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Illegal sub-letting affects both landlords and tenants. Desperate tenants end up paying over the odds to rent poorly managed, sub-standard accommodation whilst landlords lose out on rent and face expensive court cases to evict illegal tenants. Unfortunately, it’s more common that you might think.
Thanks to the internet, sub-letting properties is easier than ever. Tenants can take out a lease on a home and then advertise it for rent online, often on sites like Airbnb and Gumtree.
Research carried out by Direct Line Insurance in 2014 found that around 3.3. million people were living as unofficial tenants, i.e. not named on a tenancy agreement. That’s a lot of landlords who are unaware of who is actually living in their properties.
In this guide, we have a few pointers to help you spot – and avoid! – illegal sub-letting scams.
Is Sub-letting Illegal?
Sub-letting is illegal if you haven’t given the tenant written permission and they decide to do it anyway.
Some landlords allow tenants to sub-let. If your tenant takes on a lodger or moves out to allow a friend or relative to move in with your permission, this isn’t a problem as long as your mortgage lender allows it. However, bear in mind that most buy to let lenders and landlord insurance providers specifically prohibit sub-letting.
When things run smoothly and you are aware of the situation, sub-letting isn’t necessarily a big deal. After all, when the rent is being paid on time and the property is being looked after, you really have nothing to worry about. However, if your tenant decides to go behind your back and sub-let your property to people that you haven’t been able to vet, things are likely to fall apart faster than a wet paper bag full of rocks.
Always include a clause pertaining to sub-letting in the tenancy agreement and draw a tenant’s attention to it. That way, they can’t feign ignorance later.
Why is Illegal Sub-letting so Dangerous for Landlords?
There is usually a financial cost to bear if your tenant illegally sub-lets rooms or the entire property. Often, tenants carve up properties to maximise living space, essentially turning a family home into an HMO so they can rake in as much money as possible before the landlord twigs what’s going on.
Not only will this put the landlord in the firing line of local authority housing inspectors, but the landlord could end up being fined for not having an HMO licence, even though they had no clue what was going on.
If the tenant agrees to carry out repairs as part of the tenancy agreement but fails to do so because they’ve illegally sublet it to a bunch of other people, you’re the one on the hook when housing inspectors prosecute for health and safety offences.
The Consequences of Illegal Sub-letting
Cramming too many tenants into a property is common in illegal sublets and poses a huge fire risk. In addition, the property could sustain damage, which will probably not be covered by landlord insurance (unless there is a clause to protect you from illegal sub-letting).
If you have a buy-to-let mortgage, illegal sub-letting will almost certainly invalidate the terms of that mortgage. Should the lender find out, they might withdraw your mortgage funding, leaving you in a very precarious position.
The cost of evicting an illegal tenant can run into several thousand pounds if you have to resort to bailiffs. Don’t underestimate how long it will take either. Tenants who illegally sub-let properties are often difficult to track down, which causes delays in the legal process. Meanwhile, you probably won’t be receiving any rental income for the property.
Signs That Your Tenant is Illegally Sub-letting
Many indicators of a sub-letting scam in the making are apparent before anyone actually moves in. This means you need to be vigilant during the tenant screening process.
- Beware of a prospective tenant who seems keen to pay a large chunk of rent upfront. This can sometimes indicate they are hoping this will buy them time to carry out illegal activities in the property or they plan on sub-letting it to illegal tenants.
- Be suspicious if a tenant is looking for a property far bigger than they need. For example, if a single person wants to rent a five-bed house, they may have ulterior motives for needing the extra space.
- During inspections pay attention to personal effects. If a tenant is renting as a single person and there are clear signs of a second, third or more people your tenant may be sub-letting.
- If neighbours report a lot of noise at the property or complain to you about frequent comings and goings at the property that is another indication that your tenant may be sub-letting.
Carry out thorough checks on tenants before you offer them a tenancy agreement. One notorious serial sub-letting tenant got away with her activities for ages before she was brought to justice…
Case Study of a Sub-letting Scammer
Rose Chimuka ran an illegal bedsit scam that netted her more than £100k in rental income.
She used false IDs to rent large family homes across London. After convincing landlords she was a model of respectability, she moved in, changed the locks, illegally converted their properties into bedsits, and then stuffed them with tenants.
Each time a landlord figured out what was going on, she disappeared and reappeared somewhere else. Eventually, the law caught up with Chimuka and she was jailed for four years.
Keep a Close Eye on Existing Tenants for Sub-letting Activity
Once a tenant is installed, be alert to signs something isn’t right.
If the original tenant has disappeared and the property now contains a host of new tenants, neighbours will probably have smelled a rat. Pay attention if the neighbours call you to complain about excessive numbers of people entering and leaving the property.
Be suspicious if a tenant repeatedly tries to avoid allowing property inspections.
Look for signs of extra occupancy when you inspect your properties. Red flags include:
- Additional bedding
- More toothbrushes in bathrooms than people renting
- Spare mattresses, and sleeping bags
- Extra bags and clothes lying around
If there are more people living at the property than are allowed, extra rubbish will build up and outdoor bins will overflow. Again, it’s likely the neighbours will alert you if this happens.
What if Your Property is Being Illegally Sub-let?
As we have already mentioned, if the rent is being paid on time, it could be easy to turned a blind eye to what goes on at your property. But if your illegal tenants are causing problems, it’s time to act.
The two possible scenarios are: the tenant is subletting part of the property and is still living there, or they have moved out and other people have moved in.
How Landlords Should Handle Illegal Sub-Letting
In the first instance, if there are signs of criminal or illegal activity at the property this is a police matter.
If you suspect illegal immigrants are living at the property, inform the Home Office immediately.
When a property has been illegally converted into an HMO, contact your local housing department, so they are aware of the situation. It might prevent you from being hit with a court case and hefty fine for running an unlicensed HMO.
If none of the above are applicable, but you are not happy about the situation and you want the tenant out, it is time to start eviction proceedings.
Talk to the tenant if they are still at the property and find out what’s going on. You may find the tenant is cooperative, they have an explanation for why they’ve been subletting, and they are willing to call it quits if you let them stay. The more problematic scenario is when the tenant has moved out and the people living in the property have been given false information about who their landlord is, i.e. it isn’t you.
Whatever the circumstances, if you want to remove the tenant or his sub-tenants, you must notify the official tenant you intend to serve a Section 8 eviction notice to quit because he’s in breach of his tenancy agreement (assuming there is a clause in there prohibiting sub-letting).
Evicting Sub-tenants
It’s vital that you follow the correct procedures for evicting the official tenant or sub-tenant.
A Section 8 notice of eviction must be served to the official tenant. If they are no longer at the property, ask the sub-tenants for contact details, but bear in mind they might have been given fake information.
Once you have located the official tenant, ask them to evict the sub-tenant – you can’t do this, as they are not “your” tenant. If this doesn’t work, it’s time to start eviction proceedings through the court. Once you get legal possession, court-appointed bailiffs will remove the sub-tenants on your behalf.
Preventing illegal sub-letting: LANDLORD ACTION LIST
Prevention is always better than cure. Instead of waiting until your official tenant illegally sub-lets, put measures in place to protect your property.
- Screen tenants – check what your letting agent does to screen tenants (if applicable). If you screen your own prospective tenants, use a thorough screening service to verify the person’s identity, financial situation, and all other relevant details. If there are any discrepancies, don’t let your property to this person, no matter how persuasive they are.
- Don’t be greedy – it’s probably tempting when a tenant offers you six months or a year’s rent in advance, cash. Just think of what you could do with that money! However, DO look a gift horse in the mouth, as it’s mostly likely too good to be true.
- Listen to your gut – The longer you’ve been in this game, the more likely you are to have a gut feeling when something doesn’t feel quite right. Listen to your sixth sense. If a tenant appears respectable, but your spider senses are on full alert, walk away. It could save you a lot of pain later.
- Make sure there is a sub-letting clause in the tenancy contract – standard assured shorthold tenancy agreements usually contain a clause banning sub-letting but check to be sure if you download one from the internet. You will need this to evict a tenant for breaching their tenancy agreement.
- Carry out regular property inspections – visit the property regularly and be alert for signs of extra occupancy.
- Maintain a good relationship with the neighbours – neighbours are usually the first people to spot when something is amiss. If they tell you extra people appear to be living in the property or it’s suddenly very noisy, investigate.
- Act fast if you discover your tenant has illegally sub-let the property. Pay them a visit and check on things. Talk to them and politely warn them they will be evicted if they don’t remove the sub-tenant. If they are uncooperative or you can’t find them, inform the relevant authorities and start eviction proceedings.
Lastly, don’t be afraid to seek professional help if you have problems with illegal sub-letting. The people from Landlord Action are always happy to help with issues like this.
