“Right to Rent” – Should Trustees be Worried?

 In Trusts

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The Immigration Act 2014 in effect requires property holders to police an individual’s right to live in the UK.

Whilst the Act talks about “letting” and the payment of “rent”, the Code of Practice, published by The Home Office in May 2016  – The Code, makes clear that “rent” has a very broad definition.  At paragraph 3.6, the Code states:

(I) In some limited circumstances, a landlord may consider that due to a pre-existing relationship with the occupier, they already know enough information about their immigration status to allow them to proceed and let to them without undertaking status checks. For instance, an adult child who remains in, or returns to the family home after completing a course of education or training, and who makes a financial contribution towards their board may be a licensee and so fall within the scope of the Scheme. In this situation the landlord may be the occupier’s parents, who have full knowledge of their adult son or daughter’s immigration status and so have no need to undertake a right to rent check.

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Right to rent provisions

If an adult family member making a contribution to the house-keeping can bring their occupation within the “Right to Rent” provisions, what is the situation where a beneficiary occupies trust property and makes any form of financial contribution?

The Code’s analogy of a family member making a contribution towards house-keeping is unhelpful from a trustee perspective, suggesting as it does that any financial contribution potentially brings the occupation within the right to rent provisions, whether or not that was Parliament’s intention.  On the basis of paragraph 3.6, any arrangement whereby the occupant pays any of what would normally be a property owner’s responsibility (e.g. ground rent, service charges, insurance, possibly repairs and maintenance) may trigger the Right to Rent checks.  This is likely to be so, even if the occupant pays directly to the third party rather than reimbursing the trustee.  It is unlikely an occupier’s payment for utility services (gas, electricity, water, council tax, broadband) will trigger the Right to Rent checks on their own, provided that they are not part of a wider “service” provided by the trustee.

As matters stand, where trustees allow any adult person to occupy trust property as their only or main residence, the trustee should probably comply with ss.20-37 Immigration Act 2014 – i.e. verify that each adult has a “right to reside”.  Failure to comply with the required checks is subject to a civil penalty – a fine of up to £3,000.

Despite questions being raised with government by professional bodies (e.g. STEP), such enquiries remain unanswered.

Which properties are subject to the Right to Rent rules?

The Right to Rent provisions apply to new tenancies in England starting on or after 1 February 2016, and any new tenancies starting on or after 1 December 2014 in the following local authority areas (the Pilot Areas):

  • Birmingham City Council
  • Dudley Metropolitan Borough Council
  • Sandwell Metropolitan Borough Council
  • Walsall Metropolitan Borough Council
  • Wolverhampton City Council

New tenancies do not include where a tenant is already in occupation under an existing tenancy and either renews or varies the terms of that tenancy.  However, a new tenancy will arise if there is any change to the identity of the tenants (e.g. the tenants are A, B and C and the tenancy is “renewed” in the names of A, B and D).

At the time of writing, no dates have been set to extend the Right to Rent checks to Scotland, Wales or Northern Ireland (if at all).

What are the Right to Rent requirements?

An individual has a right to rent if they are:

  • a British Citizen
  • a European Economic Area (EEA) national,
  • a Swiss national
  • lawfully in the UK under immigration laws, or
  • granted permission to rent by the Secretary of State.

Before tenants are allowed into occupation, the “landlord” is required to have documentary evidence of the Right to Rent for every adult who will occupy the property as their only or main residence (in the UK).  Paragraph 5.2 of the Code lists those documents which are acceptable.  The landlord must keep copies of the documents obtained, in order “to establish a continuous statutory excuse”.  If the landlord allows anyone to occupy property as their only or main residence without ensuring either that the individual qualifies under the Immigration Act, or without retaining copies of the relevant documents, the landlord may be subject to a fine of up to £3,000 for each failure.

Individuals may have a time limited right to rent.  Provided that right has not expired before a new tenancy starts, they may validly enter into a residential tenancy agreement.  However, if the individual still occupies the property as their only or main residence in the UK when the right expires, the landlord is required promptly to notify the Home Office (via https://eforms.homeoffice.gov.uk/outreach/lcs-reporting.ofml).

Children (i.e. individuals under 18 years of age) are outside of the scheme, even if they turn 18 during the course of the tenancy.  However, should a repeat Right to Rent check be required once they are an adult, they will need to satisfy those checks at that time.

Sub-letting

If a person in legal occupation of a property sub-lets, they will normally be the “landlord” and responsible for compliance with the Right to Rent obligations.  However, they can ask their own “landlord” to accept responsibility.  The Code (at paragraph  4.1) states that unless the superior landlord gives written agreement, the tenant remains responsible for ensuring compliance with the Right to Rent provisions for the sub-letting.

Live-in Carers

Where a carer “lives-in”, they may occupy the property as their only or main residence, in which case the Right to Rent provisions are likely to apply.

How can a landlord manage their risk to penalties?

Where there is a written agreement between the landlord and their agent, that the agent is responsible for ensuring compliance with the Right to Rent provisions, the agent, and not the landlord, will be liable for any fines.  Whilst, for this “excuse” to be effective, the agent does not need to be a letting or managing agent, they must be acting “in the course of business”.

Excluded arrangements

Tenancies outside of the Right to Rent regime, include:

  • holiday lets (provided the rental agreement is neither open ended, nor could extend beyond 3 months)
  • social housing
  • local authority housing
  • care homes, hospitals, hospices and accommodation arranged by the NHS as part of a package of continuing health care
  • mobile homes, unless occupied other than solely by the mobile home owner(s)
  • tied accommodation
  • leases which grant a right of occupation of 7 years or more

Summary

Whilst it might not have been Parliament’s intention, the Right to Rent provisions may apply to the occupation of trust property by beneficiaries.  To protect themselves, trustees should seek to ensure compliance with such provisions.

Trustees should be aware of the identity of all adults occupying trust property as their only or main home.

Where formal tenancy arrangements are to be put in place, whether with beneficiaries or residential tenants, the landlord can avoid the potential for fines by formally contracting with their agent for the agent to complete the Right to Rent checks.

Many law firms recommend that landlords make annual checks to confirm who occupies property, and that they comply with the Right to Rent provisions (where appropriate).

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