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Government Plans To Introduce A Mandatory Licence Scheme For Rental Properties – What Landlords Need To Know

Licence - main

In a speech delivered on the 21st May, Prime Minister David Cameron dropped a bombshell on landlords and letting agents alike by announcing plans to introduce a new mandatory licensing regime of private landlords later this year.

This will go further than the ‘right to rent’ scheme, which has been trialed in the Midlands, and is set to be rolled out nationwide later this year.

In his speech, Mr Cameron stated, “There are other ways we can identify those who shouldn’t be here, for example through housing. For the first time, we’ve had landlords checking whether their tenants are here legally.

“The Liberal Democrats only wanted us to run a pilot on that one. But now we’ve got a majority, we will roll it out nationwide, and we’ll change the rules so landlords can evict illegal immigrants more quickly.

“We’ll also crack down on the unscrupulous landlords who cram houses full of illegal migrants, by introducing a new mandatory licensing regime. And, a bit like ending jobs when visas expire, we’ll consult on canceling tenancies automatically at the same point.

“It’s not just through housing and jobs; we can track down illegal migrants through the banking system too.”

So what does this mean for landlords and letting agents? What is the ‘right to rent’ scheme and do landlords who adhere to it risk breaching parts of the Equality Act 2010? How far could this new licensing regime extend?

This post aims to answer these questions so landlords and letting agents can be prepared for a possible shakeup of the private buy to let sector in the near future.

The Benefits of Introducing a Mandatory Licensing Scheme

Reading the above statement, one gets the feeling that the main reason Mr Cameron wants to introduce a mandatory licensing scheme for private landlords is to add another weapon to the immense arsenal the government requires to deal with the political hotcake that is immigration.

However, there is also another issue that is constantly rearing its head on the political agenda, and that is the chronic shortage of housing available in Britain. Ensuring migrants are prevented from renting a property after their visa expires will provide the added benefit of freeing up more housing for the rest of the population.

The government has started off the process of having landlords establish whether prospective tenants are legally entitled to be in the UK by introducing ‘Right to Rent’ checks.

The ‘Right to Rent’ Checks – A Precursor to Licensing Change?

From 1st December 2014, landlords in the Midlands have been required to check the right of prospective tenants to be in the UK before letting a property to them, or be fined up to £3,000.00. This requirement applies to those sub-letting property and individuals who take in lodgers.

The obligation to check a prospective tenants ‘right to rent’ is derived from section 22 of the Immigration Act 2014. Section 22(1) states, “A landlord must not authorise an adult to occupy premises under a residential tenancy agreement if the adult is disqualified as a result of their immigration status.”  To avoid contravening section 22 and obtaining a civil penalty, a landlord can make a few simple document checks to ensure their prospective tenant has the right to rent a dwelling house in the UK.

To decipher whether or not an individual has the right to rent a property in the UK a landlord can check the prospective tenant’s passport, biometric residence permit or other evidence identity and citizenship and in most cases do so without needing to contact the Home Office. In cases where tenants do not have documents due to an ongoing Home Office application, landlords can request a right to rent check.

Right to Rent Checks and the Equality Act 2010

The Equality Act 2010 contains nine protected characteristics, one of which is race. Race includes ‘colour, nationality, and ethnic or national origins’. Many landlords have raised concerns about the risk of breaching the Equality Act 2010 whilst complying with the new right to rent obligations.

A landlord can breach the Act by inflicting direct or indirect discrimination on a tenant or prospective tenant. An example of direct discrimination is refusing to rent a property to an individual due to the colour of his or her skin or nationality. Indirect discrimination is harder to define and subject to wide interpretation. For example, if a landlord insists on checking papers of individuals because they are of a certain nationality, would this be amount to a breach of the Equality Act 2010? The reason landlords are so concerned is that although a breach of section 22 of the Immigration Act 2014 could result in a £3000.00 fine, if a landlord were to refuse to rent a property to a tenant, who did have the right to rent, they could face a discrimination claim with liability to uncapped damages, orders to pay court costs for the other side, and bad publicity.

To assist landlords in balancing their obligations under each Act, the Government has published a Code of Practice, which provides guidance to landlords performing right to rent checks.

The Code of Practice states:

“The equality laws are there to protect everyone. Landlords are advised to conduct immigration status checks in a consistent and fair manner in relation to all prospective tenants to protect themselves from claims of discrimination and to keep records of checks made. If a prospective tenant will not co-operate with the checks, landlords should explain that they are undertaking these checks to protect themselves in law. Should the tenant still fail to co-operate, landlords are not breaching any law by looking to other tenants to fill their accommodation.”

To protect themselves against the possibility of discrimination claims, a landlord should:

  • Carry out right to rent checks on all prospective tenants, regardless of nationality or race; and
  • Keep detailed records of the checks and file documents that have been relied on
  • Be aware of the implications of introducing certain criteria when checking the backgrounds of tenants.

Licence - subDetails of the New Mandatory Licensing Regime to be Introduced

Unfortunately, at this stage, the only knowledge of what the new licensing regime will comprise of contained in the few paragraphs contained in Mr Cameron’s speech.

However, a detailed study done in 2007 revealed the many issues facing migrants, issues that are likely to be exasperated with the passing of eight years, given that net migration increased from 237,000 in 2007 to 298,000 in 2014.

The research shows that migrants face the following problems when trying to obtain adequate housing in the UK:

  • New immigrants tend to rent premises rejected by the rest of the housing market which results in a concentration of migrants in specific neighborhoods
  • Most new immigrants moved into temporary accommodation upon first arriving in the UK. Poor living conditions, lack of privacy and concerns about safety and security were often associated with temporary accommodation and were sometimes endured for many months.
  • Some immigrants reported the problems of lack of security of tenure and poor housing standards becoming long-term problems

By introducing a mandatory licensing scheme, the government hopes to crack down on criminal landlords who supply unsafe and unsanitary homes and then attempt to cram as many desperate people as they can into them. It will also provide a relatively thrifty way of identifying and restricting illegal immigrants, as local landlords could be effectively doing the job of immigration officers by uncovering illegal immigrants and overstayers and reporting them to the Home Office.

Whatever the details of the new scheme, they are bound to be controversial. Critics have already stated that various forms of regulations and licensing have so far failed to discourage unscrupulous landlords.   Stay tuned and we will keep you updated as further details of the scheme are released over the coming months.

If you would like to find out more about aspects of the law regarding landlords and immigration rules, please phone our London office on 020 3588 3500 to make an appointment.

Do you have any opinions on the proposed licensing scheme? Please feel free to post your comments below.



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