Property professionals acting on behalf of landlord clients in the letting and management of property are all too familiar with the need to vet prospective tenants.
This is a function ordinarily undertaken by the agent, often in conjunction with a sub-contracting tenant referencing agency. But when things go wrong, a problem which has grown in scale with the prevalence for identity fraud, the agent frequently finds itself in the firing line. This problem has, with effect from 1 February 2016, only magnified with the introduction of the Right to Rent provisions contained in the Immigration Act 2014 ("IA").
Right to Rent
This Scheme requires landlords of residential property (or their agents) to check the identity of all prospective adult occupiers to ensure that they have the right to reside in the UK.
Coming into force earlier this year, the Scheme applies to all landlords and their agents (including people who sub-let or take in lodgers) and places an obligation on them to carry out identity checks on all potential adult occupants (over 18 years old) prior to letting a property to ensure that the prospective tenant has a right to remain in the UK. The provisions do not apply to tenancy agreements which pre-date enactment and there are a few exceptions which include social housing, care homes and holiday accommodation.
What is required
The landlord or agent must establish who will live at the property and, within 28 days of the start of the tenancy, must check that all adult occupiers, regardless of whether they are named on the tenancy agreement, have the right to remain in the UK. This will involve checking all relevant documents to ensure that any dates for the right to remain have not expired, that the photographs are of the prospective tenant, and that there is no conflicting information on the basis of the documents presented. A list of applicable documents can be found on the Home Office website
Follow up checks must be carried out if the tenant is only allowed to be in the UK for a limited period of time. If the right to rent has expired at the time of the follow up check there is an obligation on the landlord or agent to report this to the Home Office. Copies must be taken of the identity documents and retained for a period of 12 months.
If a landlord or agent rents a property to a person who is not entitled to remain in the UK, they could face a civil penalty of up to £3,000 for each unlawful occupier. However, in respect of the landlord or agent being shown a false document which asserts a right to remain in the UK, they will only be liable for a civil penalty if it is reasonably apparent on its face that the document was not genuine.
The scheme requirements are specific, and it will be easy for busy agents to make mistakes. Landlords and their agents need to ensure compliance with the scheme to avoid penalties: all relevant staff need to be properly trained, and systems put in place. Agents should also ensure their terms and conditions and tenancy agreements are updated to reflect the Right to Rent checks that are now required.
A last minute change to the requirements was introduced as a result of a case involving Ryanair. The Home Office had levied fines of £2,000 per person under a similar statutory provision, due to the airline's failure to detect that two passengers were holding forged Greek passports. However, a High Court Judge said that the government's attempt to delegate its border control responsibilities 'offended all principles of natural justice'. Whilst welcome, scope for ambiguity remains and it will be interesting to see what a reasonably apparent non-genuine passport might look like.
We have seen huge growth in claims against lettings agents brought about by inadequate or inaccurate verification of the tenant. Identity fraud is frequently deployed by those seeking to deceive and carelessness on the part of the agent can often have significant consequences; particularly where properties are seriously damaged by the occupants, often in the pursuit of criminal activity. Substantial remedial costs and rental losses are often visited on the agent and can seem wholly disproportionate to the fee earned for the verification process initially provided.
Even those who subcontract this function need to be confident that the terms on which their contractor has been engaged offer adequate protection should errors emerge. In many cases the perceived confidence is misplaced. We would recommend a careful review of existing practices and a very careful analysis of what can be done to protect the agent; whether through terms and conditions of engagement or balance between risk and reward. Sticking to a regular inspection regime, with digitally preserved and date record evidence, can also be crucial if provide ongoing services beyond the initial lettings phase.