Subletting tenants and landlords face ‘life-changing’ fines

Subletting tenants and landlords face ‘life-changing’ fines

0:03 AM, 28th July 2023, About 11 months ago 8

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A firm that helps landlords comply with the law and avoid penalties is warning that tenants AND landlords face the prospect of ‘life-changing’ fines if a tenant sublets their rented home.

The message from Landlord Licensing & Defence comes after a recent study by Direct Line business insurance that found one in four tenants are subletting their properties.

And half of those haven’t informed their landlord.

This means that many landlords will be unaware they are violating the Housing Act 2004, which requires them to obtain a licence for a House in Multiple Occupation (HMO).

An HMO is any property that is occupied by three or more people who are not related by blood or sexual union.

HMO created without the landlord’s consent

Should a tenant couple renting a two-bedroom flat decide to let a friend stay in the spare room, an HMO has been created without the landlord’s consent.

Landlord Licensing & Defence warns that subletting tenants and landlords could face ‘life-changing fines’ of up to £30,000 per offence, or even unlimited fines if the case goes to court.

The firm advises tenants to check their tenancy agreements before subletting, and landlords to inspect their properties regularly and to act on any suspicious activity.

Not doing so means they face criminal prosecution because they have become a sub-landlord.

Act before the council starts the prosecution process

The firm’s Phil Turtle said: “Any landlord that discovers this situation should seek immediate professional help from a specialist like Landlord Licensing & Defence preferably before the council starts the prosecution process.

“Both the main tenant and the landlord are at risk of being prosecuted for breaching the HMO Regulations (Management of Houses in Multiple Occupation (England) Regulations 2006), which set out the requirements for HMOs, such as fire safety, maintenance and sanitation.

“These regulations are different from requirements for non-HMO properties, as you are very unlikely to have the necessary fire alarms, fire doors, and other measures in place to comply with them.”

He added: “The average fine for a landlord who violates HMO Regulation 4, which covers fire safety and emergency escape routes, is around £18,000 to 28,000.

“Other Regulation breaches will often bring this up to £50,000 or more. And there are six other Regulations you can be fined for.

“That’s a hefty price to pay for something you may not even be aware of.”

Landlords didn’t know their property had become an HMO

Mr Turtle says the firm deals with cases every week of landlords inadvertently breaching management regulations because they didn’t know their property had become an HMO.

He says that one of the common scenarios is when a property, housing three or four tenants, falls under a council’s ‘Additional Licensing’ scheme.

That will create a criminal offence of managing an unlicensed HMO – and so will having five tenants in a property anywhere in the country under the ‘Mandatory HMO licencing scheme’.

But the repercussions of managing an ‘unlicensed HMO’ can be serious with fines ranging from £12,000 to £15,000 on top of the management regulation fines.

The situation is also bad for the tenant whose name appears on the tenancy agreement and collects rent from sub-tenants becomes a ‘mesne-landlord’ or sub-landlord.

Unfortunately, a council can hold this individual just as accountable as the original landlord, imposing fines of £50,000 or more for failure to licence and breaches of the HMO Regulations.

Tenants living in an unlicensed HMO can potentially file a Rent Repayment Order

Mr Turtle said: “The legal consequences don’t end there because tenants living in an unlicensed HMO can potentially file a Rent Repayment Order (RRO) for the period they rented the property while it remained unlicensed.

“Interestingly, case law dictates that the RRO must be claimed against the immediate landlord – which would be the original tenant – causing even further complications for both landlords and the tenants.

“So, the original tenant could end up having to give back all the rent he/she collected from the sub-tenants, as well as the massive and life-changing fines.”


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Comments

GLee

7:23 AM, 28th July 2023, About 11 months ago

How is a landlord supposed to enforce this? The AST clearly states 2 tenants and no-one else, but the tenants choose to sublet the living room so as to reduce the reduce the rent burden. The law states that the landlord has to give 24 hrs notice for inspections, enough time for the tenants to temporarily clear any evidence of subletting.

GLee

8:48 AM, 28th July 2023, About 11 months ago

Also, I am a tenant, I illegally sublet a room. I then sue the landlord for breach of HMO regulations and get awarded a Rent Repayment Order. Win, win for me. Welcome to the land of freebies.

Shaun Hales

11:23 AM, 28th July 2023, About 11 months ago

I do not believe this applies to R2SA as short term lets are not tenancies but licences so legally are not tenants but guests. A comprehensive compliant company lease agreement should exclude the sub tenant from the housing act being that they are a corporate entity. It’s ridiculous to say a property automatically becomes a hmo when a unrelated person moves in.

MasterG

12:21 PM, 28th July 2023, About 11 months ago

Reply to the comment left by GLee at 28/07/2023 - 08:48
Nope. The sub-tenant sues you for the return of rent as you would be their immediate landlord. You wouldn't be able to sue your landlord.

Freda Blogs

13:13 PM, 28th July 2023, About 11 months ago

Don’t worry, our friend Mr Gove is levelling up the playing field between landlords and tenants, so it’s entirely fair that LLs should have to pay huge fines for the misdemeanours and breaches of contract by our tenants, carried out without our knowledge or consent.

Des Taylor & Phil Turtle, Landlord Licensing & Defence

11:42 AM, 1st August 2023, About 11 months ago

Reply to the comment left by GLee at 28/07/2023 - 07:23
It is a very difficult situation for landlords. As far as most councils are concerned operating an 'illegal' (i.e. unlicensed) HMO is only one step down from murder.

The only real protection a landlord has are regular inspections (although that is at odds with the tenants's right to quiet enjoyment)

Also a clear clause in the AST that the tenant shall not sublet nor create an HMO

And ensuring that all property is up to HMO standards particularly in respect of fire doors and alarms

Its a devilish situation for Landlords

Des Taylor & Phil Turtle, Landlord Licensing & Defence

11:47 AM, 1st August 2023, About 11 months ago

Reply to the comment left by Shaun Hales at 28/07/2023 - 11:23
You may wish to think it is ridiculous but it is the law and has been since 2004!

However in relation to SA, then as long as the occupant(s) have homes elsewhere then you are correct that they can stay 'on licence' written or inferred.

Be very aware though that if a person who has no other home moves into your SA they are automatically considered by the law to be on an AST whether in writing or otherwise and that in clouds when the LL has given them a written "licence". The law says that is an AST not a licence if it is their sole residence!

Des Taylor & Phil Turtle, Landlord Licensing & Defence

11:53 AM, 1st August 2023, About 11 months ago

Reply to the comment left by GLee at 28/07/2023 - 08:48RRO not available for breach of HMO regulations, but is available for the below offences.
And yes sub-letting tenant potentially has a RRO case against the superior landlord although unlikely the FTT would make an award if LL properly represented and the matter contested.
Offence
======
Having control of, or managing, an unlicensed property. (Failure to Selective Licence)
s95 Housing Act 2004
Having control of, or managing, an unlicensed HMO (Failure to Licence HMO)
s95 Housing Act 2004
Using or threatening violence for securing entry into premises
s6 Criminal Law Act 1977
Illegal eviction or harassment
s1 Protection from Eviction Act 1977
Failure to comply with an Improvement Notice
s30 Housing Act 2004
Failure to comply with a Prohibition Order
s32 Housing Act 2004
Breach of a Banning Order
s21 Housing and Planning Act 2016
Full description towards the bottom of this page https://landlordsdefence.co.uk/rent-repayment-order/ under the heading Everything you ever needed to know about Rent Repayment Orders

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