Reigate plans Article 4 controls for small HMOs
3 weeks ago
How a ‘model tenant’ secretly turned a family home into an HMO
by Des Taylor
6:59 AM, 11th August 2026, 2 weeks ago
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A landlord who believed he had found an ideal tenant was later threatened with substantial financial penalties after his property was secretly converted into an unlicensed house in multiple occupation (HMO.
The landlord let a four-bedroom house to a man who said he wanted it for himself and members of his family. He appeared organised, produced convincing documents and gave a plausible explanation for needing a large property.
The tenancy agreement stated that the house was being let to a single household and expressly prohibited subletting. However, once the tenant had possession, reception rooms were turned into bedrooms, locks were fitted to doors, and individual rooms were offered to unrelated occupiers.
The tenant selected the occupiers, agreed their payments, collected the money and dealt with repairs. To those living in the property, he was the landlord. The owner knew nothing about the arrangement.
For several years, the tenancy appeared to be running smoothly. The agreed rent arrived on time, the tenant answered calls immediately and rarely asked the landlord to pay for repairs. He repeatedly said the property was in good order and discouraged unnecessary visits.
Might discover changed locks
The rent paid to the owner was only part of the money collected from the occupiers. Repairs were handled privately because a contractor might have discovered locks, beds and unrelated people throughout the house. Promptly answering calls gave the tenant advance warning of inspections.
The deception came to light after the property attracted attention from the local authority, possibly following a neighbour’s complaint, police visit or another routine incident.
When officers spoke to the occupiers, they learned that several unrelated people were renting separate rooms. They identified the tenant as the person who had granted access, collected their money and managed the house. Some had never met the actual owner.
Messages, payment records, room agreements, photographs and witness accounts showed who lived there, what they paid and who controlled the accommodation. By the time the owner received the first council letter, officers may already have known more about the property than he did.
HMO license breaches
The council began investigating possible offences involving an unlicensed HMO and breaches of the HMO management regulations. Although the tenant had created the arrangement, the owner was also investigated as a possible person managing or having control of the HMO under the Housing Act 2004.
The landlord was bewildered. He had granted one tenancy to a man and his family. Subletting was prohibited, the rent had always been paid, and the tenant had repeatedly said everything was fine.
However, the wording of the tenancy agreement did not prevent the council from investigating what had happened.
Councils can issue statutory requests for information and invite landlords to interview under caution. A landlord who treats those communications as an informal attempt to clear up a misunderstanding can make damaging admissions without appreciating how they may be used.
In this case, the owner obtained professional advice before responding further. The required information was supplied, but the response was limited to the facts and prepared with the criminal allegations in mind.
Fines for an unlicensed HMO
The council later issued notices stating that it intended to impose financial penalties on the property-owning company for allegedly managing or having control of an unlicensed HMO and breaching the HMO management regulations.
The defence focused on the evidence rather than the fact that the company owned the building.
The tenancy agreement showed that the property had been let to one household and that subletting was forbidden. The tenant had secretly created the HMO, chosen the occupiers, granted the room agreements, collected the money and controlled the rooms.
Crucially, the council’s witnesses identified the tenant as their landlord. They did not say that the property-owning company had granted them rooms or managed their occupation.
Representations were made that the company was neither the person managing nor the person having control of the HMO for the purposes of section 263 of the Housing Act 2004. It was also argued that the company had a reasonable excuse because it did not know the tenant had created and operated the HMO.
According to the case account, the council cancelled the proposed penalties rather than reducing or negotiating them.
That outcome did not mean the landlord had managed the property well.
Tenant’s claims not verified
The deception succeeded because the tenant’s claims were not independently verified, inspections were too infrequent and regular payments were treated as evidence that nothing was wrong. A good personal relationship had replaced active management.
After the case, the owner reviewed the portfolio. Occupancy was checked, properties were inspected on proper notice, records were updated and inspections were introduced every three months.
Contractors were asked to report unusual signs rather than limiting their attention to a specific repair. Locks on bedroom doors, excessive numbers of beds, large amounts of post or occupiers who do not know the named tenant can all justify further checks.
Landlords should also verify references and identity documents independently. A tenant offering extra money, discouraging professional referencing or appearing unusually keen to prevent inspections should not automatically be treated as dishonest, but those circumstances justify closer scrutiny.
Inspections must establish more than the condition of the decoration. Landlords need to know who is living at the property, whether its use has changed and whether rooms have been altered.
Silence is not proof of compliance. Rent arriving on time does not show that a property is occupied lawfully, that fire precautions are adequate or that the named tenant is the only person making money from it.
Take council correspondence seriously
The case also shows why council correspondence should be taken seriously. A request for information, an alleged-offence letter or an interview under caution can mark the beginning of a criminal investigation, even where the council is considering a civil financial penalty rather than prosecution.
The owner avoided the penalties because the evidence supported the defence. Another landlord with weaker records, fewer inspections or communications suggesting knowledge of the subletting might face a different result.
The lesson is simple. Trust the tenant, but verify the occupation, inspect the property and keep evidence of what was agreed and what was found.
A landlord who does not know who is living in a property may discover the answer only after the council does.
Des Taylor is a director of Landlord Licensing & Defence who has extensive experience of the Renters’ Rights Act, rescuing landlords and letting agents from council fines and rent repayment orders. Mr Taylor also advises on property compliance, HHSRS, HMO licences, HMO design, fire risk, housing and planning Law and selective licensing.
Tags:
HMO financial penalties, Housing Act 2004, landlord compliance, landlord HMO fraud, landlord inspections, tenant subletting, unlicensed hmo
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Member Since August 2026 - Comments: 11
8:45 AM, 13th August 2026, About 1 week ago
Reply to the comment left by David at 11/08/2026 – 11:49
They attempted to do so.
Issued Notice of Intention to Impose a Financial Penalty.
The landlord was wise and took professional advice.
Representations were submitted against the allegations.
The representations were very strong reference legislation and the council’s own
allegations.
The council dropped it so the fine was quashed.
Glad to say that Landlords Defence Limited provided the professional advice and submitted to the representations.
Fortune saved for the landlord.
Member Since August 2026 - Comments: 11
8:49 AM, 13th August 2026, About 1 week ago
Reply to the comment left by Reluctant Landlord at 11/08/2026 – 12:43
The council pursued everybody and of course fines were issued where they thought they could get the money.
Understanding how and why a fine must be issued and why a council will get it wrong most of the time was probably the most valuable advice.
The representations were comprehensive addressed every possible opening that the council could use and made sure it was sealed.
They had no option other than to drop the fine based upon the representations as the reputational damage and the cost of pursuing the party that was not liable as per the evidence would go against public interest and use of public funds.
It would not be possible to comment on what the subletter did or didn’.t do correctly one can infer that Council most likely became alerted due to management issues by the subletter.
Member Since August 2026 - Comments: 11
8:53 AM, 13th August 2026, About 1 week ago
Reply to the comment left by Beaver at 11/08/2026 – 14:58
Self managing landlords more often than not to find themselves in these situations because they have not doing everything they need to do in the due diligence process of establishing occupation of the property.
Ot is vital to establish who is in the property how they are related and to evidence that with government issued identification and if they are going to be family and not all there at the time of the commencement of the tenancy landlord should be regularly checking the occupation and right to rent status of anyone in the property.
A judge at a tribunal will expects the landlord to have known who was occupying the property through his management processes and ongoing management reports.
That statement was made by a judge to a landlord in a tribunal hearing.
Member Since May 2018 - Comments: 2436
10:05 AM, 13th August 2026, About 1 week ago
Reply to the comment left by at 13/08/2026 – 08:53
This is absolutely, 100% all correct: Landlords need to know who is going to be in a property, including numbers of children. Since the introduction of the Labour Renters Rights Act due diligence (i.e. screening tenants) became critical to avoiding severe financial penalties. Landlords need a lot more pieces of personal tenant information: NI number, photo ID (passport and driving licence), tax returns etc. Landlords need to do due diligence and be able to SHOW that they have carried out due diligence.
The devil is in the detail and if you look at the detail of the wording of the Labour Renters Rights Act you can see that it is a wolf in sheep’s clothing; the Labour Renters Rights Act is nothing like the rental reform bill legislation that other parties were proposing. The majority of the private rented sector is small portfolio landlords…the bulk of the market. When Labour published their Labour Renters Rights Act they were sending a wolf out to harvest this flock, primarily for ideological reasons rather than the needs of the market. If they go ahead with their Labour Landlord Database (which will also look nothing like any PRS database proposed by any other party) they will also be laying a minefield for any landlord that does not have the protection of a shepherd, in the form of an agent.
The jobsworths in councils are not going to go after the big companies for breaches of the Act because jobsworths are risk averse and the bigger companies will have better legal representation: They are going to use the Act, and any Labour Landlord Database, to persecute small landlords and small HMOs.
Member Since April 2018 - Comments: 568
10:13 AM, 13th August 2026, About 1 week ago
Reply to the comment left by Reluctant Landlord at 11/08/2026 – 12:43
Would be nice to know if action was taken against the person sub-letting and if not why, in which case that is further proof councils are only interested in persecuting easy targets like landlords. Get that ion the front page of media rags.
Member Since May 2018 - Comments: 2436
10:18 AM, 13th August 2026, About 1 week ago
Reply to the comment left by David at 13/08/2026 – 10:13
Why would a jobsworth try to take action against a sub-letting tenant?
If landlords take tenants on housing benefit and they find out the tenant wasn’t eligible for the housing benefit the housing benefits people don’t go after the tenant; they go after the landlord. That’s what makes benefits tenants high risk: The only way to reduce the risk (although you can’t eliminate it) is again by doing far more due diligence.
In any case, even if they had the stomach to do it, the council can only take action against the sub-letting tenant if they have the sub-letting tenant’s details, including photo ID and NI number.
Member Since August 2026 - Comments: 11
11:20 AM, 13th August 2026, About 1 week ago
Self managing landlords more often than not to find themselves in these situations because they have not doing everything they need to do in the due diligence process of establishing occupation of the property.
It is vital to establish who is in the property how they are related and to evidence that with government issued identification and if they are going to be family and not all there at the time of the commencement of the tenancy landlord should be regularly checking the occupation and right to rent status of anyone in the property.
A judge at a tribunal will expects the landlord to have known who was occupying the property through his management processes and ongoing management reports.
That statement was made by a judge to a landlord in a tribunal hearing.
Member Since August 2026 - Comments: 11
11:25 AM, 13th August 2026, About 1 week ago
Reply to the comment left by Beaver at 13/08/2026 – 10:05
Yes they will go after companies and the easy pickings of the smaller landlords who do not have large legal departments to fight back for them.
Landlord Licensing & Defence is there for that purpose and as you see the article this was in a unique situation it appeared but is seen regularly on a daily basis in the work that we do.
Small landlords have the power of a large company when they come to us and this fine was quashed.
It does not mean that all fines will be quashed often the evidence cruise guilt beyond reasonable doubt and even more often there are errors in what has been done what has been left out and whether proper legal procedure has been followed these are some of the areas where technicalities can have a fine removed.
Member Since August 2026 - Comments: 11
11:25 AM, 13th August 2026, About 1 week ago
Yes they will go after companies and the easy pickings of the smaller landlords who do not have large legal departments to fight back for them.
Landlord Licensing & Defence is there for that purpose and as you see the article this was in a unique situation it appeared but is seen regularly on a daily basis in the work that we do.
Small landlords have the power of a large company when they come to us and this fine was quashed.
It does not mean that all fines will be quashed often the evidence cruise guilt beyond reasonable doubt and even more often there are errors in what has been done what has been left out and whether proper legal procedure has been followed these are some of the areas where technicalities can have a fine removed.
Member Since August 2026 - Comments: 11
11:28 AM, 13th August 2026, About 1 week ago
Reply to the comment left by Paul Essex at 11/08/2026 – 17:42
The intermediate landlord did not receive rent for the tenants after the council became involved because of course I have formed them of the rent repayment order.
Told the tenants not to leave and of course the intermediate landlord did not pay the superior landlord and now the repossession of the property is being followed under the relevant due legal process and how long that will take is unknown.