Right to Rent: unfair to landlords and tenants?

Should landlords be expected to act as border control officials when renting to a new tenant? This is the question that a Judicial Review of the government’s controversial Right to Rent policy, which obliges landlords to undertake immigration checks on prospective tenants, will be asking as it gets underway today.
The Right to Rent scheme was rolled out nationwide in 2016, meaning that landlords must now check the immigration status of would-be tenants. Understandably, this initiative has proved really unpopular. Landlords are already under pressure from the government (see my blog Landlords under fire, posted on 11 December) and certainly don’t want to take on responsibility for ensuring that tenants have a legitimate right to rent a home.
When the scheme came into effect, the Joint Council for the Welfare of Immigrants (JCWI) thought it was so potentially discriminatory that it put forward – and won – a legal challenge, gaining the right to launch a High Court case against the Home Office. As I write this blog, a full hearing is taking place before the High Court today and tomorrow.
The JCWI’s legal challenge is being supported by the Residential Landlords Association (RLA), which has carried out research to find out how landlords feel about the scheme. The RLA found that, as a result of the Right to Rent policy, 44% of landlords are now less likely to rent to someone without a British passport, mainly because they are scared they may be prosecuted if they get something wrong. Landlords also say that, as a result of Brexit and the continuing uncertainty around the future status of EU nationals in Britain, they are now less likely to rent their property to anyone from the EU or the European Economic Area.
According to Landlord Today, the RLA is calling for Right to Rent to be scrapped, arguing that it discriminates against those unable to easily prove their identity and foreign-born nationals who have documents unfamiliar to landlords. It is also calling for urgent guidance for landlords to be issued by the government, explaining clearly the rights of EU citizens to rent property, especially in the case of a no-deal Brexit.
The whole situation is reminiscent of the Windrush scandal that came to light earlier this year. Landlords are not government officials and shouldn’t be expected to act on behalf of the Home Office or to make a judgment call around who is and isn’t legally entitled to rent a property. Landlords are under enough pressure from excessive taxation and a new raft of regulations without being expected to act as immigration officers too.

To charge or not to charge?

If the Tenants Bill, now going through parliament, becomes law next year letting agents and landlords will only be able to charge for rent and deposits – now to be capped at 5 weeks’ rent; for a change in or early termination of a tenancy; for utility and council tax bills; and for damage or cost caused by a tenant, such as replacing lost keys.

 The government says it doesn’t want tenants to be “stung by unexpected costs” and intends to make renting fairer and more transparent.This is sound thinking. At Ringley we support making renting and moving home cheaper. We also applaud any attempt to outlaw profiteering from tenants who simply need a home – and there are some very high charges levied, often up to£200 per tenant for ‘referencing and tenancy fees’. 

There are a number of genuine costs that are passed on by letting agents. Tenant finders fees are paid by a landlord to their letting agent, and rightly so. Where landlords are complaining about this, they need to understand the work that goes into the actual referencing of the tenants, obtaining proof of salary and past tenancies from previous landlords.

Likewise referencing fees. These are a legitimate expense for which it is only fair to charge tenants. I believe a letting agent would be negligent if they suggested their landlord clients should accept tenants without referencing them and until the government chooses to provide a free referencing service, references are a necessary disbursement incurred with every new letting.  

If the government is determined to abolish referencing disbursements as well as letting fees then it should centralise and open up the records it holds, providing them free of charge to letting agents and landlords.  

Government records that could underpin free referencing include:  

-PAYE tax records (to verify earnings), easy now all employers must file electronically,

– CRB checks (to verify ASBO cases and criminal activity)

– Housing Act court cases (to check previous evictions and breach actions)

– Land Registry data (to verify guarantors)

– Tenancy Deposit Service disputes (to gauge tenant waste/neglect)

Consideration would also have to be given to those cases that don’t get as far as the court process – for example, tenants who wreck a property and leave it to the landlord to foot the bill. Without previous landlord references they could move on and do it again, so maybe some kind of review system for tenants could be developed, with the proviso that if it has been a bad exit from the tenancy, landlords could keep their references anonymous. It would also help if the government could compel the credit agencies to share credit checks

Moving on to tenancy fees, most letting agents adopt the same tenancy for every let and so it is reasonable to assume that this task involves no more costly administration than filling in the direct debit form to pay the rent. That said, at Ringley we pay for and use legal software that automatically updates our agreements when laws change. We do need to input the details of the tenancy and set up the tenancy in the system to ensure that it collects rent on time and recognises when inspections are due. We are also liable to ensure that if things are done via the internet, that the person really is who they say they are on the passport and that we have checked this. Also, non-UK resident tenants need a ‘right to rent’ check. If this is not carried out, the landlord can be fined.

However, given that there are mobile Apps such as PlanetRent that take all the admin out of the deal (offers, referencing, move in monies, e-signing contracts, move in checks and compliance), for just £12 a tenancy an agent can do the whole transaction without a shred of paper.  Admin staff can be redeployed to lettings, management or accounts, saving agents a lot more than £12.  If a landlord wishes to use his/her own agreement then they should pay the costs of any additional administration incurred.  This would make a huge difference, both financially and time-wise to both landlords and agents.

So some payments are legitimate and others are not. As the Tenants Bill continues its passage through Parliament, let’s hope sufficient scrutiny is given to determining which are which.