One of the surprises of the budget was a small paragraph about subletting.
It was in a section called ‘Support for the sharing economy’
It may be worth quoting the whole section so you can see it in context:
Support for the sharing economy
1.193 The government wants to ensure that Britain is the global centre for the sharing economy, enabling individuals and businesses to make the most of their assets, resources, time and skills through a range of online platforms.This Budget therefore announces a comprehensive package of measures that will break down barriers, create opportunities for sharing, and unlock the potential of this dynamic and growing area. Building on the recommendations of the independent review of the sharing economy, the government will:
- make it easier for individuals to sub-let a room through its intention to legislate to prevent the use of clauses in private fixed-term residential tenancy agreements that expressly rule out sub-letting or otherwise sharing space on a short-term basis, and consider extending this prohibition to statutory periodic tenancies
- enable government employees to use sharing economy solutions to book accommodation and transport when travelling on official business, where this represents value for money
- encourage Local Authorities to use their business rates discretionary relief powers to support the sharing economy, including shared workspaces and makerspaces
1.194 The sharing economy also presents an opportunity to drive local growth and deliver local public services more innovatively and efficiently.
To demonstrate the benefits of the sharing economy the government will launch two pilots in Leeds City Region and Greater Manchester in 2015-16, to trial local sharing initiatives in the areas of shared transport, shared public space, and health and social care.
1.195 These and other initiatives are set out in the government’s response to the independent review of the sharing economy.
There has been a lot of criticism of this proposal for example this post in Property Industry Eye which raises issues relating to rent to rent and HMOs.
However budget paragraph reads to me more like a desire to allow tenants to take in lodgers (as is often permitted in social tenancies) or run a modest B&B business.
Allowing lodgers and paying guests
I can see advantages in this.
- Many tenants are finding it hard to make ends meet, and being able to take in a lodger or paying guest (which most landlords forbid out of hand) would help them greatly financially.
- It would be particularly helpful in situations where one or more tenants have lost their job or where one of joint tenants wants to move out.
Then there is the overall housing crisis. As has been pointed out by Oxford Professor Danny Dorling, we do actually have sufficient capacity to house our population – it is just not being used efficiently.
Giving tenants the right to rent out their spare room to make a bit of cash, would help ease the housing crisis, certainly so far as single people are concerned, by giving them a wider pool of places they could go.
Which would be a good thing.
Drafting legislation for lodgers
The legislation permitting this would have to be very carefully drafted.
It would need to make it clear that subletting can only take place while the tenant remains in occupation, and that landlords be entitled to introduce clauses to protect their position. For example
- The number of lodgers be limited (at present you can take in two lodgers without creating an HMO)
- That any existing HMO license conditions for the property be respected (indeed landlords could be permitted to prohibit lodgers in HMO properties)
- The ‘right to rent’ checks be carried out where appropriate
- That the tenant should carefully reference any lodgers and give them a lodger agreement and
- That the tenants would be responsible to the landlord for any damage done by their lodgers to the property
It may be possible to define a special type of subletting and limit the tenants rights to sublet to this specific type – which would be effectively lodgers and paying guests.
If this legislation is introduced, I would also suggest that at the same time the ‘rent a room’ allowance be increased, which is something people (for example the online service Spare Room) have been calling for, for years.
And finally
No doubt this proposal is also driven by the Treasury’s apparent desire to save money on hotel bills by requiring their officials to stay in small B&Bs rather than fancy hotels when travelling on official business.
Or thats how the paragraph reads to me.
What do you think about it all?
Ben Reeve Lewis says
I have to say I lean towards the Property Industry Eye view on all this.
I have been involved on sooooo many disputes about ‘House guests’ shall we call them, and the whole ‘rent to rent’ phenomenon is bringing too many crooks and opportunists into the game, although I admit that this takes place more when the tenant doesnt move in.
I dont think its a good idea and it will likely lead to more disputes and harassment allegations
Tessa Shepperson says
Crooks and opportunists will do what they do regardless of the legislation.
I quite like the idea that having a right to take in lodgers will help cash strapped tenants pay their rent and hang on to their homes. While giving someone a home.
It will also help the treasury as it will probably reduce the benefit bill.
ML says
I am really shocked by your naivete, Tessa.
What a totally reckless piece of legislation this would be!
I carefully vet my tenants but this legislation would allow people unvetted by me to use my property.
It would also cause a lot of extra wear and tear.
Additionally, I don’t want any of my houses to be turned into an HMO!!!
Also, this mnean that anyone living next door to a rented house may suffer the consequences of living next to an HMO, regardless of whether the landlord ever let it as such.
Sharing economy my foot. Why doesn’t Osborne share HIS house with druggies and benefit claimants instead of condemning decent landlords’ properties to a fate like this?
Tessa Shepperson says
@ML I appreciate your concerns. However most tenants will not want to share their home with ‘druggies’or impecunious people unable to pay their rent, either.
If you read the post you will see that I suggest that the legislation be drafted so as to prohibit lodgers in situations where this would create an HMO situation, or if the property is already an HMO, where this would breach the occupation limit.
My point is that the horror stories we all hear about, happen anyway. Crooks don’t take much notice of legislation.
We don’t have any figures because there are no proper records kept, but I suspect that the vast majority of tenants are law abiding, and this measure (provided it is properly drafted) would help them.
Bear in mind by the way, that in a sense, once you have let ‘your’ property to a tenant it ceases to be ‘yours’ for the duration of the tenancy http://www.landlordlawblog.co.uk/2015/01/13/do-tenants-own-the-property-they-rent/
ML says
Tessa
I happily forego the extra profits that letting my houses on a room-by-room basis would bring, and this is for a number of very good reasons which you naively seem to ignore.
If this moronic law is passed, however, I will serve notice on all my tenants and then let all my properties on a room-by-room basis.
After all, why should I get all the extra wear and tear but none of the extra profits?
Once all houses are let as HMO’s the consequences of Osborne’s moronic law will be clear.
When will clueless politicians stop meddling with thisngs they know nothing about?
HB Welcome says
“I will serve notice on all my tenants and then let all my properties on a room-by-room basis.”
The trouble with that ML, is that unless you rent and live at the property, you miss out on the big profits with this.
If you live there, you can turn the property into a down market Travel Lodge by advertising on the websites in the linked article. 150% of the monthly rent is easily achievable, especially if you aren’t paying for the extra fair wear and tear.
Or for the brave, naive and/or reckless, target the ‘druggies’ and the impecunious. Double or treble the market rent, paid cash well in advance. Big deposit- no pesky deposit legislation for lodgers. Any sign of trouble, boot ’em out on the street and change the locks- no section 21, no section 8, no retaliatory eviction, no court, no lawyers nor bailiffs required.
If the neighbours/landlord complain about you running a doss house, just tell ’em they all are contributing to the sharing economy.
Margaret Goslett says
The Treasury (George Osborne) has not thought through this suggestion:
a) most mortgage companies are quite particular about knowing who is living in a property
b) HMO rules prevent more than three unrelated people from living in a property of more than three storeys and this might be disregarded by Tenants wishing to make money
c) certain insurance companies stipulate that certain categories cannot live in a property or it will compromise the insurance (e.g. students) – could be disregarded as in b)
d) landlords are charged with carrying out due diligence on tenants to make sure they are legally in the UK – could be disregarded as in b)
e) quite a number of blocks of flats have their own regulations about sub-letting and short-term letting
Rent Rebel says
Funny to see so many landlords spitting chips at this. Whatever next?! Real security of tenure?
Paul Shamplina, founder of eviction firm Landlord Action said: “We have never seen so many sub-letting cases going to court because of unscrupulous tenants trying to cream a profit from a property they have rented”
Oh the irony; like the butter wouldn’t melt. We might be able to ‘cream that profit’ legally soon. For advice on that, just ask your average landlord. Don’t worry tho, with the “no fault” grounds for eviction still permissible, all the power still lies with them.
Reality is that many tenants will sublet a room to cover ever increasing rents, and prevent the bailiffs at the door – not provoke them. If some of them get a little greedy, I don’t advocate it, but just look around at the precedent.
Trainee Landlord says
Tessa said: “I quite like the idea that having a right to take in lodgers will help cash strapped tenants pay their rent and hang on to their homes. While giving someone a home.”
If you read the independent review that’s referenced in the budget red book it talks exclusively about subletting on a “short-term” basis (which isn’t defined, but Airbnb.com is mentioned as an example several times). Giving tenants the automatic right to take in a lodger might go some way towards easing the housing crisis using sites like SpareRoom.co.uk or RoomBuddies.co.uk, but it really depends how that “short term” aspect (mentioned in 1.193 in the budget) gets defined because the Airbnb.com model isn’t going to do anything to address the problem.
Also, if my tenants were subletting a room via Airbnb.com, sharing parking space through JustPark.com and possibly selling attic space through ShareMyStorage.com (all examples explicitly mentioned in the independent review), I’d be seriously concerned that this would risk changing their residential tenancy in to a commercial tenancy agreement, at least under current legislation. Where will the line be drawn under any new legislation? (And let’s not even get in to a discussion on the government’s recent track record on poorly drafted housing legislation. How many times have the tenancy deposit regulations been amended now?)
Tessa Shepperson says
Yes, it does depend on proper drafting, and I have to agree that recent drafting efforts have been pretty poor.
I just don’t think the idea of allowing tenants to have lodgers should be dismissed out of hand – it could work well if done properly.
Trainee Landlord says
Fair point. My earlier comment could easily come across as sounding more negative than I had intended. I wasn’t raising an objection in principle, rather making an observation that “there are lots of different ways that this could cause problems”.
ML says
Tessa, you must be joking!! When has the govermnet ever been able to produce “proper drafting”? Or have you now forgotten that the deposit protection legislation has been drafted twice and is still a ghastly mess?
I think Paul Shamplina has got it 100% right: http://www.lettingagenttoday.co.uk/1609-still-no-detail-on-government-s-sub-letting-proposal
The government is incapable of doing its job and so it washes its hands of it and lumps it on decent landlords.
UKBA incapable of handling illegal immigrants? No worry, make private landlords do the work for them.
Local authorities and private builders (big Tory donors, remember?) won’t build enough houses? No worry, turn other people’s properties into HMO’s whether the owners want that or not.
When most houses have been turned into HMO’s and there are no houses to let, I will indeed quote inept Osborne’s “sharing economy”.
This country is going to the dogs.
Alan Ward says
I have a few questions for DCLG before they embark on their “consultation”
1. Can you confirm that the provisions on sub-letting will only be taken forward if the next Government decides to do so and that these proposals are not set in stone?
2. Why was there no consultation with the industry prior to these proposals being announced?
3. Would the proposal apply to Wales?
4. Will tenancy agreements have to allow sub-letting or would it be a case of sub-letting being allowed only with the landlord’s permission? In para 2.234 of the Budget red book – what would be deemed reasonable?
5. Would tenants who sublet be considered to be the landlord for the purposes of tenancy deposits, serving relevant paperwork (gas safety certificate, EPC, S21) and immigration checks?
6. Would subletting tenants be responsible for Housing Health and Safety Rating System, and maintenance of the property in the portion of the property they sublet?
7. How would such legislation interact with local licensing – would a tenant who sublets also require a licence? Who will be responsible for breaches? Would a reasonable cause to refuse a sub-let come under selective licensing?
8. Who will be held responsible for general landlord breaches by a tenant who sub-lets?
9. What happens when the tenant who sublets absconds, leaving behind the sub-tenant? Could the landlord regain possession of the house, even if they don’t have a contract with the sub-tenant themselves? What rights to occupy would the sub-tenant have?
10. Will this also apply where a tenant moves in a partner, rather than renting out a room? Can leases still forbid this or require landlord permission/change of tenancy? What happens if the original tenant leaves and the partner stays?
11. Would a landlord renting out a property that is subsequently sub-let then find that the property is classified as a House of Multiple Occupation?
12. What happens about so-called rent-to-renters? How would a landlord regain possession of their property if they don’t have a tenancy agreement or even know the names of the sub-tenant?
13. What is meant by “short term” let?
14. Who takes responsibility for any anti-social behaviour carried out by a sub-tenant?
15. Would tenants who sub-let be subject to provisions within the Deregulation Bill on retaliatory evictions?
16. Will the Government be consulting on the proposals? If so, what is the likely timeframe?
17. What is the difference between the sub-tenant and a lodger?
The Residential Landlords Association letter has gone to the department.
HB Welcome says
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/414111/bis-15-172-government-response-to-the-independent-review-of-the-sharing-economy.pdf
2.9 The government will amend its model agreement for an assured shorthold
tenancy by summer 2015, to provide that tenants in private rented accommodation
can request their landlord’s permission to sub-let or otherwise share space, on a
short-term basis.
2.10 As set out in Budget 2015, the government will also go further. The government
will also look to clarify and strengthen private residential landlords’ statutory
responsibilities when considering requests from tenants to sub-let, and will look to
extend these responsibilities to requests from tenants on the sharing of space more
generally.
2.11 The government also intends to legislate on prohibiting the use of clauses in
private fixed-term residential tenancy agreements that expressly rule out sub-letting
or otherwise sharing space on a short-term basis, and will consider extending this to
statutory periodic tenancies. This will ensure that landlords always have to consider
tenants’ requests reasonably
Industry Obesrver says
I really wouldn’t get too worked up about all this. Even if the Budget/Finance Act/Red Book whatever it is called is passed before 30th March this will all depend on who wins the election.
In any case it is such an insane proposal no sensible party would actually eventually approve it. As Tessa says the legislation would be a nightmare – and look at what a dog’s breakfast they make of simple stuff.
Don’t worry this will never happen. No party can afford to destroy the PRS which is what this will do – along with all the other niceties going on at the moment
Industry Obesrver says
Second thought re Alan Ward’s post. Actually technically and above all legally no matter what the contract (agreement) says isn’t it actually, if push comes to shove, a legal right of a tenant to sub-let (as in commercial). Or put another way, in reality is it not impossible for a Landlord to actually prevent?
Or do anything meaningful, quickly, if the tenant does?
By the way be careful Alan if you want a level playing field with Wales (licensing of Landlords as well as agents?)
Rent Rebel says
This is probably karma for all that rejoicing over the curbs on landlord licencing. It’s not all about you, you know.