The core risks of unauthorised subletting remain, but most private residential tenancies in England are now assured periodic tenancies rather than ASTs. Section 21 has been abolished, so a head landlord seeking possession must rely on an applicable Section 8 ground and follow the current statutory procedure. Unauthorised room-by-room letting can also create an HMO. In England, an HMO occupied by five or more people forming more than one household generally requires mandatory licensing, and smaller HMOs may require a licence under a local additional licensing scheme.
The issue of subletting, if not done properly, can be a source of great risk to landlords and sub-tenants alike. This post looks at those risks and the issues landlords and agents should be aware of.
Subletting is where a tenant rents a property from a landlord and, in turn, rents out whole or part of it to another person – a subtenant. Many residential tenancy agreements prohibit subletting, parting with or sharing possession of the property without the consent of the landlord. But as demand for rental property outstrips supply in some areas there is an increasing temptation on tenants to profit by sub-let without the landlord’s agreement. , often granting separate tenancies for each room.
Many subtenants are not aware that the tenant does not have permission to rent the property and will hand over deposit monies which are not protected in one of the government approved schemes and are never returned. The tenant will then collect the rent from the subtenants and may not pass this money onto the landlord causing rent arrears that result in the landlord taking possession action.
If the tenant’s intention is to make as much money as possible, they may make internal changes to the property to fit in as many people as possible, creating separate tenancies for each room. This can lead to overcrowding and damage to the property.
The landlord may discover that 10 people are living in the property, not the family of four that signed up to the original tenancy agreement. Not only can the condition of the property deteriorate but, even more concerning, the property may well become a House in Multiple Occupation (HMO). The landlord will not have applied for the necessary licence which leaves the tenants without the protection of the licensing process and enforcement action may be taken by the Local Authority.
If a subtenancy is created in breach of the tenancy agreement, the head landlord may have grounds to seek possession or other remedies, but must use the correct legal procedure and establish an applicable statutory ground where the occupier has an assured tenancy. By obtaining a possession order against the tenant this will wipe out any sub tenancy that has been created. To put it illustratively the branch falls with the tree. Therefore, the unauthorised subtenant has no protection and are just left with a breach of contract claim against the tenant who is their landlord. Such a claim is likely to have little or no value in reality.
A point to note is that if the tenant surrenders their tenancy then this will not terminate the sub tenancy that has been created. A landlord would become bound by the sub tenancy. If the landlord does not want to forfeit the agreement then an injunction can also be sought for the subtenant to surrender the tenancy, although in practice most landlords would want rid of both the tenant and subtenants.
Although these situations can never be totally avoided there are preventative measures that can be taken. Proper referencing and periodic inspections of the property will minimise the risk. From the sub-tenant’s point of view, if there is any doubt who owns the property, a land registry search will reveal the ownership for a small fee.
Useful UK legal and solicitor links
- GOV.UK: Houses in multiple occupation
- GOV.UK: Tenancy deposit protection
- Osbornes Law: Rent-to-rent agreements
This article provides general information only and is not a substitute for legal or tax advice on a specific case.
