In our last blog, we identified some of the unintended consequences from the government’s efforts to support the property rental market.  This blog entry looks at another aspect of government policy which exposes private landlords to the risk of a £3000 penalty if they get things wrong.

In any sensible world, a “Right to Rent” would be a statement of the citizen’s entitlement to the provision of decent housing at a reasonable rent somewhere near their place of work.  But in the “Newspeak” of recent UK governments, the right to rent now means the obligation of a potential tenant to show that they are entitled to rent a property and the duty of the proposed landlord to demonstrate to the State that it has checked that entitlement.

To some property owners, this is already a fact of life.  Since 1 December 2014, landlords of properties in Birmingham and other parts of the West Midlands have had to check that someone has the right to rent before letting them a property. From 1 February 2016 this will be extended to landlords of all properties throughout England by what is euphemistically described as a “Code of Practice”. Failure to follow it will be evidence of an offence under immigration legislation.

What properties are covered?

Pretty much all private residential properties for all people aged 18 or over who will use the property as their main home.  This includes house guests, lodgers and sub-tenants.

Prospective property buyers should note that if they buy a property that is occupied by residential tenants, they will need confirmation from the Seller that the relevant checks have been completed to avoid liability for any inherited breach of the rules and will of course be liable for future checks as they become needed.

Who has a right to rent residential property?

Anyone seeking to rent residential property falls within one of three broad categories depending on their immigration status:

  1.  An unlimited right to rent (i.e. British citizens, EEA and Swiss nationals, people who have the right of abode in the UK, or who have been granted indefinite leave to remain or have no time limit on their stay in the UK),
  2. A time-limited right to rent (i.e. people who have valid leave to enter or remain in the UK for a limited period of time or are entitled to enter or remain in the UK as a result of an enforceable right under European Union law or deriving from section 2(2) of the European Communities Act 1972),
  3. No right to rent (i.e. anyone else unless they are either under 18 or have been given a specific permission by the Secretary of State to rent in the UK).

What occupation arrangements require proof of the right to rent?

The rules technically apply only to a residential tenancy agreement but this has a broader meaning than in other legislation as it is defined as being a tenancy that grants a right of occupation for a property for residential use, provides for the payment of rent, and is not an excluded agreement. It therefore includes any lease, licence, sub-lease or sub-tenancy and any right for one or more adults to occupy a property as their only or main home, whether or not the property can be used for any other purpose.  It will catch any of the following typical arrangements:

  1. self-contained accommodation let on a lease or tenancy agreement;
  2. accommodation sub-let by existing occupiers; and
  3. lodgers and others with a licence to occupy a property.

The rules do not apply unless:

  1. a rent is being paid; and
  2. the property is being occupied as a person’s only or main home.

However, these exceptions are fraught with difficulties.  Rent, for example, includes any financial transaction “in the nature of” rent so it may cover contributing to the costs of using services and utilities.  Similarly, whether a person is using a property as their main home is a question of fact including how much time the occupier will spend at the property, their personal and family ties to the home, how much it will be used, whether they will keep most of their belongings there, whether they will be registered with a doctor or dentist or for voting purposes there, whether their partner or children live there, or they receive post there.  If in doubt, the rules advise landlords to assume that a person intends to occupy the property as their only or main home.

Some properties are excluded from the rules but these exclusions are not likely to be of much assistance to the average private landlord.

How do I prove that I or my tenant has the right to rent?

It will come as no surprise that compliance with these rules is additionally complicated by the fact that they must be applied in a non-discriminatory manner.  In practice this means that in order to be able to demonstrate that they have not committed an offence under the right to rent rules, landlords will have to ask everyone to prove their right to rent.  There are 3 steps involved:

  1. Landlords will have to conduct initial right to rent checks before authorising an adult to occupy rented accommodation;
  2. Landlords will have to conduct follow-up checks at the appropriate date if initial checks indicate that an occupier has a time-limited right to rent, and;
  3. Landlords will have to make a report to the Home Office if follow-up checks indicate that an occupier no longer has the right to rent.

As tenancy agreements may continue (by statute as much as under contract) after the right to rent has expired, this means that a landlord may have to report their tenant to the Home Office once they cease to be entitled to rent so the importance of keeping diary dates and acting on them cannot be underestimated.

The ways of proving the right to rent will be familiar to most of us now if we have ever tried to open a bank account of carry out any major financial transaction as they are essentially identity checks. There are arbitrary time limits which could be used to trap the unwary.

There are 4 basic steps to conducting an initial right to rent check and they may only be undertaken and recorded up to 28 days before the tenancy agreement comes into effect:

  1. Establish the adults who will live in the property as their only or main home;
  2. Obtain original versions of one or more of the acceptable documents for adult occupiers (passports and photo driving licences for example);
  3. Check the documents in the presence of the holder of the documents, and
  4. Make copies of the documents and retain them with a record of the date on which the check is made.

It is of course perfectly possible that persons with an unarguable right to rent will not be able to prove that fact if they do not drive or their passport has expired.  In certain circumstances, the landlord can request verification of a right to rent from the Home Office’s Landlords Checking Service but as this will only apply when there is a Home Office reference number such as an application or appeal number, this will not be of any assistance for a British citizen without such documents.

Follow up checks need to be carried out where the initial right to rent checks are satisfied with a document or a response from the Landlords Checking Service that indicates only a time limited right to rent.  Bizarrely this would include a British national who has only been able to prove their right to rent by producing (for example) a birth certificate and a photo driving licence. This time-limited statutory excuse lasts for 12 months or until expiry of the person’s permission to be in the UK or the validity of their document which evidences their right to be in the UK. Follow-up checks have to be undertaken within 28 days of that expiry date, in order to maintain the statutory excuse.

What happens if a tenant does not have a right to rent?

If the tenancy has yet to be entered into, the tenancy must not be completed.

If the right to rent has expired but the tenancy already exists, then the landlord does not need to evict them (indeed, under statute they probably cannot do so without a court order), but should make a report to the Home Office as soon as reasonably practicable after discovering that the right to rent has expired, and in any event before their existing time-limited statutory excuse expires.

This report must be made in writing (by post or email), and contain all of the following:

  1. The full name of the occupier believed to have no right to rent;
  2. The address of the premises they are occupying;
  3. The name and contact address of the landlord;
  4. Where relevant, the name and contact address of the agent;
  5. The date on which the occupier first took up occupation; and
  6. Copies of the documents kept by the landlord when undertaking the initial right to rent checks in respect of the occupier.

Landlords must ensure they keep a copy of the report sent, noting specifically the time and date sent.  Their statutory excuse which will then last for as long as the person continues to occupy the premises.

Again this is not as clear as it could be.  Is the landlord obliged to take steps to recover possession once the tenancy agreement has also come to an end?  Presumably, the landlord cannot enter into a new tenancy but is he prevented from collecting rent while the tenant holds over?  What happens if he inadvertently takes a step which gives a tenant a right to a new tenancy agreement (whether for a definite or indefinite period)?

What happens if a Landlord breaks the rules?

So long as the occupier actually does have a right to rent, then no offence has in fact been committed although as noted it is at least theoretically possible that in letting to someone who has a right to rent but cannot prove it, a landlord could fall foul of anti-discrimination legislation.

If, however an offence has been committed, then the landlord is liable to what is described as a “civil penalty” (i.e. not actually a fine) of up to £3000.00 per unauthorised occupier. Lodgers in a private household, attract a lower penalty of £500 per person.