Investing in residential property has traditionally delivered better returns than the more traditional investment asset classes is usually a significant part of any wealth management strategy.
The Immigration Act 2016 came into effect on 1st December 2016, consolidating the Right To Rent regulations that came into effect in February. The new legislation means that agents acting or landlords, will be committing a criminal offence if they have "reasonable cause to believe" that the apartment or house they are letting is being rented by a disqualified tenant.
It is now also an offence for agents who have "reasonable cause to believe" that their landlord client is letting to a tenant disqualified because of their immigration status, and who go ahead with the management of the property. The penalties for both offences on indictment are imprisonment for up to five years and/or an unlimited fine; penalties on summary conviction are imprisonment for up to 12 months and/or, again, an unlimited fine.
Therefore, it is becoming ever more important for property investors to make sure that they take the appropriate steps to ensure that they are compliant with the new regulations, particularly if they do not use a lettings agent or a managing agent.
The starting point must be that landlords must check all new tenants and make sure that the any tenant can legally rent your residential property. Before the start of a new tenancy, you will need to undertake checks for all tenants aged 18 and over, even if:
- they’re not named on the tenancy agreement
- there’s no tenancy agreement
- the tenancy agreement isn’t in writing
Once you have ascertained which adults will use your property as their main home you will need to ask for original documents that prove the tenant can live in the UK, for example a biometric residence permit, a vignette (HO sticker in a passport) or an Immigration Status document.
Once you have been provided with the following documents then you will need to check for the following whilst you are with the tenant:
- the documents are originals and belong to the tenant
- the dates for the tenant’s right to stay in the UK haven’t expired
- the photos on the documents are of the tenant
- the dates of birth are the same in all documents (and are believable)
- the documents aren’t too damaged or don’t look like they’ve been changed
- if any names are different on documents, there are supporting documents to show why, e.g. marriage certificate or divorce decree
- If the tenant is arranging their tenancy from overseas, you must see their original documents before they start living at the property.
In addition to the verification process the Regulations require landlord’s to make copies of the documents making a note of the date that you carried out the right to rent check. Make sure that you keep copies of the tenant’s documents for the time they’re your tenants and for one year after.
In some instances tenants may not be able to provide you with the documents, for example if they have made an application to renew or extend their leave and their application is currently being processed by the Home Office. In these circumstances you will need to make use of the Home Office Landlord Checking Service and they will come back to you within 2 working days with an answer as to whether or not you can rent the accommodation to the tenant.
Provided you have carried out the correct verification procedures and have protected yourself by making sure that you have kept evidence of this you would have a defence to any possible sanction.
If you are in any doubt then do not rent a property to a prospective tenant unless you are sure they have the correct documents.
A landlord’s responsibility does not necessarily end after the initial checks have been completed. If you don’t make a further check and your tenant’s permission to stay runs out you could be subject to a civil penalty.
Depending on which is the longest, you must make a further check just before either:
- the expiry date of your tenant’s right to stay in the UK
- 12 months after your previous check
Income generation and the potential for capital appreciation means that property will continue to be attractive to investors but any landlord must be aware of the responsibility that the legislation places upon them so that they can continue to benefit from the rewards of their investment without leaving themselves open to a civil penalty or criminal sanction.