then end the tenancy at the end of the fixed term and evict the tenants.
The issue with sub-letting is that if the tenants are not family members, i.e. not a household, then the property is technically classed as a house of multiple occupation (HMO) and subject to strict regulations. HMO properties require: fire safety measures; decent sized bedrooms; annual gas safety checks; electrical checks every five years; enough cooking and bathroom facilities for the number of tenants; and clean communal areas.
Here are three main issues caused by illegal sub-letting:
Consent
Sub-letting is almost certainly a breach of the terms of your mortgage, if applicable, and landlord insurance. You need to inform your mortgage provider and insurance company who will advise on your next steps
HMO Licence
This can be a serious headache as there are heavy penalties for not having a licence, including prosecution in a magistrates’ court (unlimited fine) or a penalty charge notice of up to £30,000. Technically, tenants can apply for a Rent Repayment Order for up to 12 months’ worth of rent (highly unlikely). Your only option is to comply by applying for a licence from your local council.
Ending the tenancy
You will not be able to use a Section 21 notice until after the fixed-term agreement has ended. If you have illegal multiple occupants, you won’t be able to use a Section 21 as the property is not HMO licensed. The only other option is to use one of the grounds for possession in Schedule 2 of the Housing Act 1988 – which means serving a Section 8 notice.
If the tenants refuse to stop sub-letting, you need to seriously consider eviction under ground 12 (breach of an obligation of the tenancy). Although sub-letting is a serious matter, ground 12 is discretionary so is subject to the judge’s ruling. You will need to gather strong evidence.
Legal advice
Please treat this article as general information. Every situation and circumstance is different, so we always recommend that your first seek professional legal advice from an experienced property solicitor.
If you are intending to become a buy-to-let landlord, you can request a free, no obligation chat with Knight Property Management. Call us today on 01992 308181.
