Home » The Market » Sub-letting scams and their negative impact on prime residential in London

Sub-letting scams and their negative impact on prime residential in London

According to the National Land Association 11% of all tenants in the UK sublet. Only 5% say they have permission from their landlord to do so. With short let platforms like Airbnb, that percentage is set to rise.

Most private tenancy agreements will have a standard clause which prohibits sub-letting and not to use the property for trade or business purposes or any purpose other than as a private residence but the tenant does so anyway. 

Some landlords may turn a blind eye, but the danger is the landlord has no legal relationship with the subtenant which is crucial when it comes to collecting rent or ending a tenancy. Furthermore, if the tenant is subletting to numerous individuals this could result in it becoming a House of Multiple Occupancy for which you need a licence from the Council. 

Landlords who do not have a licence for an H.M.O. can be fined. If the subletting amounts to a change of use of the property, planning permission from the Council may be required. More importantly, subletting can place a landlord in breach of the terms of their mortgage and/or insurance policy, rendering their insurance policy invalid, and even bring them into conflict with their freeholder as they could be in breach of their lease covenant. 

We are not talking about the student trying to cover their rent while they are or subletting – done temporarily and often in ignorance. We are talking about professional scammers; ‘Rogue’ lessees who intentionally target prime rental properties, pretending to take on leases as genuine tenants with the deliberate intention of sub-letting the accommodation for personal profit – unlawful profit made at someone else’s expense.

You can almost time it now, as soon as you go live with a new rental property in a large purpose-built block with no porter located in Knightsbridge, the phone rings, it’s a short-let scammer.

Other signs to watch out for are being in a hurry to close a deal and offering to pay the rent a year upfront. It is worth regularly checking the various short let websites to check a property is not being marketed for the short term. 

They have also started using mules who will not show up on industry forums to alert agents. 

Everything about these operators is wrong, from using other people’s properties to make illegitimate money, paying no tax, putting the actual owners in breach of their leases and planning laws to the vast expense and stress involved in getting them out. 

One block in SW3 with over 100 units and 24-hour security has been targeted also. In this block there is a zero-tolerance policy. A leaseholder is immediately put on notice that their lease can be forfeited, and the porters are on red alert. One operator went as far as installing a key box in the bushes across the street and their excuse to the short-let guests was that they don’t trust the porters so that is why the keys are hidden in the bushes!

For a managing agent to get rid of these sub-letters whilst minimising the cost to the ultimate owners they need to have a deep understanding of the landlord and tenant act, keep the pressure on and ideally, we need more help from legislation.

A sub-letter should be legally responsible for the “right to rent” obligation. They too should also be fined £3,000 if they sub-let to a person not authorised to rent by law. Local authorities should also have the power to shut down the operation as they are also breaching planning law, the action is currently against the title which is not fair as the title holder is not the one who is committing the breach.

We have never exposed a client to financial loss, our first encounter with the scam was in 2015 (our own flat), following two management visits we became suspicious that we never found any clothes in the cupboards. As we started to ask questions the tenant started to be difficult, once he knew that we knew, he stopped paying rent (this is a common step). He thought he got himself a rent-free period whilst we went through the eviction process, wrong. On the tenancy expiration date (a month later) we changed the lock. 

He called, furious, “this is criminal give me the keys right now” to which we replied “sure will be there at 4pm with the Police” he paused and answered in a lower tone “Why the police?” he said “because I am frightened” was the response. He put the phone down and disappeared.

Changing the lock for clients is a whole different game, if you do and it backfires then the negligence claim is on the agent. However, some litigation lawyers question if it is a criminal offence. The property is not the short-let scammers primary residence, it’s a business. 

Some leaseholders also breach the laws themselves and this then becomes an issue for their freeholder to address. A good method in controlling this is the fob system, these can be programmed for legitimate residents and deactivated for abusers. 

Sharing names of these scammers amongst agents is an effective way of self-policing. We published a name on an industry forum and within a few hours the man stormed into our office, “Get my company name off that forum”. We maintained that simply asking if anyone knows the company is not defamation and we didn’t take it off. The next day we received a 4 page, badly written defamation warning letter. We maintained that we haven’t done anything wrong, a man stormed into our offices shouting and we are entitled to know more about him.  

We go out of our way to fight this, the reputational damage for agents is the worst part. 

Once a tenant has been taken on the only way you would find out they are subletting would be with routine property inspections carried out by you or your letting agents. Further signs would be complaints from neighbours. Usually regarding noise, the number of people coming in and out, and rubbish being put out on the wrong days. It is important to log all these details and get statements from neighbours all of which can be used should you have to go to court.

This is usually a written Section 8 notice which is used when a tenant has breached their Tenancy Agreement. The landlord must have legitimate grounds for seeking possession and must state them and the notice period. It is always best to seek legal advice on correct procedure and time-frames for issuing legal notices. When this notice expires the landlord has to apply to the County Court for a possession order which gives them the right to evict them and take possession. The landlord or letting agents must supply evidence of the sub-letting and any grounds given can be contested by the tenant in court. Serving a Section 8 notice can end up being both costly and time-consuming.

It is both the landlord and the sub-tenant who are the victims in these scams. The subletting scammers know how to work the system. 

In 2013 the government passed the Prevention of Social Housing Fraud Act making it a criminal offence to unlawfully sublet social housing properties. Those found guilty face up to two years in jail and huge fines. With unlawful subletting becoming an ever-increasing problem in the private sector and undeserving tenants holding tenancies that could be used for those that are deserving should there now be a call for legislation in the Private Rental Sector?

If you need any help with this issue please do not hesitate to contact Farnaz Fazaipour of Palace Gate at farnaz@palacegate.com. 

Further details about Farnaz and her agency can be found in our directory (members-only).

If you are not yet a member please visit this page to find out more.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

Loading...