Are subletting tenants destroying the PRS?

Short-term letting has become extremely popular in recent years but whilst it may be one of the fastest-growing accommodation channels there is a darker side.

Tenants who sublet without the landlord’s permission can make a huge fortune by renting out a home on Airbnb whilst the landlord is left to pick up the pieces when things go wrong.

This Property118 investigation highlights the rise of illegal sub-letting and the dangers it poses to landlords.

Serious consequences for tenants who sub-let

New data from Direct Line Business Insurance reveals more than half (48%) of renters who sublet their properties did not disclose this to their landlords. Three-quarters (77%) of respondents did not review their existing lease agreements to determine if subletting was permitted before doing so.

One in ten (13%) of renters admit to renting out part of the home they currently live in, ranging from a single room to the entire property. This rises to 25% among younger people, aged 18 to 34.

Gary Holmes, the landlord product manager at Direct Line business insurance, told Property118: “There could be serious consequences for tenants who sub-let, but landlords need to be aware that in these circumstances there could also be insurance implications.

“Sub-letting is not covered under most insurance policies, so it’s really important that landlords make their tenants fully aware of the restrictions on the lease and maintain that communication to help prevent any breaches.”

Sarah Casey, Landlord Product Manager at Direct Line business insurance, added: “With the market having seen an increase in average rents in the last year, it is hardly surprising that a larger number of renters are tempted to offset this expense by subletting their property.

“It’s important that landlords perform regular checks on their rental property to ensure that only those listed on the tenancy agreement live in at the address. Should they become aware of any changes, it’s important that they deal with the situation swiftly and notify their insurer to make sure they have the appropriate landlord insurance in place.”

The rise of Airbnbs

Landlords are proving to be the unfortunate victims of Airbnb’s soaring popularity with tenants subletting properties without the owner’s permission.

On the BBC programme Inside Out in 2019, one landlord was left £10,000 out of pocket after his tenants sublet his property in London’s Bloomsbury on Airbnb.

The tenants had a 22-month assured shorthold tenancy through a letting agency. However, during a periodic inspection, the agents, Base Property, arrived to find the tenants checking a family into the property.

The agent found the property was listed on Airbnb as a single dwelling and as two separate bedrooms.

Airbnb had more than 70 booking reviews for the property with the first being when the tenancy began, which meant that the tenants had been subletting the property from the very start.

The letting agency contacted the tenants to inform them that they were breaching several licensing rules and that they should remove the listing from Airbnb.

Despite the warning, the tenants ignored the agency and continued to host on Airbnb.

The tenants even refused access to contractors who were due to fix a leak, causing further damage to the property.

Kristjan Byfield of Base Property told the programme: “One thing I found extremely disappointing was Airbnb’s refusal to take any action whatsoever.

“When we contacted them and provided evidence that the “hosts” were not the legal owners of the property and were in breach of the landlord’s mortgage and buildings insurance terms, local licensing laws, and both short-term let and HMO licensing, their response was to take it up with the tenants.”

One person told the Guardian how they had booked an Airbnb for their mum’s 70^th birthday. However, when they arrived, they found the property damaged and unmaintained.

The next day a woman came to the property to inform the guests that the so-called ‘host’ was subletting the property without permission and threatened to call the police if they didn’t leave.

Airbnb offered a refund for the unused two nights and promised to escalate to a full refund.

‘Subletting can cause all sorts of problems for landlords’

Chris Norris, policy director for the National Residential Landlords’ Association, told Property118: “Subletting in the PRS can take several different forms, but the one consistent element is the need for a tenant to obtain permission from their landlord if they want to let part or all of their rental property.

“At its most extreme non-contractual sub-letting can see entire properties let to other households on a long-term basis, or homes being let short-term via platforms like Airbnb.”

He added: “This can cause all sorts of problems for landlords in relation to licensing conditions, overcrowding, freeholder conditions or covenants, as well as presenting serious legal complications should their original tenant default in some way.”

Mr Norris says that illegal sublets can cause disruption and misery for the local community.

He said: “Aside from being a clear violation of the terms of a tenancy agreement, illegal sublets can also cause disruption and misery for neighbours and the local community as sub-tenants are unlikely to have been vetted in any way.

“If landlords suspect their tenants are illegally subletting, we recommend that they arrange to inspect the property to ensure it is being used for its proper purpose before exploring all legal options which are open to them.”

‘Illegally subletting their council properties to make money’

However, the problem isn’t just found in the private rented sector – this is also a huge problem for social housing providers too.

Councils have begun to crack down on illegal subletting and the Royal Borough of Chelsea and Kensington council is now teaming up with Airbnb to tackle the number of illegally sublet council-owned properties.

The collaboration will see Airbnb Payments UK share its data with the council for two estates in north Kensington to help crack down on illegal short-term lets.

Councillor Kim-Taylor Smith, the council’s lead member for housing, said: “There is a huge demand for social housing in our borough and it’s simply not fair that people in genuine need are being denied a place to call home because others are illegally subletting their council properties to make money.

“It costs the public purse an average of £42,000 a year for each home and this welcome collaboration with Airbnb will help us to clamp down on it in our borough.”

Theo Lomas, the head of government relations for Northern Europe at Airbnb, added: “Hosting in subsidised or social housing in the UK is illegal and has no place on Airbnb.”

‘Zero-tolerance approach to illegally subletting’

In Hackney, 1,000 council homes that were illegally sublet, abandoned or obtained through fraud have been returned to the council housing waiting list – for those in genuine need.

Councillor Robert Chapman, the cabinet member for finance, told us: “We have a zero-tolerance approach to illegal subletting in Hackney.

“It has a direct impact on those on our waiting list who are in great need of a home and are patiently following all the right procedures.”

Mr Chapman said to combat the issue, the council’s anti-fraud service is working with the housing service and social landlords to tackle fraudsters.

He said: “We have a dedicated team of officers from the council’s anti-fraud service who work with our housing service and other social landlords to tackle fraudsters. Our pioneering approach is bearing fruit, with 1,000 recovered tenancies since 2010.”

‘More action needed to be done’

With an ongoing housing crisis, there is a need for more homes and genuine tenants are suffering because of illegal subletting.

The problem can cause a great deal of heartache for landlords with more action needed to stop it.

Until then, landlords need to be alert to the problem and nothing is more effective than arranging regular visits to a rented property and, of course, regular checks of short let holiday sites just to make sure that their property isn’t being listed without their permission.

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