Landlords are leaving themselves exposed to the country’s worst tenants by failing to carry out basic checks, AXA has warned.
Research carried out by the insurance firm revealed that almost 60% of tenants admit to breaking the terms of their rental agreement, and a third had broken the law in relation to their rental.
For example, 26% of tenants pay their rent late (equivalent to 2,158,000 tenants nationwide) and one in 10 tenants admit to having done a moonlight flit to avoid paying the landlord money.
In addition, 18% have kept pets in the property without the landlord’s permission, 15% have received complaints from neighbours for excessive noise and 8% have sub-let to someone else without the landlord’s permission.
At the most serious end of the scale, 8% of tenants – equivalent to two thirds of a million tenants nationwide – admit to actually committing a crime on the landlord’s premises, and 10% say they’ve had the police called to the property.
Landlords do carry a legal responsibility to ensure that their premises are not used for criminal purposes. Under the Misuse of Drugs Act, landlords can face prosecution if a tenant is found to be producing cannabis or banned substances on their property.
In October, the new Immigration Bill is also set to come into force, placing greater responsibilities on landlords to vet their tenants. Under the new law, landlords who fail to check a tenant’s right to be in the country will face a fine of up to £3,000 if the slip-up means they have someone on their property who is in the country illegally.
AXA warns that while the responsibilities on landlords to keep their houses in order are getting stricter, many are still failing to carry out any checks on their tenants or even visit their properties at all. The research found that 38% of landlords carry out no checks on prospective tenants, and only 5% carry out a criminal record check. Meanwhile, a third of landlords never visit their property during a rental.
And despite many landlords relying on rental income to cover expenses such as mortgage payments and basic living costs, few of them check if their tenants have the means to pay their rent. Just under a third of landlords: a) carry out a credit check (31%), b) ask for employer references (27%), or c) ask for references from previous landlords (29%).
Tenancy agreements are also an important part of the picture, giving the landlord a firm foundation to evict non-paying tenants or claim damages for financial loss caused by the tenant. AXA found that landlords are getting better on this front – this year’s study revealed that 75% of rentals are now based on a formal agreement, compared to just 52% at the beginning of 2013.
“During the recession, we saw a significant increase in the number of accidental landlords – people who never expected to rent out their property, but couldn’t sell a former home or needed the additional income. With a booming rental market, they aren’t going anywhere,” said Darrell Sansom, managing director at AXA Business Insurance.
“When you first start renting out property, you may not realise all the legal implications and duties involved. Last year, for instance, we found that a third of these landlords are, often inadvertently, breaking laws on safety checks, and a quarter have the wrong or no insurance.
“In addition, landlords are under more scrutiny and subject to heavier legal penalties than ever before. HMRC launched a crackdown on landlords whose tax affairs aren’t in order this March, and May’s Immigration Bill introduced fines for landlords who fail to check a tenant’s right to be in the country.
“While legislation toughens, we need to make sure that enough is being done to inform and educate landlords too. Certainly, our experience is that many new landlords aren’t wilfully failing in their duties, they simply aren’t aware of all their obligations and commitments.”