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How should landlords deal with illegal subletting?

As a landlord, you can spend as much time as you see fit on vetting potential tenants to live in your property. You can interview them, conduct background checks, get references from their former landlords and employers – or you can get a letting agent to do all these things for you – but there comes a point when sheer trust has to come into the equation. You can’t know everything about your tenant, so you must assume based on what you do know that they will be honest and reliable occupants. Time will tell whether or not you’re right.

So it’s inevitably frustrating when you’re perfectly happy with a tenant, only to discover that they’ve been acting as a landlord themselves under your nose, subletting the property and making a tidy profit in the process. It’s an all-too-common problem for landlords up and down the country, so here is everything you need to know and exactly how you can deal with the problem…

What is subletting?

Subletting refers to a number of different scenarios where a ‘chain’ of letting is created as a tenant lets their property to another sub-tenant. It is not illegal per se, but where subletting is undertaken without the knowledge and express permission of the landlord then it does break the law. Whether you are the type of landlord who regularly visits your property in person (or properties) or you live on the other side of the world, you can be affected by subletting scams.

How does illegal subletting happen?

Subletting scams take several different forms. In some cases a trusted tenant simply shares their room or the property with someone else – splitting the cost of rent and bills – and never informs you, breaking the tenancy agreement in the process. In other, more serious cases, a tenant never actually moves in – they simply sign with you under the pretence of being a tenant, pay their rent and bills on time and make financial gains by renting the property to another tenant (who actually lives in the property) at an inflated rate. 

The problem of subletting has existed for a long time, but has grown exponentially with the rise of online short-term letting platforms such as Airbnb, on which many tenants sublet their properties as holiday accommodation with no knowledge on the part of the landlord. In extreme cases listing a rented property on one of these sites can lead to fines in the hundreds of thousands of pounds.

Why is subletting illegal in many cases?

Subletting does not only breach the terms outlined in the standard wording of most fixed-term tenancy agreements. It can also mean that as a landlord, the terms and conditions of your mortgage agreement or insurance policy are being broken. 

Where subletting divides a property into a number of separately let rooms it can turn it into an HMO (house of multiple occupancy), which requires you to hold a separate landlord’s HMO licence, and carries additional fire regulations. The penalty for letting out an unlicensed HMO can be as high as £20,000. 

What are the signs that a tenant is illegally subletting?

There are a number of signs that you should keep an eye out for in order to identify subletting scams early, or before they are set in motion. These include:

  • A single person looking to rent a property much bigger than they would need themselves
  • A tenant insisting on offering several months’ rent upfront
  • Complaints from neighbours about excessive noise from a property, or about large numbers of people coming and going
  • A tenant who tries to avoid routine landlord visits from you, makes excuses or makes it difficult for you to visit the property
  • Giveaway signs within the property such as excessive clothing and shoes, extra toothbrushes, excessive rubbish, extra bedding or sleeping bags

How should I deal with illegal subletting?

Minor cases of subletting should be dealt with by confronting the tenant or subtenant directly, these constitute a breach of the tenancy agreement. It is up to you whether you wish to pursue eviction proceedings, but if not then you should give them a specific period of up to 30 days to rectify the problem. Tenancy agreements should be ended properly and legally in all circumstances.

More serious cases of illegal subletting, however, such as a property being turned into an HMO without your knowledge, should be reported to the council. If they are made aware of it as soon as it is uncovered, then this will protect you against any fines which could be incurred. Additionally, criminal activity should be reported to the police and any breaches of the right to rent regulations should be reported to the Home Office.

How can I protect myself from illegal subletting?

Illegal subletting provides as good a reason as any to ensure that proper tenant referencing is carried out. This should include checks such as:

  • A credit check
  • Whether they have sufficient income to afford the rent
  • Whether they live where they say they do at the time of applying
  • Public information such as bankruptcy 
  • An employer reference
  • A reference from the previous landlord
  • Carrying out regular inspections of the property.
  • Speaking to your neighbouring properties about any concerns.

Contact information collected during the tenancy application process should make it easier to contact the tenant in the event that they disappear or owe you money, so ensure that this is comprehensive. You should also ask for previous utility bills and three months’ worth of bank statements in order to cross-reference addresses. 

You are within your rights as a landlord to carry out regular inspections of the property as long as you provide sufficient notice to the tenant. Ensuring that you do so will help you to spot the signs of illegal subletting and minimise the damage caused.

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