12 December 2014

Immigration Act 2014 — Compliance by private landlords

The Immigration Bill received Royal Assent on 14 May 2014 and the provisions relating to letting of private property are gradually being introduced. From 1 December this year private landlords will be required to check the immigration status of tenants both before they rent, and on an ongoing basis. A trial of the checking system will begin in areas of Birmingham, Wolverhampton, Dudley, Walsall and Sandwell with the rest of the country likely to follow in 2015.

Most residential tenancies will be caught by the Act, but it will not apply to student accommodation, leases over seven years in length, social housing or rental agreements entered into before the Act came into force or which are subsequently renewed, as long as there is no break in occupation. These requirements will place increased burdens on landlords with the failure to comply leading to potential fines. Both current and new landlords should understand the requirements and plan how to comply with them when entering into new tenancy arrangements.

The measures sit alongside the government’s wish to crack down on landlords who provide substandard or illegal accommodation to tenants. Landlords who fail to comply with the checking requirements under the Act will be faced with fines of up to £3,000 for repeat offending, with no right of appeal. The Home Office’s draft Code of Practice on Civil Penalties for landlords and their agents provides useful guidance.

The obligation is on landlords to review tenant documentation to determine whether a tenant has a ‘right to rent’. Follow up checks will also be required, especially if the tenant’s right to remain in the UK is time limited. Landlords must report to the Home Office if their checks show that an individual does not have a right to rent. If unsure, landlords will have the right to request a rent check through the Home Office Landlord’s Checking Service, which is intended to respond to the request within 48 hours. A landlord will then have a statutory defence for the first 12 months against a penalty under the Act if they receive the green light from the Home Office. If the Checking Service replies saying the landlord cannot let the property to the proposed tenant, the landlord will need to file a report with the Home Office, failing which a fine may be imposed.

Responsibility can be transferred by agreement to, for example, the managing agent so the terms of any agency agreements landlords may have should be reviewed to ensure the agent will comply with the landlord’s’ responsibilities under the Act. It is likely that agents will charge for this service.

Those with a ‘right to rent’ include British citizens, nationals of an EEA State, Swiss nationals and those with leave to enter and remain in the UK (provided the leave does not expressly prohibit renting UK property).

Although Immigration and Security Minister James Brokenshire has announced that the right to rent checks will be ‘quick and simple’, the Royal Institution of Chartered Surveyors has raised concerns over the burden to be placed on landlords in policing immigration and the way in which the measures will be implemented. The Institution has made clear it feels the checking mechanism could involve unnecessary red tape and potentially unintended consequences. Although systems will no doubt evolve to deal with the increased bureaucracy, some growing pains should be expected.

The Home Office has suggested that landlords may end up benefiting from lower losses of rental income because of more stringent checks, but the administration involved may be quite demanding. Landlords will be required to do checks each year throughout the term of the tenancy, and to store information obtained from tenants, which will need to comply with the Data Protection Act. Some concerns have been raised that this could lead to discriminatory practices in favour of British citizens as well as higher costs for landlords.

Although it seems likely the Act will not be rolled out nationwide until after the general election next year, current and potential landlords should start to think about how they will comply with the Act’s requirements. If a landlord uses a managing agent, the terms of the agency agreement should be reviewed to ensure the agent will comply with the landlord’s’ responsibilities under the Act. This may also mean an increase in agent’s fees.

It remains to be seen how the reforms will be implemented in practice. Standard systems will likely evolve to deal with the requirements under the Act, but landlords should start thinking about how to manage the transition now, be alive to the ongoing responsibilities it will impose, and be aware of the additional costs they may incur.


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