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Official probe into rent-to-rent sector launched

rent to rent

The NRLA is questioning whether rent-to-rent’s days are numbered after regulators announced it was investigating the sector in a bid to understand its impact on tenants and landlords.

A new consultation by Trading Standards seeks to study the business practices of rent-to-rent operators, some of whom have brought the sector into disrepute, particularly if firms with no material interest in a property let to tenants while evading their legal obligations. Landlords are sometimes unaware that their property is being sub-let.

The Renters Reform Bill is likely to change how rent-to-rent schemes function and will make superior landlords liable for the behaviour of operators as the government bids to protect tenants from the effects of poor tenancy and property management.

Unscrupulous

Northwood estate agency is one of the biggest firms offering landlords guaranteed rent, but MD Phil Gee (pictured) says some people tar this with the same brush as unscrupulous operators. His firm takes all the risk, operating only with the landlord and tenant – not a chain of landlords sub-letting a property, he tells LandlordZONE. “Our model is honest and genuine, and we are members of a redress scheme.”

Gee welcomes the consultation and hopes that it will result in a more even playing field. “We believe the sector should be regulated and for standards to be higher for everyone – we certainly hope the government wouldn’t outlaw it.”

The NRLA explains that most rent-to-rent agreements are based on fixed term tenancies and stipulate that a property will be returned with vacant possession at the end of the agreement. But the abolition of fixed terms and Section 21 are likely to make this impossible.

Where a superior lease is the same length as the sub-lease, it usually means that the subletters will become the tenants of the superior landlord rather than the rent-to-rent operator, leaving the superior landlord with no choice about their tenant.

Given that periodic tenancies will be the default going forward, this is potentially extremely challenging for landlords if they are misled by a rent-to-rent operator posing as a standard tenant, as both tenancies will typically be exactly the same length.

Rogue operators

Paul Shamplina, founder of Landlord Action (pictured), who has been lobbying the Government to clamp down on rogue operators within the private rented sector and attended several Government briefings, says it is encouraging that Ministers have finally grasped that rent-to-rent need regulation.

“Illegal sub-letting of properties by rent-to-rent companies as highlighted by several recent cases is becoming a growing problem within the private rented sector and is giving the reputable providers a bad name,” he says.

“They also make possession claims difficult because it’s often hard to work out who the landlord really is and, as in one recent case, tenants believe they have paid their rent on time but are facing eviction by the ‘superior landlord’ for non-payment of rent.”

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