New government legislation which targets landlords, dubbed 'Right to Rent' in the media, could mean significant financial penalties for those that fall foul of the new rules. When added to the recent changes in how buy-to-let taxes are calculated, it is easy to see why beleaguered landlords might feel that they are being unfairly singled out by the current executive.
Many of those who provide private housing in England, where the new rules have taken effect, are understandably irked by the changes. With landlords now required to check the immigration status of their tenants, many see this as a role that places them in the invidious position of acting as an extension of UK border police. However, despite many landlord's antipathy towards the new rules, which came into effect at the beginning of February, they are now legally encumbered with this task and so must take the matter seriously. Failure to make the relevant checks can mean substantial fines. Landlords who have been turning a blind eye to the immigration status of their tenants will find this is no longer a viable option.
According to the Residential Landlords Association (RLA), seven out of ten residential landlords still do not properly understand the new rules. When these changes were piloted in the West Midlands, more than half a dozen landlords received fines averaging £800, with one landlord receiving a penalty of almost £2000. A landlord who is deemed to have broken the rules can expect a fine for each tenant who has no right to remain in the UK. On the first occasion of each transgression the fine can be anything up to £1000 per tenant, with subsequent penalties rising to £3000 for each additional tenant found to be in the UK illegally.
Although the scale of these fines, and the ethos behind them, may deter potential new landlords thinking of entering the market, they should not. Anyone seeking to let residential property should be prepared to take an organised and diligent approach to every matter concerning their let, and these new 'right to rent' rules are essentially no different to any other paperwork. Although letting a property can initially seem a relatively risky venture, it is usually those that are completely unwary that end up coming unstuck. A key part of the business of being a residential landlord is taking all sensible precautions to protect oneself from all foreseeable problems. There will always be those events which cannot be anticipated, and those should be dealt with in a timely and professional manner as and when they occur. A successful landlord should always be able to immediately lay their hands on any relevant paperwork, be it contract, insurance policy or safety certificate. Regular checks of such documents to ensure they are up to date and correctly filed away is an essential part of the job.
While the new 'right to rent' penalties may be viewed by some as rather severe, fortunately the work involved to make the necessary checks is itself not too onerous. However, it is important for the landlord to be meticulous in their handling of the documentation supplied by their tenants. They must work to establish the veracity of the documents provided, as well as to note any expiration dates associated with them: lapsed or counterfeit paperwork will not provide the landlord with any protection from the large fines which accompany this new legislation.
The full list of the precise details of the checks that need to be made can be found here on the UK Government's website.
A check must be made for everyone living at the rental property who describes it as their main residence and is over 18, irrespective of whether they appear on any tenancy agreement. There are some exceptions to the scheme such as some student accommodation, care homes and long lease properties which are outlined in detail at the above website. However, the vast majority of residential properties being let in England now fall under the scheme.
The landlord is required to have sight of an original document from those listed on the government website, where there is a list of acceptable single documents, which includes passports, biometric immigration cards and permanent residence cards. A tenant able to produce any of the documents on this list will have the right to stay in the UK for an indefinite period. For tenants who are only permitted to be in the UK temporarily, there is a second list from which they must produce two valid documents. These include a letter from a UK higher education establishment confirming that they are a student, a letter from the UK police confirming that they have had their documents stolen or a letter from HM Prison Service confirming that they have been released from custody in the last 6 months.
The landlord must check that the documents are valid, in the presence of the tenant. It is important to establish that identifying details such as the name on the document, as well as any photographic identification, matches the tenant presenting it. Any expiry dates must also be checked to ensure they have not already passed. The landlord should make dated copies of all documents presented to them, as evidence of the tenants right to rent the property. Documents which show expiry dates will need to be carefully noted by the landlord to remind them to return to obtain a copy of their replacements when the time arrives. Should the Home Office currently be dealing with the tenant, they may be also be in possession of their supporting documents. In this case, the landlord must use the online 'Right to Rent' tool at the government website linked to above.
Faced with a number of tenants from very different backgrounds, all proffering odd looking documents can make these checks seem more complex than they actually are. In fact, the truth is the checks are really quite simple: there are 3 broad categories of tenants in the UK. Any landlord who can correctly identify which of these categories their tenants fall into, together with dated copies of the relevant documentation to support their assertion should avoid being penalised. The key point is that landlords must not, under any circumstances, have dealings with migrants who have no right to rent.
Unlimited Right to Rent — Those with unlimited right to rent include British nationals, Swiss nationals and those from the European Economic Area (EEA). Also included are those who have the right of abode in the UK, or have been granted indefinite leave to remain. Letting to those with unlimited right to rent will not result in a penalty.
Time Limited Right to Rent — Those who are not included in the above group have the right to rent provided they have a valid visa to remain in the UK or an enforceable right to remain under European Law. Letting to those with time limited rights will not result in a penalty, provided follow-up checks are made at the appropriate future date.
No Right to Rent — Those who do not currently have permission to remain in the UK, do not have the right to rent. Landlords who rent a property to migrants who fall into this group will be liable for the penalties mentioned above.
Landlords who use a letting agent can instruct them to perform all the necessary checks on their behalf. Where this approach is taken it is important that a dated, written agreement is drawn up, which has been personally signed by the agent. A copy of this agreement should be carefully retained by the landlord, as this document may be their only defence should a problem later be discovered. Letting agents in university towns can be extremely busy at the start of the academic year, so where possible it is best to approach them outside of this time.
It may be tempting to think it is okay to take a more relaxed approach with rental properties that are close to the university campuses, such as the Southsea area of Portsmouth for example. Believing that such rentals will only appeal to legitimate students, and are therefore a lower risk, is a mistake. If it is discovered that the paperwork is incorrect for even one residents, the resulting fine may well wipe out the landlord's entire yearly profit for the whole property.
It is believed some ill-informed landlords may seek to reduce their chances of incurring a fine by renting only to those who appear likely to have been born in the UK. However, should they be discovered indulging in such blatantly discriminatory behaviour they may find themselves in extremely hot water. Tenants who feel they have been unfairly treated by their landlord can sue them for 'injury to feelings'. As the average payout in such cases is more than £6,500, this is an extremely unwise path for worried landlords to take. The only fair, sensible and pragmatic approach to the new legislation is for all professional residential landlords to carefully check the immigration status of all of their tenants with equanimity, paying no heed to their nationality, work status or ethnic background.
The law does not currently apply to properties located in Scotland, Wales and Northern Ireland. It seems likely that should the scheme succeed in its stated aim of creating a 'hostile environment for illegal migrants', many of these are likely to seek further refuge in the areas of the UK where rental rules remain more relaxed. Were this to happen, it seems likely that the Scottish and Welsh Assemblies would quickly follow suit and introduce their own versions of right to rent.