Lettings agents have not been universally happy about this February’s new Right to Rent regulations, to put it mildly. In a sector already facing a raft of new red tape and regulation, it’s come at a bad time.
Many agents say it’s not the policy that they oppose, but how agents are being asked to do much of the legwork on the government’s behalf, or ‘gatekeeping’ as some put it.
In the old days there would have been an ‘inspectorate’ but today the necessary face-to-face ID and document checks are being carried out by agents.
That leaves a lot of work for them to complete on top of their day jobs. While the number of people who are being reported to the Home Office is likely to run into hundreds, agents may have to check several million prospective tenants a year.
Foreign tenants create the most work because their ID is more complicated and the referencing service FCC recently revealed that 17.6 per cent of those it processed during 2015 were foreign nationals or approximately 2500,000 a year.
It’s been difficult to get answers out of the Home Office… operators can deal with basic questions but complicated issues have to be escalated. Theresa Wallace, Savills.
“It’s been challenging,” says Theresa Wallace, Head of Customer Relations Services at Savills.
“Sometimes it’s been difficult to get answers out of the Home Office and occasionally the advice has contradicted itself, although we’ve told the Home Office about this.
“This is the downside of the call centre approach – operators can deal with basic, easy questions but as soon as the issues or questions become more complicated they say it has to be escalated.”
Michael Cook, a Lettings Manager at Romans, says that his company is spending £4,000 a quarter on training to ensure that all the company’s negotiators understand the basics of Right to Rent and in particular, how to spot fake documentation.
“Clearly, we’re not UK Border Patrol but at least we’re at a basic standard of competency,” he says. “But the thing for me is that you’re going to have rogue landlords and illegal tenants and, no matter what you do with legislation, it’s not going to stop these people doing what they want. It’s just making life difficult for already compliant letting agents and doesn’t really solve the problem.”
On the other hand, the Association of Residential Lettings Agents (ARLA), in its response to the government’s consultation on Right to Rent following the initial Midlands trial, broadly welcomed Right to Rent and said that feedback from its members had been positive.
Nevertheless, the Government’s own figures for the trial reveal that 26 out of the 56 letting involved said their workload had increased.
“It’s not a criticism, but if it had been rolled out in London as well as the Midlands then it would have been helpful because in London things are different,” says Theresa.
“There is a much larger range of ID documentation that applies to people coming in from outside the EU and it’s our job to ensure that it is genuine.
“Different companies are finding different workarounds to deal with this problem because at the moment the Home Office won’t allow us to accept ID that has been authorised or certified abroad.”
Another problem, according to rental services firm Let Alliance, is that the system isn’t set up for the UK’s fast-paced markets such as London, Manchester and Leeds where both UK and foreign tenants often snap up properties months before they move in, just to secure their next home.
This means agents are having to process documentation twice – once when the contract is signed and then again just before the tenants move in, or afterwards.
Theresa from Savills says she attended a seminar run by the Home Office and that this subject was one of the hot topics that agents were asking about – namely ‘what do we do?’
It would appear that, after listening to the Home Office advice, Savills now asks to see copies of certified documentation to get the ball rolling once someone says yes to a property. But when the prospective tenants arrive to move in, Savills then won’t release the keys until the tenants have been seen in the flesh with their original ID.
“The bigger issue for us is when a partner or family member arrives after the tenancy has started,” says Theresa. “They are not supposed to move in until we’ve seen them face-to-face with their ID.”
SOLUTIONS AND MORE CHALLENGES
But one other problem with Right to Rent has already been solved, in April, following a Commons vote. This was the threat of ‘immediate criminality’ and fines for letting agents who by mistake allow a tenant who doesn’t have a right to rent’ to move into a property.
Now, after the legislation was changed – unopposed – in Parliament, a ‘breathing space’ has been introduced to give agents enough time to evict the tenant without facing an immediate fine – as long as they take reasonable steps within an appropriate timeframe.
Nevertheless, although Savills says the recent months have been a bedding-in process, many other in the industry say there are two other parts of the legislation that are problematical:
Overseas students: Timing is the main problem here. Agents specialising in students have to process a lot of Right to Rent checks in a very short period of time at the beginning of each academic year. ARLA says it hopes this will be sorted, but probably not until next year.
Headscarves and veils: The Act requires the identity of a prospective tenant to be established before they can move in or sign a contract. This will require that letting agents verify that they are who they say they are by comparing their ID with their face. So agents will have to ask prospective tenants to remove veils or headscarves and therefore have a female member of staff and a private room to do this – which will be difficult if you’re a one-room lettings agents with only male employees.
“It’s been raised as an issue in our offices, in particular about what to do in practice even though we do have the right, as Border Control does at the airports, to ask prospective tenants to show their faces so we can verify their identity,” says Theresa.
DOES RIGHT TO RENT AFFECT INSURANCE?
One area of Right to Rent that it would seem no one in government has thought about is insurance. Building and contents insurance is not affected by it but landlord insurance is, according to Richard Williams of specialist insurer Rentguard.
The company, which has been going since 2001 and is based in Brentford, Essex, offers landlord insurance but asks that the tenants pass standard reference checks before a landlord or agent can be offered cover.
We pay up to £3000 a month up to a maximum of £25,000 so we want to understand each tenant’s bill and rent payment history. Richard Williams, Rentguard.
“With our legal expenses and rent guarantee landlord insurance we pay up to £3,000 a month up to a maximum of £25,000 so we want to ensure that we understand each tenant’s bill and rent payment history; that they are who they say they are and that their address history has been checked,” says Richard.
But what’s less clear is what happens if a tenant has to be evicted from a property because they are subsequently found not to have a Right to Rent and then the property sits empty for a period of time. Would landlord insurance cover this?
A small industry has sprung up since Right to Rent was trialled in late 2014 to offer agents and landlords checking services to ensure they comply with the new laws.
“We have always covered any tenants from working professionals to asylum seekers provided that checks have been undertaken and now, with Right to Rent, we’ve introduced these more stringent
requirements into our tenant referencing service,” says Richard.
Another company involved in this sector is Let Alliance, which offers what it calls ‘global referencing’ including an ID check and cover against any fines levied against a letting agent for non-compliance.
When an agent collects the tenant’s ID or visa documentation we cross validate those documents using optical character recognition software. Jo Dickens, Let Alliance.
“What we do now is that, when an agent collects a copy of an ID or visa document from a prospective tenant and it’s on the approved list that the government supplies, we then cross-validate those documents using optical character recognition software,” says Jo Dickens, Head of Customer Development.
“This process will confirm several things including that the document is genuine, the tenant isn’t a ‘politically exposed person’ or on the sanctions list or on any money laundering registers.
“We will also confirm whether the person has a right to rent, a time-limited time to rent or no right to rent. Also, when the period of someone’s right to rent comes to an end, we will send a reminder to the letting agent.
“Some of our agents do these Right to Rent checks for all their tenants, partly to avoid any accusations of discrimination but also to cover themselves in case it later turns out the tenant didn’t have a right to rent – as we will pay any subsequent fines.”
However, what the third-party companies in this market can’t do is eyeball either the documentation or the tenants – the letting agent involved still has to do this. So there remains an implicit responsibility and, equally, a concern that agents are being required to judge prospective tenants without necessarily having the right tools to make the right decision.
Insurances for landlords