Landlords in the private rented sector have had a lot to contend with in recent years.
In April 2007 tenancy deposit legislation introduced provisions to ensure tenants’ deposits are secure and are not at the mercy of unscrupulous landlords. October 2015 saw further changes that (among other things) prevent landlords from undertaking “retaliatory evictions” if tenants complain about disrepair and ensure that tenants are given information about the safety of the property and their rights as tenants.
While it was once fairly easy for those with spare funds to invest and “dabble” in the rental market, landlords who are not familiar with the rules can now quickly find themselves tripped up. Many have found themselves at sea with tenancy deposits and others are probably equally unaware of the recent legislative changes. This backdrop does not bode well for the next sizeable wave that is about to hit.
What is the ‘right to rent?’
From 1 February 2016, all private landlords will be required to comply with the provisions of the Immigration Act 2014 (“IA”) and check that their tenants (and any adults who will be living with the tenant) have a right to rent.
In theory, it all sounds simple. In the presence of the adult occupiers (either their physical presence or via live video link) a landlord must check the documentation of those individuals to ascertain if they have a right to rent. Copies of this documentation need to be taken and retained for 12 months after the end of the tenancy.
The government’s code of practice contains two lists of suitable and approved documentation. One lists all acceptable documents that can be produced to prove an individual has an unlimited right to rent. British, EU or Swiss passport holders fall within this group and if an adult occupant provides one, then the landlord can proceed without concern.
The more difficult scenario is where an adult occupant can prove only a time-limited right to rent. As long as a landlord has carried out checks within 28 days of the commencement of the tenancy and provided the adult occupants had a right to rent as at the day the tenancy commenced, the landlord need not worry for the following 12 months.
However, a further check will need to be carried out after 12 months. If the tenant no longer has the right to occupy, the landlord does not need to evict – but must report to the Home Office.
If a tenant cannot produce documents to support their claim but does indicate that, for example, they have a pending claim with the Home Office; or the Home Office holds their document, then a landlord can use a checking service with the Home Office. The Home Office has stated that a response will be provided within two working days.
If an adult occupant cannot provide any documentation, then the landlord cannot rent the property to that person. If the landlord does proceed, it will be liable for a civil penalty which could be as much as £3,000 per occupant – although notably, at present, there is no obligation for landlords to report such individuals to the Home Office.
The provisions apply only to new tenancies, which will come as something of a relief for landlords – but landlords will need to bear this provision in mind when finding new tenants. There are also some limited exceptions that are outside the scope of this article. It is more likely than not that private rented sector tenancies will fall under the IA provisions.
The problems
Landlords should be concerned about these new rules. The risk of falling foul of the IA provisions is obvious. Landlords could fairly easily find themselves inadvertently accepting fake documentation, or failing to carry out checks within the time limits.
But there are other, less obvious, issues lurking. As documentation proving the right to rent has to be retained by landlords for a period of 12 months, landlords must also comply with the requirements of the Data Protection Act 1988.
There are concerns that landlords could find themselves facing discrimination claims if they try and avoid the complexities of the IA by renting only to UK nationals. The government has issued guidance for landlords on how to avoid discrimination – but even with this guidance, discrimination claims are likely to increase.
Organisations that represent landlords have expressed serious concerns at the idea that landlords will become border officials. Indeed, the criticisms of the IA were such that many in the sector doubted that it would ever become operational. But landlords must now get their house in order, ready to face the changes.
It is unlikely the provisions are going to be scrapped in the foreseeable future. Indeed, the government’s support for the law has been reinforced by drafting that is currently before parliament in a new Immigration Bill. If the bill becomes law, landlords could see themselves imprisoned for breaching the right to rent provisions.
A pilot scheme of the right to rent rules has been operating in the West Midlands since December 2014. No formal analysis has been carried out so far – but anecdotally the scheme has reportedly led to an increase in discrimination with just a handful of penalties being handed to landlords for breaching the rules.
With government departments across the board being subject to ever increasing financial constraints, it is difficult to see how the Home Office will be able to robustly police these rules when they do roll out. But landlords would be foolhardy to rely on this. Private landlords must therefore ensure they are geared up to deal with these procedures, or to seek assistance from professionals who can help to ensure compliance.
Joanne Young is an associate in the property litigation team at Ashfords LLP
