Uh-oh… is your property being sub-let?

publication date: Feb 25, 2016
 | 
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

 

Uh-oh… is your property being sub-let? 

 

According to the super team we work with at Direct Line, as many as one in six tenants are sub-letting their home to make extra money on the side, many without telling their landlords.

This is alarming news if you are thinking of letting your own home, if you’re an investment landlord or planning to get on the lettings ladder this year.

Some people may, of course, not have an issue with this – but it can be a BIG problem both for the tenant and for landlord.

This is because, as a landlord, if you have someone as a tenant who is not on the lease, then it’s not quite as straightforward to get them out. From a tenant’s perspective, it could well mean you are breaking your tenancy agreement; there have already been a few high profile cases where tenants who have lived in their home for years have then been lawfully kicked out because they didn’t seek any agreement from the landlord.

Read - How to Evict a Tenant Checklist

 

Who are tenants sub-letting to?
It probably comes as no surprise but friends – and friends of friends – are top of the list at 28% while 21% sub-let to family members. That may sound fine but, in my experience, they will then fall out and huge problems can be caused – especially if the tenant left isn’t the one on the lease! Even worse though is that Direct Line’s research shows that 19% sub-let to complete strangers after advertising; this highly risky – for the tenant as well as the landlord.

Read - Buy to Let Insurance Checklist

Your property’s location is key
To me, the most fascinating bit of the research illustrates that tenants in certain parts of the country are more likely to sub-let.

On average, one in six (17%) of tenants are sub-letting. However, that figure rises to 23% in London and even higher at 27% “up North” and in the West Midlands.

Region x % of tenants who have rented out part or
all of their property
North West   27%
West Midlands   27%
London   23%
Yorkshire & Humberside   19%
North East   18%
Scotland    15%
East of England   14%
Wales   13%
South West   12%
East Midlands   10%
South East   9%
Northern Ireland   7%

This is particularly significant information for landlords who have properties which are nowhere near where they live – and another reason why you need someone locally (even if it’s the neighbour) or ideally a NALS/RICs or ARLA/UKARLA agent to let your property for you that carries out physical property checks during the year.

Why does it matter if your tenant sub-lets?
The issue is important mainly because when tenants do sub-let, many haven’t actually told you, the landlord, or letting agent about it. According to Direct Line: “A quarter of sub-letters did not check the terms of their lease before sub-letting, while a third haven’t informed their landlords.” It can put you in breach of your mortgage agreement or insurance and that if there are any problems, it limits what you can do legally.

Read - How to Evict a Tenant Checklist

 

What should you do? (Communication is key)
If you are a tenant, make sure you ask first and get written permission; it’s not fair on the landlord otherwise and 23% per cent of tenants are found out. In 11% of cases the tenants named on the lease were evicted, 6% losing their deposit in the process. In 22% of cases, the landlord decided to increase the rent, while others issued fines or a formal warning.

As a landlord, make sure you carry out property checks to find out if someone else is living there, have a good relationship with neighbours (this is how I found out my tenant was ‘shipping in’ five mates for parties every weekend!) and talk to your tenant to advise them why they can’t just rent it out to someone else and the consequences if they do.

Warn them that AirbnB is for homeowners only, if they have the right insurance and permission to rent out their property. Tenants don’t have this permission, not even for a night.

Read - Buy to Let Insurance Checklist

 

Does sub-letting cost landlords money?
The lovely Paul Shamplina from Landlord Action says, in the last two years, their stats show an 18% increase in the number of instructions from landlords with sub-letting cases. He says: “Sub-letting is fast becoming one of the leading grounds for eviction, alongside rent arrears and Section 21 for possession only.”

If a tenant is not named on the lease, your insurance might not cover you for evicting them. Without insurance, you could end up spending around £5,000 evicting them, and it could take months.

 

Be wary of rent-to-rent scams
Sadly some of the sub-letting problems are arising from organised sub-letting scams where someone offers to take the hassle of letting off a landlord or where the tenant – sometimes even fake tenants – advertise properties and rooms on holiday/accommodation websites in order to cream a profit without the landlord’s consent.

In these cases they should be picking up the tab for all the property costs too, but they often don’t. I know landlords who have been caught up in rent-to-rent scams where they have received no money from tenants, discovered that there are too many people in the property, putting them in breach of the law and ending up with thousands of pounds of bills to pay.

Read - How to Evict a Tenant Checklist

 

 


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