HMO Landlords: Guilty Until Proven Innocent

01 Apr 2020

Over the past year we have seen Mandatory HMO licensing increased in scope to include all properties with 5 or more occupants, where they belong to two or more households.

Since this we have seen a dramatic increase in the use of prosecutions, civil penalty fines and Rent Repayment Orders against Landlords.

Many landlords, doing their best and running what they believe to be good HMO operations,  are oblivious to the fact that a licence is even required. As we all know, ‘ignorance is no defence in the eyes of the law’.

We have a growing number of people being influenced by YouTube and property promotional events to rent properties and then re-rent them as serviced accommodation (hotel) rooms or HMOs having  little or no regard to the requirements for housing act compliance, planning permission or licensing. Ignorance of the law, again.

Most landlords do not realise that local authorities have become extremely powerful. We now find case after case where Councils are using nigh-on military and espionage type tactics in order to secure prosecutions or, increasingly, apply civil penalty fines (which the council gets to keep).

The most terrifying thing for people like myself – working in compliance and defending portfolio and small landlords against the authorities – is the startling number of cases where the severity of the situation has not sunk in. Each of these Landlords is the alleged perpetrators of one or more crimes committed by breaching HMO licensing and/or HMO management regulations.

They need to wake up! These are severe criminal matters and the fines are enormous.

An increasing number of Councils are also enacting Additional HMO Licensing schemes that mean all ‘sharer’ houses in an area need to be licensed as HMOs or the landlord will face a criminal charge.

Many council planning departments are also enacting HMO Article 4 Directions – which mean that any and every newly formed HMO (think 3+ people, not all one family, sharing) requires formal planning permission. So many rent-to-rent and rent-to-SA people are falling foul of this.

The regulations are about to get tougher too. The forthcoming new (post-Grenfell and post Bolton Cube) ‘Fire Safety Order’ is going to seriously upscale the requirements on fire doors and fire alarm systems in ALL rental properties – whether single let, HMO or serviced accommodation. And whether they need licensing or not.

We expect the existing systems HHSRS and LACORS both to be rewritten and republished in the next couple of years too. (If you don’t know what these are, you need to find out.)  

Since those requirements were written in the mid-noughties, and the advancement of the HMO industry, it is clear that we are seeing more and more demand for high-end HMO rooms – on a comfortable, more safe and more luxurious level.

These are becoming the first-time home for many starting work or graduating from University rather than a stop gap as they were in the past. They’re also popular with older ‘silver-singles’.

We find that most councils don’t understand this market at all (or choose not to).  They still view HMOs as the bottom of the housing food chain with occupants as described by the Judge in the case of Nottingham vs Parr as likely to be ‘immigrant, low income and vulnerable.”

This could not be further from the growing reality of the type of occupants that many readers of this magazine provide high quality HMO accommodation for.

These are more likely to be persons of high intelligence, multinational education, educated to degree or even master’s level. Often working in managerial and even C level positions, and on very respectable incomes.

Yet we see frequent, wilful, enforcement from local authority housing officers based on all HMOs being as per Nottingham vs Parr ‘housing for the most vulnerable in society who have no choice where to live and who need protecting from evil landlords.’

The result is that we see often overzealous, and probably promotion hungry, enforcement officers leaving common sense in the bathroom when they go out to work in the morning in order to aggravate, chastise and prosecute generally good landlords who are following clearly safe guidelines.  

They aim to penalise decent landlords over miniscule things or findings; because they now have the POWER to fine landlords under the civil penalty legislation. They send these out like parking tickets (except these are for up to £30,000) even though frequently  the council itself has not followed due process and procedure on its part.

Have no doubt: You the landlord are guilty until proven innocent under this regime.

I found it quite astounding but in the last year, I’ve worked on many cases where legal sub-landlords had been presented with £25,000 civil penalties where the council has entered premises and has not followed its legal duty nor done the required complete assessment of the property to establish the grounds for its intended prosecution, let alone the issuance of the civil penalty!  

There are many cases that come across my desk and one as recently as last week was a landlord who had being taken to court by the local authority for licensing and management offences relating to operating an unlicensed HMO. Despite the fact it was declared by the landlord that he had rented the property to two sisters and their husbands (Two sisters and two brothers-in-law, that sounds like one family to me).

Yet the over-zealous council decided that these were four persons forming two households and issued a declaration that the house is an HMO and then proceeded to prosecute them under their Additional HMO licensing scheme.

If that nonsense (and I use that legal term advisedly) was to hold water then there are thousands of properties being rented by large families that this council would claim are illegal HMOs.

We are up against Council Nonsense every day!

Another very interesting recent case was where a wealthy landlord had let a property to a company; for them to sublet by the room (rent-to-rent).  In that local Borough, the property would require an Additional HMO licence. The agreement was that the superior landlord would apply for the required licence. He did not even after significant pressure from the sub-landlord.

The sub-landlord company then received a massive Rent Repayment Order from one of the occupants. We expect all the occupants to do likewise, which will end up in a cost of more than £50,000 to the sub-landlord who will then have to litigate against the superior landlord for breach of contract.

The superior landlord and the sub-landlord can both expect to be prosecuted for the Section 72 offence of operating without an HMO licence plus a Section 234 offence for breach of management regulations. These are very serious criminal charges.

This once again illustrated to me just how many landlords are blatantly and wilfully ignoring their legal duty to operate Housing Act compliant licensed properties and to comply with planning legislation.

Landlords and rent-to-rent operators all too often have their heads in the sand. They believe they are innocent; or being unfairly or harshly treated. Despite all logic and reason, they do not accept nor believe that they (or the property company they are running) have committed a criminal offence for which there are expensive and criminal consequences and redress by the local authority and the tenants.

Let me be very clear; when the Housing and Planning Act 2016 came into force it gave councils the power to prosecute you without any reference to the courts, judges nor the Crown Prosecution Service. In effect it gave them the power to be police, judge and jury. That is a frightening amount of power.

The Council is not your friend.

Stop talking to them!

Let me explain: Most days in our office the number of calls coming in that are in response to problems the landlords have with licensing or planning enforcement . It makes us think we’ve put out an advert offering free gold bars!

The stark reality is that they are landlords and agents calling in desperation as they begin to find out that they are in breach of legislation and slowly realise they are guilty. 

What makes it all the more difficult is that it is their decision making thus far that has got them into this trouble. Yet they continue to make decisions which get them into deeper and deeper trouble. 

The common response when we explained to them that they are guilty, is they believe they can just call the local council and negotiate their way out.

They fail to understand that the council is their prosecutor.

If the police accused you of a serious crime, you wouldn’t pop in to tell them everything you know in the hope of negotiating your way out.  You would get expert representation.  Yet this is exactly what landlords do when the council invites them to ‘pop in for a chat’.

What the council has actually invited them to is a PACE (police and criminal evidence) interview which is conducted under caution.  Landlords attend these interviews and spill their hearts out to expertly trained interviewers. Convicting themselves.

Please don’t get me wrong we at Landlord Licensing  & Defence are very much in favour of rogue landlords, bad landlords and illegal landlords being removed or rehabilitated through enforcement of legislation.

But not the increasing onslaught of councils against decent landlords.

We are seeing eye-watering amounts in civil penalty fines being issued by councils. It reminds me very much of American lawsuits where they’ll go for as high a figure as they dare; with the aim of negotiating a settlement through plea bargaining. 

Unfortunately, time after time we see unrepresented landlords (with minimal knowledge of housing law) then attempt to plea bargain against skilled inquisitors. Inevitably it makes their situation worse rather than better.

Last word

If you find you are in trouble with a council remember they are prosecuting you on criminal matters.

Stop talking to them immediately and get professional representation from an expert in Housing Act law and regulations.

Stop talking to them immediately and get professional representation from an expert in Housing Act law and regulations.

If you need help with anything relating to what you’ve just read – or any other problem with councils, licensing, housing law and regulations etc., etc. Contact Us Here   

Des Taylor biography

Des Taylor is HMO Licensing and Compliance Specialist and HMO Landlord who assists Landlords to be compliant through HHSRS, LACORS  and the Housing Regulations and his firm Landlord Licensing and Defence defends Landlords and Letting agents against Civil penalties, Rent Repayment Orders and Court Prosecutions.

Shock as 500,000 rental homes lost to Airbnb and others

31 Jan 2020

Nearly half a million properties could be removed from the long-term lettings market as disenchanted landlords move to short-lets.

A survey by the Association of Residential Letting Agents, in partnership with research consultancy Capital Economics, has been published to take the lid off the UK’s short-term lets sector and its implications for the private rented sector.

Highlighting the huge growth in the short-term lets sector, the number of active listings on Airbnb in the UK rose by a third (33 per cent) to 223,000 in 2018 from 168,000 in 2017. 

As to be expected, London has the largest market in the UK, with the number of active listings rising four-fold from 18,000 in 2015 to 77,000 in 2019. 

Edinburgh has seen growth in short-term lets triple, with 32,000 active listings in the Scottish capital in 2019, up from 11,000 in 2016.

The report reveals 16 per cent of adults have let out all, or part, of their property at least once in the last two years – equating to 8.2 million people. 

This suggests 4.5 million properties, the equivalent of 19 per cent of the UK’s housing stock, have been used for short-term lets.

ARLA says a key concern with the increase in short-term lets is the impact it’s having on the private rented sector and the tenants who will suffer due to a fall in the number of properties available for long-term rent. 

Ultimately, if supply in the private rented sector continues to fall, a rise in rent costs will be inevitable warns the association.

The findings show 16 per cent of landlords said they only offer short-term tenancies and a further seven per cent offer both short and long term lets. 

Of the overall landlord population, 2.7 per cent have changed from long-term tenants to short-term lets. This equates to 46,000 properties that have already been made unavailable for local people looking for a home. 

London saw a larger share of people (four per cent) who stated they had offered short-term lets on properties they previously used for longer term rentals. 

Nearly half (46 per cent) of landlords that offer short-term lets do so to enjoy more flexibility in how they use their property. 

What ARLA describes as the assault on the private rented sector over recent years and the burdensome regulations in the long-term letting market was cited by two-fifths (38 per cent). 

Over a quarter (27 per cent) were encouraged to move to short-term lets because they thought they could achieve higher rents.

One in 10 landlords is likely to consider a switch to short-term lets, which will have a significant impact on the country’s already stretched housing supply. 

Landlords with more than five properties in their portfolio are considerably more likely to reduce their offering of long-term lets and replace with the short-term letting model.

Based on the number of landlords considering a move to short-term lets, up to 230,000 properties could be left unavailable for tenants if landlords who said they were ‘very likely’ to move to offering short-term lets were to do so. 

If this included landlords who stated they were ‘fairly likely’ to make the move, the number of properties rises to 470,000, which is a huge concern, particularly for vulnerable or low-income tenants, who are reliant on the private rented sector.

“The growth in short-term lets is particularly concerning for the traditional private rented sector. As landlords are continuously faced with increased levels of legislation, it’s no surprise they are considering short-term lets as a chance to escape this. Unless the sector is made more attractive, landlords will continue to exit the market resulting in less available properties and increased rent costs” explains David Cox, the chief executive of ARLA.

ARLA has issued a series of recommendations to limit the impact of short-term lets:

  • Carefully consider the impact of any future regulation that may incentivise landlords to start using their properties for short-term lets and thereby reduce housing supply for local people trying to find a home;
  • Ensure a level regulatory playing field between short-term and long-term lets including protections for tenants and health and safety requirements;
  • Ensure a level taxation playing field between short-term and long-term lets so there are no advantages for commercial landlords using their properties for short-term lets;
  • Identify ways to improve enforcement of cases in which commercial landlords are not complying with local planning laws or the 90-day limit for short-term lets in London;
  • Recognise that the impact of short-term lets on housing supply is not uniform across the country and ‘one size fits all’ regulations are unlikely to be optimal;
  • Distinguish between using one’s primary residence for short term lets when the property is being under-utilised and commercial landlords renting out entire properties on a full-time basis;
  • Monitor and track the number of entire properties on sharing platforms by hosts with multiple listings in different areas to inform future policy;
  • Consider introducing limits on short term letting activities in areas in which there is a demonstrable impact on private rented housing supply.

Link to original article

Airbnb host fined £100,000 for letting council flat

30 Jul 2019

An Airbnb host who rented out his central London council flat to tourists has been fined £100,000 and evicted.

Council tenant Toby Harman, 37, created the fake identity “Lara” on Airbnb to rent out his studio apartment.

The flat, in Victoria, had been advertised since 2013 and received more than 300 reviews, Westminster City Council said.

Anti-fraud software had found Harman’s first name in reviews and connected the listing to him.

Harman’s bank statements showed he had been receiving payments from Airbnb for a number of years.

He had been taken to court and, after a failed appeal, evicted and ordered to pay £100,974 in unlawful profits, the Times reported.

Airbnb told BBC News the council property listing had been removed from its website earlier this year.

“We regularly remind hosts to check and follow local rules – including on subsidised housing – and we take action on issues brought to our attention,” said a spokeswoman.

“Airbnb is the only platform that works with London to limit how often hosts can share their space and we support proposals from the mayor of London for a registration system to help local authorities regulate short-term lets and ensure rules are applied equally to hosts on all platforms in the capital.”

Westminster Council said it was currently investigating at least 1,500 properties in the borough for short-term letting.

“Social housing is there to provide much-needed homes for our residents, not to generate illicit profits for dishonest tenants,” the council’s Andrew Smith said.

“It’s illegal for council tenants to sublet their homes and we carry out tenancy checks, as well as monitoring short-term letting websites for any potential illegal sublets.”

It said it would now be able to allocate the property to someone else.

“We’re also pressing government to introduce a national registration scheme to make it far easier for us to take action against anyone who breaks the rules on short-term letting,” he added.

London’s Airbnb market has quadrupled since 2015, from 20,000 to 80,000 listings.

One of the most popular areas for Airbnb listings in the country is Shoreditch, particularly the area around Brick Lane.

What about residential lets?

Arla Propertymark, the professional body representing UK lettings agents, told the BBC that people renting out their homes for days or weeks at a time is on the rise.

“We increasingly hear anecdotal evidence from our members in the big cities London, Birmingham and Manchester) about properties that have been let on tenancy agreements appearing on short-term letting sites…which is reducing the number of properties within the traditional rental market,” said Arla Propertymark’s chief executive David Cox.

One legal expert said that most private residential landlords would not allow their properties to be sub-let, almost all “well-drafted” Assured Shorthold Tenancy agreements include a provision that bans the act, which would cover listing rooms on Airbnb.

“Landlords in general are very cautious of having multiple people in properties because the implication of that is that the landlord has to have a Houses in Multiple Occupation (HMO) licence,” she said.

There would also be concerns about whether the property was adequately insured, she added.

She said that her law firm had been involved in cases where tenants had been taken to court for breaking the rules.

Link to original article

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