The growing compliance burden
There is no shortage of things to consider when preparing a new rental property for tenants. Increasingly, being a responsible landlord means staying compliant with all the rules and regulations that now come with operating in the Private Rented Sector.
The same applies to letting agents, who are also faced with a growing checklist of legal requirements and licensing compliance obligations that they must abide by in order to keep their business from falling foul of the law.
There’s a common misconception that property licensing compliance is one such obligation that falls squarely at the feet of the landlord. After all, the licence is for the landlord’s property – they’re the ones who pay for it and almost invariably it’s their name that’s listed at the top of the licence.
However, agents who choose to pass all responsibility onto their landlords when it comes to securing the correct HMO or Selective licence, are playing a risky game. Especially when we consider the damaging consequences of being caught unlicensed. And if you don’t know already – these penalties may include a Rent Repayment Order of up to 12 months, a civil financial penalty of up to £30k from the council, and even a criminal prosecution and an unlimited fine from the courts.
What does the regulation say?
The Housing Act 2004, which is where property licensing was first introduced, places responsibility for licensing on anyone fitting the statutory definition of ‘person having control’ or ‘person managing’.
Now these terms are slightly open ended. However, as Anthony Gold Solicitors state, “the key point for agents is that anyone who receives the rent on behalf of the landlord will be a person managing”.
There is a clear liability for agents operating on a ‘property management’ or ‘rent collection’ basis because they are regularly collecting rent from tenants. Even if the agent’s terms and conditions explicitly state that they do not take on the responsibility for licensing and the landlord agrees to it, that agent does still hold responsibility for licensing according to this statute
The case for ‘let-only’ agents
Now, agencies operating on a let-only basis may think this gives them a ‘Get out of Jail Free’ card as they won’t be regular rent collectors.
However, it’s very common in these arrangements that the agent will collect the first month’s rent along with the deposit from the tenant. While their involvement may end once the tenants move in, those initial transfer of funds may still render the agent liable.
According to a case precedent involving Camden council, let-only agents are still very much at risk of being prosecuted if their property gets caught out as unlicensed. The local authority argued that the receipt of the first month’s rent made the agent a ‘person managing‘ for the whole tenancy term arranged by the agent. They also posited that holding the deposit would also make the agent a ‘person managing‘.
Their case was indeed successful and the agent was convicted of breaches of the Management of HMO (England) Regulations 2006.
While the Judge’s decision in this case can’t be considered as binding on future court cases the ruling has raised further concerns for ‘let only’ business owners and it is likely to influence how local authorities pursue their enforcement.
Why risk it?
It is fair to say then that all agents, whether they are managing the property or not, must have the correct processes in place to ensure their properties possess the necessary licensing. It is simply too risky to pass on this responsibility to the landlord. Agents must also remain alert to changes within their portfolio – staying aware of properties that become licensable due to changes in occupation or changes to the council’s regulations.
Contact us or book a demo now to understand how Kamma can solve property licensing for you.
