How can landlords protect themselves from subletting scams?
As the impact of the tenant fee ban and increased private rented sector regulation continue to sink in, many commentators predict that rents will carry on rising and choice will steadily continue to fall. The April 2019 RICS UK Residential Survey results projected a rise in rents of around two per cent at the national level over the coming twelve months, with growth accelerating to average three per cent per annum over the next five years.
Tenant demand continues to climb slowly, while landlord instructions continue to dwindle. And comments from contributors to the survey suggest that the tenant fee ban and the proposed abolishment of section 21 could lead to more landlords exiting the market, adding to the impact of tax changes within the sector in recent years.
The impact of rising rents and dwindling supply of rental properties on illegal subletting
If the trend of rising rents and dwindling supply continues as predicted, it is likely that there will also be an increase in the number of sub-letters looking to reduce the cost of their increased rent, whilst also potentially taking advantage of growth in demand for much sought after rental properties.
Even before the tenant fee ban came into force, rising rents and a shortage of affordable housing, combined with the introduction of platforms like Airbnb, had opened the door to a buoyant but illegal subletting market and a dramatic rise in tenants subletting.
There are a variety of circumstances in which illegal subletting can occur, but they generally involve a person taking out a tenancy and then re-letting the property to another subtenant for more money.
The tenant could, for example, be making a bit of extra cash by discreetly subletting to a friend who sleeps on the sofa. While this may not seem like a major big deal if the rent is paid on time and the property is looked after, the tenant is nonetheless in breach of contract if they have not sought your permission or there is a clause prohibiting subletting in their AST agreement. What’s more, the wear and tear on your property will inevitably be increased and you will not have carried out reference checks on that sub-tenant who is effectively now living in your property. Ultimately it is up to you to decide whether it is a problem, but bear in mind that if you knowingly sublet your property you will invalidate your insurance.
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The rise in tenant subletting scams
Unfortunately, there are many unscrupulous people making a living out of unauthorised subletting, carrying out subletting scams that are far more sinister than the case of the sofa sublet.
These scams make victims not only of landlords but of the sub-tenants too, who become the unwitting victims of the tenant.
In the most sophisticated cases, the scamming tenant will draw up tenancy agreements for individual rooms which they will then let out separately, sometimes even going as far as changing the locks and dividing the property into bedsits, subletting them to desperate tenants and pocketing the cash.
In most cases, the subtenants don’t know who the real landlord is, let alone that they are at risk of being evicted.
What can go wrong? A case of an illegal sublet by a professional scam artist
In an episode of Channel 5’s ‘Nightmare Tenants Slum Landlords’, airing on 17 June 2019, Hamilton Fraser company, Landlord Action, tackles an eviction case involving an illegal sublet by a ‘professional’ scam artist.
Young landlord Han Yip discovers his West London flat is being illegally sublet to three unsuspecting students. They have been paying thousands of pounds to live in an exclusive part of London, but their rent is being pocketed by the man who posed as the legitimate tenant. Flaunting his seemingly ‘flashy’ life on Instagram and showing off about his ‘property business empire’, he is in fact a scam artist, who has spent time in a US prison on fraud charges.
Calling on the help of Paul Shamplina, founder of Landlord Action, Han Yip is determined to expose the rogue tenant and reclaim his debts.
“Han Yip was very unlucky. He had done everything correctly, from using a professional letting agent to carrying out thorough referencing. Unfortunately, this particular fraudster had changed the spelling of his name among other tricks to slip through referencing. Illegal sub-letting is becoming something of an epidemic in London and more needs to be done to prevent cases like these.”
– Paul Shamplina, Landlord Action