It has been revealed that most landlords have no appreciation of their responsibilities under the new Right to Rent scheme which is now in force.
From February 1 it became law for letting agents and landlords to carry out immigration checks on their prospective tenants to ensure they had a right to live in the UK. The scheme was piloted in the West Midlands last year and has now been rolled out across the rest of England.
Failure to comply with the law could lead to a landlord being fined up to £1,000 for their first offence, and £3,000 for each subsequent offence. Now the Residential Landlords’ Association (RLA) says landlords are faced with a difficult choice.
90% of landlords surveyed had not received any information
The RLA says that, despite the government announcing the introduction of this new law last October, more than 90% of the landlords it surveyed have not received any information outlining their legal responsibilities.
In addition, 72% of landlords said they did not understand their obligations under the law. Under the Right to Rent scheme, a landlord can accept a range of documents to prove that the tenant has a right to live in the UK, including their passport.
The landlord, or their agent, must check the documentation with the tenant present and the documents must be original and belong to the tenant. Landlords must also take a copy and retain it for the tenancy’s duration and for one year afterwards.
Some tenants may have limited permission to stay in the country, and the landlord must conduct further checks before that time limit expires.
Landlords say they will accept only familiar documents
However, the RLA survey reveals that 44% of landlords said they would accept only documents they are familiar with.
David Smith, the RLA's policy director, said that: “The government says the scheme will make the UK a hostile environment for illegal immigrants, but our survey shows it is also creating a hostile environment for good landlords and their legitimate tenants.”
Nicola Thivessen is the head of compliance with estate agency Chestertons, and she added that: “Some landlords may feel the new law is a bureaucratic minefield and believe they can play safe by only renting to British people. This is absolutely not the case and is tantamount to discrimination.”
Rocketing number of limited companies in BTL transactions
Meanwhile, it has been revealed that there's been a huge rise in the number of limited companies submitting buy-to-let mortgage applications. Mortgages for Business says the proportion of transactions being made by private limited companies has risen from 38% in December to 43% in January.
The firm's managing director, David Whittaker, said: “Landlords have realised that purchasing a property through a corporate vehicle is feasible and, in some cases, is a prudent route going forward.”
Mr Whitaker is predicting that the number of landlords using a private limited company will rise, particularly if they are higher rate taxpayers, which will also help tackle the upcoming changes to mortgage tax relief.