01 Aug 23
News that up to 25% of tenants are sub-letting and half of those tenants had not told their landlord that they were subletting has led to a warning that the landlord AND tenant could be facing ‘life-changing fines’.
The warning comes from Landlord Licensing & Defence after research from Direct Line business insurance uncovered the shock statistics.
The firm says that these landlords are unwittingly breaking the law. In fact, any landlord would be breaking the criminal law because their tenants may offer a friend a place to stay – but create a House in Multiple Occupation (HMO) by doing so.
Even though the move will be done without the landlord’s knowledge they will be in criminal breach of the Housing Act 2004.
That’s when a rented property is occupied by three or more people who are not related by blood or sexual union – which means an HMO has been created without the landlord’s consent.
And there’s bad news for the original tenant too because they will be liable for criminal prosecution and ‘life-changing’ fines’ as a sub-landlord.
Phil Turtle of Landlord Licensing & Defence says the firm deals with similar cases every week of landlords breaching management regulations because they didn’t know their property had become an HMO – and they could end up with fines of £50,000 or more.
One of the common scenarios leading to these hefty fines is when a property, housing three or four tenants, falls under a council’s ‘Additional Licensing’ scheme.
That creates the criminal offence of managing an unlicensed HMO as will having five tenants in a property anywhere in the country under the ‘Mandatory HMO licencing scheme’.
But the repercussions of managing an ‘unlicensed HMO’ can be serious with fines ranging from £12,000 to £15,000 on top of the management regulation fines,
“Any landlord that discovers this situation,” says Mr Turtle, “should seek immediate professional help from a specialist like Landlord Licensing & Defence preferably before the council starts the prosecution process.”
The situation is also bad for the tenant whose name appears on the tenancy agreement and collects rent from sub-tenants becomes a ‘mesne-landlord’ or sub-landlord.
Unfortunately, a council can hold this individual just as accountable as the original landlord, imposing fines of £50,000 or more for failure to licence and breaches of the HMO Regulations.
Mr Turtle explains: “Both the main tenant and the landlord are at risk of being prosecuted for breaching the HMO Regulations (Management of Houses in Multiple Occupation (England) Regulations 2006), which set out the requirements for HMOs, such as fire safety, maintenance and sanitation.
“These regulations are different from requirements for non-HMO properties, as you are very unlikely to have the necessary fire alarms, fire doors, and other measures in place to comply with them.”
He adds: “The average fine for a landlord who violates HMO Regulation 4, which covers fire safety and emergency escape routes, are around £18,000 to 28,000. Other Regulation breaches will often bring this up to £50,000 or more. And there are six other Regulations you can be fined for.
“That’s a hefty price to pay for something you may not even be aware of.”
Mr Turtle says: “The legal consequences don’t end there because tenants living in an unlicensed HMO can potentially file a Rent Repayment Order (RRO) for the period they rented the property while it remained unlicensed.
“Interestingly, case law dictates that the RRO must be claimed against the immediate landlord – which would be the original tenant – causing even further complications for both landlords and the tenants.
“So, the original tenant could end up having to give back all the rent he/she collected from the sub-tenants, as well as the massive and life-changing fines.”
He adds: “The law means that tenants cannot even choose to let a friend move into their spare room.
“For example, if a couple rents a flat with 2 bedrooms and later a friend splits up with their partner and overnight is effectively homeless, obviously most people would say ‘Come and live in our place for a few months till you get sorted out’.
“Well, the law says you’ve created an HMO with all of the problems above.
“One has to question whether a legislative framework that prevents tenants from deciding who can live in their homes is sensible. It would be good to see the tenant action groups like Shelter, Safer Renting, Justice for Tenants and Generation Rent taking up this issue which would help both tenants and landlords.”
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