Allowing sub-letting could create havoc in the Private Rented Sector, say insurance experts

by Jason McClean

13:06 PM, 25th March 2015
About 4 years ago

Allowing sub-letting could create havoc in the Private Rented Sector, say insurance experts

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Allowing sub-letting could create havoc in the Private Rented Sector, say insurance experts

Property118’s Landlord Insurance experts have expressed concerns over the Government’s plans to allow private tenants to sub-let properties.insurance

Included in last week’s Budget small print, under the title “Support for the sharing economy”, was a clause seemingly giving the green light to sub-letting. See what readers think here.

The wording said that the government intended to “make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis.”

In simpler terms, landlords will no longer be able to include clauses in tenancy agreements forbidding tenants from sub-letting part of the property out to others.

“The Government is effectively opening a can of worms and paving the way for havoc in the private rented sector,” says a spokesperson for Property 118’s Landlord Insurance provider Discount Insurance.

“There are many questions left unanswered over this, such as what will happen if the tenant sub-letting the property leaves, but the tenant they are subletting to remains?”

There are also concerns over how landlords are expected to carry out checks on the immigration status of their tenants, if they can no longer retain full control on who is living in their rental properties.

Some landlords are experiencing problems with tenants taking out tenancy agreements and then not moving into the property themselves, but instead putting up partitions and sub-letting to as many people as possible. This problem could potentially escalate now that the government has effectively given this process a thumbs up, say industry experts.

“We hope that the government will reconsider this ruling, in the meantime, we recommend landlords protect themselves and their investment not only with landlord household insurance, but also with Rent Guarantee Insurance, this will ensure that they will have always have money to pay the bills in what could be an uncertain period.”

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Comments

Dr Rosalind Beck

12:59 PM, 26th March 2015
About 4 years ago

I'm wondering also about when a house is licensed for, say 4 people, and then they move others in. The council can have a go at the tenants then for a change, presumably? (as if)
Also, this could lead to serious overcrowding and/or fire hazards....
It could also have a detrimental effect on things like condensation and the general condition of the house - presumably then, if an Environmental Health Officer visits, they will blame us as landlords even though it is not our fault and we may be completely unaware of it.
As others have said, how would we then evict people who aren't even tenants?
The idea of giving a tenant - and then, non-tenants too, such power over somebody else's house is contrary to principles of justice. In plain language, it's bloody stupid. I'd like to know which idiot dreamt it up and in what committee so we can name and shame them for their ill-thought-out nonsense. This is the problem with people who have no expertise in an area having power over the laws relating to it.
Those are just some of the repercussions and implications I can think of, off the top of my head.

Mandy Thomson

14:51 PM, 26th March 2015
About 4 years ago

On the face of it, this seems like a good idea to relieve the housing crisis and help tenants make some money - while there has been legislation of late that's detrimental to landlords, such as selective licensing, I think the powers that be are going to get fed up if every time there's any proposed change to legislation, we landlords throw up our hands in horror and exclaim, "but this is going make it hard to let/ruin the PRS, etc" - while this is often valid, we have to accept SOME changes to legislation will happen.

In answer to the question about the main landlord being responsible for the immigration status of any sub tenant (or lodger), under the Immigration Act 2014, it is the tenant (or LODGER landlord) who is directly responsible for ensuring that any adult they allow to live there (in whatever capacity) has the right to rent in the UK - Google "lodger from outside EU" (this is one of the few landlord legal obligations that can also be delegated to a managing agent).

However, on the minus side, the devil is in the detail. It depends on how effectively worded the legislation is - IMHO, if it clearly restricts sub letting to live in landlord/lodger situations ONLY, it can't do much harm, Illegal rent 2 rent is going to happen anyway, regardless of legislation, and tenants are going to have friends and relatives to stay without checking with their landlord - they are after all adults in their own home! Having said that, the legislation needs to allow the head landlord a veto against a lodger that doesn't pass a tenant check for conduct.

Ros also raises a good point about landlords whose properties are licensed being held accountable for the conduct of their tenants and any occupiers - but doesn't that liability exist for licensed landlords anyway? And again, if both the tenant and the lodger are properly referenced, and the head landlord has a good relationship and communication with the tenant, and does regular inspections, any issues should be minimal.

Last but not least, there's more to taking in a lodger than simply clearing out the spare room and putting up an ad. There is still plenty of legislation to adhere to, and you have to be ready to share your home. However, nearly all the legal compliance is the responsibility of the LODGER landlord (or in this case, the tenant) and NOT their landlord.

The best thing is to do is to talk to your tenant before they get a lodger, and ensure they're up to speed on their responsibilities and the realities of house sharing.

Mandy Thomson

15:07 PM, 26th March 2015
About 4 years ago

Just to add, in the public rental sector, tenants have been encouraged to take in lodgers for several years now, and it was even suggested that those claiming universal credit would have the rent disregarded for benefit purposes, and those claiming under the current benefit system can still keep most of their benefit, if they provide at least one meal for the lodger.

Despite this, very few tenants, even those affected by the "bedroom tax" have taken this up, whether this is because of resentment of the bedroom supplement or more likely, because most people find the thought of taking in a lodger unpleasant, I can't say, but I suspect that only a small number of private tenants would exercise their right to take in a lodger.


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