Alex Timperley, 01 March 2016
Rents across most of the UK continue to rise at a faster rate than wages. According to the Home Let Rental Index the average rent in the UK (outside of London) in January 2016 was £740 pcm, a rise of 5.5% over the previous year.
This steady rise in rents comes at a time when most people’s spending power is standing stubbornly still. The much celebrated average wage rise of approximately 3.5% in 2015 doesn’t look quite as impressive as it was presented to be when considered against the rise in rents. The recovery from the banking crisis shows no signs of trickling down to the average person on the street and the economic outlook for most is getting bleaker.
Given these circumstances, does it really come as a shock that sub-letting is on the rise?
Sub-Letting is the process whereby an existing tenant lets a part of their home to someone else, known as a sub-tenant, often without the knowledge or permission of the landlord. Recent research by insurance company Direct Line has found that there are up to 3.3 million people across the UK living in rental accommodation who are not listed on the tenancy agreement.
It can be done above board and legally. It is not unknown for a landlord to agree to a sub-let – and why not? If current tenant has proven trustworthy and the prospective sub-tenant has good references and a reliable stream of income, then what does it matter to the overall landlord? The money is still coming in and tenancy agreements can be rewritten to accommodate this change of circumstance.
It is when a sub-let is agreed between the tenants without the knowledge of the landlord that the issue becomes more complicated.
Does it really come as a shock that sub-letting is on the rise?
The most obvious risk is that the landlord loses track of who lives in the property. Without the opportunity to vet the sub-tenant, the door could be open to someone who will not treat your property with the appropriate care. If a sub-tenant is not covered under the original tenancy agreement then who is legally responsible for any damage? And taking this point to its logical conclusion, what if the original tenant leaves and the sub-tenant remains? Suddenly the legal waters are extremely murky.
Sub-letting also throws up a lot of questions when considering insurance. One of the factors taken into account for landlord insurance is the type of tenant. For instance, student tenants will lead to different rates from young professionals. How does a landlord honestly answer the required questions when an illegal sub-tenant is thrown into the mix? Neglecting to mention their existence could invalidate insurance policies in the event of a disaster. Bringing them up could lead the insurance company to charge the highest possible rate on account of the unknown risk.
Another danger of sub-letting is overcrowding. If the landlord does not or cannot keep track of the number of people living in your property then overcrowding becomes a real risk. This is unsafe for the tenant and puts the landlord at risk of large fines imposed by the Local Authority.
What can be done about an illegal sub-tenant?
The best method is to be a good, hands-on landlord. This does not involve harassing tenants with surprise visits every other week. It is more about making sure you have a good relationship with your tenants where possible and fully explaining the potential risks of sub-letting to both of you at the outset. Renting is, after all, a two way process and treating your tenants like functioning human beings will go a long way.
A practical solution might be for the landlord or property manager to carry out pre-agreed quarterly inspections of their properties. From there, it will be easy to note any illegal sub-letting and the degree of wear and tear on the property. If either are becoming an issue it is then a simpler case of dealing with problems as they arise, for instance by getting the sub-tenant on the tenancy agreement, than letting the issue escalate and waiting for the worst to happen.
The second method is for when that worst case scenario arises - a formal warning, followed by the full eviction process. This will be costly, time consuming and stressful. This is a situation best avoided but in some cases the legal process will be the only way.
Alex Timperley, 01 March 2016