Like most of the property industry, those involved in the private rented sector (“PRS”) will have breathed a collective sigh of relief at the largely unexpected result of the recent general election. The political issues facing the sector in the lead up to the election were highlighted in the article The politics of private rents (EG, 25 April 2015, p83). While some of the more widely feared proposals, such as rent control, are no longer a concern, the new government’s focus on immigration appears likely to result in some unanticipated changes. These could have a significant impact on the sector.
Right to rent
The pilot right-to-rent scheme, running in the West Midlands since December last year, has been well covered in the property press. This scheme exposes landlords and letting agents to civil penalties of up to £3,000 per illegal immigrant adult occupier. It was always anticipated that the scheme would be rolled out across the UK, placing a significant burden on PRS landlords.
The implementation of immigration status checks prior to granting new tenancies has been described officially as “simple”. In practice, however, it can be complicated and time consuming (see “Discrimination dangers” box for some of the practical and legal difficulties). Landlords need to meet every adult occupier face-to-face (or by live video link) to check their original immigration documents. Considering that the larger PRS schemes might comprise in excess of 500 flats (often housing more than one occupant), the time and cost burden of carrying out such checks is obvious.
Post-election speech
On 21 May, David Cameron gave a speech summarising the new government’s immigration plans. Although not widely publicised, the proposals in relation to the termination of certain residential tenancies extend some way beyond what most were expecting.
The prime minister started by confirming that the right-to-rent pilot would be rolled out nationwide, then continued by announcing the introduction of a new mandatory licensing scheme for landlords. It is understood that the mandatory licensing scheme would apply only to houses of multiple occupation, but this has not yet been confirmed.
He concluded with a proposed consultation on cancelling tenancies “automatically” when visas expire, as well as allowing landlords to evict illegal immigrants more quickly. Further details are awaited with interest.
No visa, no tenancy?
These proposals would be a significant change to the current laws surrounding the termination of tenancies – and a further extension of regulation of the PRS.
There is clearly much debate to be had in the consultation process, but the difficulties for landlords are foreseeable. How can a landlord always know, with absolute certainty, that its tenant’s immigration status has changed so that the tenant no longer has a right to live in the UK? What if the landlord takes steps to terminate the tenancy on immigration grounds, only to find out that it was mistaken? There will be considerable scope for race discrimination claims, in particular.
The Equality Act 2010 applies to landlords and lettings agents, and outlaws race discrimination. Race discrimination includes discrimination on grounds of nationality – and nationality is intertwined with immigration status.
Analogies with employers’ duties
Cameron drew ominous comparisons with employers’ immigration law obligations, which have become more and more onerous. When first introduced, the maximum penalty for employing an illegal worker was a relatively small civil fine. Over the past 20 years or so, the punishments have increased progressively, with employers today facing civil penalties of up to £20,000 per illegal worker, as well as criminal sanctions – even custodial sentences for representatives of employers. If the current government’s approach continues, it could well be that the right-to-rent scheme, as piloted, is simply the tip of the iceberg.
An extended right-to-rent scheme which mirrors the existing employers’ right-to-work scheme would cause difficulties for landlords and lettings agents. A simpler and fairer scheme for landlords would be one in which landlords need only take eviction action on receipt of a clear notification of illegal status from the immigration authorities. This of course is likely to be resisted by the government, as it places much of the administrative burden back with the immigration authorities.
Planning for the future
It is important that landlords and letting agents seek to influence the future of the right-to-rent scheme and associated proposals by participating in the relevant consultation processes.
In practical terms, the PRS needs to train staff to conduct the prescribed right-to-rent checks, brush up on data protection compliance and race discrimination avoidance and revise standard tenancy and terms of business documentation.
The debate around the role PRS has to play in solving the housing crisis will remain high on the government’s agenda. However, it is clear there are issues closer to the government’s heart which will continue to undermine its claim to support further investment in the PRS.
James Souter is a partner in the property litigation group and Anne-Marie Balfour is a senior associate in the employment and immigration group at Charles Russell Speechlys LLP
