At around this time of year, London sees an annual influx of tourists keen to secure short-term holiday rentals as they look to soak up the unique seasonal atmosphere associated with one of the greatest capital cities on the planet.
That said, not only can these short-term lets prove a pre-New Year’s day hangover headache for unwitting landlords, so too can long term sub-lets where your tenant hasn’t bothered to seek your permission before giving the keys to someone else.
So, what kind of practical measures can you take to help prevent yourself from falling victim to what’s commonly known as ‘unlawful subletting’? Our Director of Legal and Compliance, Manjit Kataora, shares some insight on the fine details of subletting:
Tenancy agreement
The starting point is to check the wording of your tenancy agreement. A decent tenancy agreement will restrict use of the property by the tenant to that of their private residence so that only they and their immediate family can reside in it during the tenancy. This might smack of being merely the proverbial ‘paper shield’ but it’s presence in the agreement is an important pre-condition for initiating legal action, should that later be required.
Likewise, there should be a contractual clause prohibiting registering a business at the property, and preventing unlawful or immoral use of the property.
On the back of the popularity of short-term lettings platforms, it’s also common nowadays to have a clause in the tenancy agreement prohibiting the tenant from advertising the property on any internet-based marketing / social media website.
An assignment clause will prevent the tenant as an individual from ‘sharing’ or’ parting with’ possession of the property with anyone else except those named in the agreement, - usually the tenant and their family members.
Assignment clauses are usually subject to landlord consent: commonly the wording contains words to the effect as ‘such consent not to be unreasonably withheld by the landlord’.
Examples of where it would be reasonable for a landlord to refuse permission would include where a proposed sublet would be to individuals who might then create a house in multiple occupation, for which not only would a local authority licence be required, but also potentially substantial and invasive works to the property so that the property then meets the safety conditions contained within the licence conditions. Such costs can run into several thousands of pounds and, if not carried out by the date specified in the licence, leave the landlord at risk of a fine from the local authority, even where they didn’t know the property was being carved up in that way. It’s quite possible that a landlord in these circumstances might be able to avail a ‘reasonable excuse’ defence against action by the council, but where rent has been collected, the offence is strict liability, i.e. landlords are presumed guilty unless they can prove their innocence.
Other permissions and consents
Mortgage or insurance conditions could also be breached (although its unlikely these would be enforced if you can show no consent to sub-let was actually given and/or that measures are being taken to recover the situation.
Permission for short-term rentals also carries the risk of breaching the strict ninety-day rule in London. This rule prohibits the letting of property for more than this period in any one calendar year without first having secured planning permission (and may also breach mortgage, insurance and local authority conditions).
Increased risk of damage
Properties used for short-term lets are also at risk not only of increased wear and tear but nuisance as occupants come and go, perhaps at anti-social hours.
Company lets
Corporate lettings should name specific individuals, e.g. a chosen employees as the ‘permitted occupiers’, helping protect the property against a churn of anonymous occupants
It might seem that a tenancy application from a company looks like a safe bet, but there are companies that operate rent-to-rent business models. Such companies might present as student occupancy organisations, but take private rented sector accommodation through letting agents then sub-let the property to multiple occupants – though not before carving up the property internally allowing them to create more individual rooms in order to accommodate multiple occupants. The business model charges individual tenants a greater aggregate rent than is charged to the company by the landlord and profits from the margins, which can be significant where the operation is scaled.
Some simple DIY preventative measures
Unfortunately, even the most plausible tenancy application can sometimes mask hidden risks. But there are a few practical ways to keep an eye and remain alert to the risk of falling victim to unlawful sublets.
A good managing agent will regularly inspect your property and provide you with an inspection report. Their experienced inventory clerks will have seen it all and will be able to look for and identify signs of use at the property inconsistent with single-occupancy use.
However, inspections take place often months apart, so it’s a good idea as well to periodically check your rental property address on Companies house. Has a company been registered at the address? If it has, alert your agent who can then contact the tenant immediately with the evidence and require that they remove registration from the premises. Not only would Companies House issue paperwork to the property but so to might other regulators, e.g. the ICO. The result can be regular correspondence that can build up over time and expose the address to risk being used for commercial purposes, credit lines, and even fraudulent or criminal activity.
Check as well to see if the property address comes up on short-let platforms. Tenants who short-let on well-known platforms can only do so much to change the appearance of a property and if you suspect this is going on, do an online check or instruct your managing agent to inspect the property and look for signs of misuse.
If you are minded to consent
Where you are considering granting consent, such consent should only be considered where appropriate references have been taken from the proposed sub-tenants and they can demonstrate they have the right to rent as required under Immigration Act 2014.
If you are unfortunate to have fallen victim to unlawful sub-let you can recover possession of the property by first serving a Section 8 notice (and, depending on how near you are to a break clause or the end of the tenancy, or if the tenancy is periodic, by serving a Section 21 Notice in parallel). Available grounds within Schedule 2 Housing Act 1988 include:
• Ground 12 - where any obligation of the tenancy other than one related to the payment of rent has been broken
• Ground 14 - nuisance, annoyance, illegal or immoral use of the property – (factors which can be caused by, and are often associated with, unlawful subletting)
Granted these are discretionary grounds therefore unless the section 8 notice does the trick, evidence of these factors will need to be placed before the court but it may be relatively easy to obtain, in the form of complaints, etc.
Aside from these discretionary grounds, mandatory ones e.g. arrears can be added and if present will make obtaining possession much easier.
Take the weight off
Perhaps the wisest thing to do is ensure your property is in the hands of an experienced who can help you navigate these risks. Consider as well, rental and legal protection insurance that will save you time and money associated with a costly and potentially lengthy legal process by covering you for expenses if the worst does happen.
