First Lets – Avoid expensive right-to-rent and discrimination blunders
As you’ve seen in parts 1 and 2 of getting the best tenants, bad tenants could cost a buy-to-let property investor thousands. It’s, therefore, important to start the tenant vetting process as early as possible, and that’s where the questions you ask on the rental application come into play.
One section of the law that is particularly pertinent when finding the best tenants is the right to rent scheme and discrimination laws. Get these wrong, and you could find yourself in some very hot water.
In this article, you’ll learn what you need to know about the right to rent scheme, and I’ll give you five tips that will keep you on the right side of the discrimination laws when finding the best tenants to rent your investment property.
How much could a right to rent blunder cost a buy-to-let investor?
Under the Immigration Act 2014 (Section 22), if you let your investment property to someone who doesn’t have the right to rent here in the UK, you could be fined up to £3,000.
This law applies to all tenancies that started on or after February 1st , 2016. If your tenant was in place before this date and wants to renew their tenancy, you should make the right to rent checks detailed a little later in this article.
Who has the right to rent your buy-to-let investment property?
There are three categories classified under the right to rent scheme:
1. Unlimited right to rent
People who have an unlimited right to rent in the UK include:
- British citizens, and EEA or Swiss nationals
- Those who have a right to live in the UK, or have been granted indefinite leave to remain
You won’t receive a civil penalty for leasing to a person who has an unlimited right to rent.
2. Time-limited right to rent
People who don’t have an unlimited right to rent may have a time-limited right to rent if:
- They have been granted leave to remain in the UK for a limited period; or
- They are entitled to remain in the UK under European law
While you won’t be liable to a penalty if you rent to someone with a time-limited right to rent, you have to make follow-up checks to ensure their time-limited right to rent is still applicable.
3. No right to rent
People who would require permission to remain in the UK but don’t have that permission have no right to rent.
If you lease your property to someone with no right to rent, you could be hit with that £3,000 fine.
Have an excuse to avoid a fine
While ignorance of the law is no excuse, to avoid a penalty the law requires you to have what’s called a ‘statutory excuse’. To have this, you must:
- Conduct initial right to rent checks
- For those with a time-limited right to rent, conduct follow-up checks at the appropriate intervals
- Report to the Home Office if your tenant’s time-limited right to rent has expired
Here’s how Ezytrac complies with these requirements:
1. The initial right to rent check
First, we make sure that we know who the prospective tenants are. The rental application and background checks are part of this process, but we also collect the ‘acceptable documents’ that prove the person has a right to rent. These documents include any of the following:
- A British passport
- An EEA or Swiss passport or ID card
- A registered certificate which has been issued by the Home Office and indicates the status of permanent residence
- A passport that indicates the holder is exempt from immigration control and is allowed to reside indefinitely in the UK
- An in-date immigration document that states the person is permitted to stay in the UK indefinitely
- A certificate of registration or naturalisation as a British citizen
We also ask for two of the following documents (having these negates the need to carry out follow-up checks):
- A full birth or adoption certificate issued in the UK, the Channel Islands, the Isle of Man, or Ireland
- A letter issued within the last three months confirming the holder’s name, issued by a UK government department or local authority, or issued by a person who employs the holder, confirming the holder’s status as an employee
- A letter dated no older than three months from a UK police force, confirming the holder is a victim of crime and that personal documents have been stolen
- Evidence of current or previous service in UK armed forces
- A letter from the UK further or higher education institution confirming the holder’s acceptance on a current course of studies
- A current full or provisional UK driving license
- Disclosure and Barring Service Certificate issued within the last three months
- Benefits paperwork issued by HMRC, the local authority, Job Centre Plus, or the DWP within three months before commencement of tenancy
In the case of a time-limited right to rent, we’ll obtain documentation which may include any of the following:
- A passport that has been endorsed to show the holder is allowed to stay in the UK for a period
- Immigration documentation issued by the Home Office
- A residence card issued by the Home Office if the person is a non-EEA national, but is a member of an EEA or Swiss national family
- Immigration status documentation issued by the Home Office with a limited stay period indicated
We always check the documents in the presence of the rental applicant and make dated copies of them to keep with our records.
All of this initial checking must be completed no sooner than 28 days before the start of a tenancy.
2. Follow-up checks
If our initial check shows that the tenant has a time-limited right to rent, we make follow-up checks to maintain the statutory excuse. These checks must be done no later than one year after the initial check or when the tenant’s original leave to stay expires (whichever is later).
The tenant has to provide evidence that they have had their leave-to-stay period extended, or that they now have an unlimited right to rent. If the right to rent period has been extended, then further follow-up checks will be required.
If the tenant cannot produce documentation that proves the right to rent period has been extended or that they now have a permanent right to rent, then the law states we must report this to the Home Office.
3. Reporting to the Home Office
Where we’ve been unable to establish whether your tenant no longer has the right to rent, we’ll report this to the Home Office (don’t worry, we keep you in the loop at all stages). When we make our written report, we provide:
- The name(s) of the tenant(s)
- The address of the property they are renting
- Our details as your investment property management provider
- Your name and address as the property owner
- Dates of tenancy
- Copies of all documentation provided by the tenant(s)
Making this report doesn’t mean that the tenant has to be evicted; it’s simply a process that may or may not lead to eviction in due course.
What if the tenant can’t provide acceptable documentation?
Just because the tenant can’t provide certain documentation that we need to take, doesn’t mean they don’t have a right to rent. It may be that they have an ongoing application with the Home Office. In such a case, we’ll use the Landlord Checking Service to confirm the right to rent, and the time limit if applicable.
Five tips to avoid falling foul of the discrimination laws
By now, you might be tempted to only receive applications from UK nationals. Does it make the whole process of leasing your property a lot easier, right? There are two problems with this approach. The first is that you could be missing out on an exceptional tenant. The second is that you’ll be accused of discrimination.
Here are my five tips to avoid falling foul of the discrimination laws when leasing your property:
- Make right to rent checks on all tenants (remember, this is all occupants over the age of eighteen)
- Never discriminate because of race, nationality or ethnicity
- Never assume anything because of race, nationality, ethnicity or accent (this includes the ability to speak English)
- Treat all tenants equally (including those that have a time-limited right to rent)
- Never treat a tenant differently because they don’t have a British passport
What to do now
In this article, I’ve given you a lot of information. It’s important that buy-to-let investors understand all of this. If you don’t, you could find yourself making a very costly mistake when finding the best tenants. So, I’m going to leave things there for now. If you’ve got any questions, please feel free to contact me or one of the Ezytrac team today on +44 1522 503 717and we’ll ensure that you’re meeting all your legal obligations.
Our investment property management services help ensure that you get the best tenants and that they and your property are monitored throughout the tenancy. It’s the hassle-free way to make sure your property investment is performing.
In my next article, I’ll introduce you to background checks, and how they can help you get the best tenants for your investment property.
Yours in effortless property management,