A firm specialising in assisting landlords to comply with housing laws and avoid potential penalties is sounding the alarm about the potential for severe fines that could drastically impact both tenants AND landlords.
Landlord Licensing & Defence points to a Direct Line business insurance study which reveals that one in four tenants could be subletting their rented home without telling their landlord.
Apparently, younger tenants are more prone to subletting than older renters.
And while landlords won't know about the subletting activity, it could mean they are unknowingly in breach of the Housing Act 2004.
That law makes it mandatory to have a licence for a House in Multiple Occupation (HMO) - that's when a property is occupied by at least three unrelated individuals.
It also means that a student landlord runs the risk of being fined if a student tenant, for example, offers to help a friend with the chance to stay in their property.
Landlords should seek immediate professional help
The firm's Phil Turtle said: "Any landlord that discovers this situation should seek immediate professional help from a specialist like Landlord Licensing & Defence - preferably before the council starts the prosecution process.
"Both the main tenant and the landlord are at risk of being prosecuted for breaching the HMO Regulations (Management of Houses in Multiple Occupation (England) Regulations 2006), which set out the requirements for HMOs, such as fire safety, maintenance and sanitation.
"These regulations are different from requirements for non-HMO properties, as you are very unlikely to have the necessary fire alarms, fire doors and other measures in place to comply with them."
He adds: "The average fine for a landlord who violates HMO Regulation 4, which covers fire safety and emergency escape routes, is around £18,000 to £28,000.
"Other regulation breaches will often bring this up to £50,000 or more. And there are six other regulations you can be fined for.
"That's a hefty price to pay for something you may not even be aware of."
HMO created without the landlord's consent
The firm highlights that if a couple renting a two-bedroom flat decides to have a friend live in their spare room, then an HMO is created but without the landlord's consent.
However, this legal breach could expose both the landlord and tenant to 'life-changing fines' of up to £30,000 per offence.
And if the case goes to court, they could face unlimited fines.
To avoid falling into this legal trap, Landlord Licensing & Defence advises tenants to carefully review their tenancy agreements before thinking about subletting.
The firm also says that landlords should carry out regular property inspections and act promptly should they see suspicious activity.
Failing to do so could lead to criminal prosecution, as the tenant will inadvertently become the sub-landlord.
Landlords unintentionally breach management regulations
Mr Turtle reveals that their firm encounters cases weekly where landlords unintentionally breach management regulations due to their lack of awareness that their property has become an HMO.
One common scenario involves properties with three or four tenants falling within a council's 'Additional Licensing' scheme.
In such cases, having an unlicensed HMO becomes a criminal offence.
Similarly, if a property houses five tenants, it falls under the 'Mandatory HMO licensing scheme', which also creates a criminal offence for unlicensed management.
Managing an HMO without a license
The consequences of managing an HMO without a license can be severe, with fines from £12,000 to £15,000, in addition to the fines under management regulations.
This situation also poses challenges for the tenant who is named on the tenancy and is collecting rent from a sub-tenant since they are a sub-landlord, or a 'mesne-landlord'.
That also means the council can hold them accountable, along with the landlord, and impose fines of £50,000 or more for not obtaining the required license and for breaching HMO regulations.
Mr Turtle says it is 'crucial' for both landlords and tenants to understand the licensing requirements and ensure compliance to avoid facing such substantial penalties.
'Obvious problem for student landlords under HMO license rules'
Simon Thompson, the managing director of Accommodation for Students, said: "There is an obvious problem for student landlords under HMO license rules.
"And that's when a student tenant offers a room to a friend, takes rent and they live there as a tenant though they aren't named on the tenancy agreement.
"The tenant thinks they are doing a favour and they have done nothing wrong, but the landlord doesn't know and the penalties can be severe."
He added: "Student landlords need to be aware of any licensing schemes in the area where they rent out student property and they must carry out regular inspections.
"Not doing so means, unfortunately, they could be facing huge fines.
"And with an acute shortage of student accommodation, this scenario might become a regular horror story as landlords get caught up in an expensive mistake they had no knowledge of."
