Landlords accused of ‘greed’ as thousands switch from traditional to holiday lets

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Landlords with properties within the UK’s key rural and coastal holiday hotspots have been accused of greed as many switch from traditional long-term rentals to holiday lets, ironically persuaded to do so by more generous tax breaks.

A councillor in Suffolk are the latest to berate landlords for switching properties to Airbnb or holiday cottage rental platforms.

Liberal Southwold and Reydon district councillor David Beavan told local media that: There will be no community left…I think they don’t rent locally as they make lots from holiday lets. It’s pure greed.

“The first problem locally has been [that[ prices are inflated and secondly holiday rents going up more rapidly and provide higher returns and are more profitable,” he says.

A property search on Rightmove makes the point; only three properties are available to rent outside of the county’s two ‘working towns’ while hundreds of properties are available on Airbnb at rents of £150-£200 a night which is five or six times the average monthly rent locally.

And while profits from these short-term lets have in the past been offset by long void periods during the low-season, restrictions on foreign travel during Covid means many have been fully booked for months on end over the past year-and-a-half.

Generation Rent has also campaigned on the topic, publishing a blog that also claimed holiday lets are pushing up rents for traditional properties.

Airbnb listings

It says Cornwall has 62 homes to rent on Rightmove but 10,290 AirBnB listings and that within one village in Wales, three quarters of the houses are holiday homes.

And as LandlordZONE reported recently, Anthony Mangnall, the Tory MP for Totnes, recently declared a housing emergency after local complaints about a shortage of rented properties.

Also, Generation Rent has launched a petition calling for the tax benefits afforded holiday let landlords but not traditional let landlords to be withdrawn, which 43,000 people have signed so far.

The NRLA agrees, saying recently that it wants “to ensure the tax system encourages the provision of longer-term rental property over short-term holiday lets.

“From April this year, the final phase of reducing mortgage interest relief for landlords to the basic rate of income tax will be completed.

“This measure does not apply though to furnished holiday lets. This has encouraged the removal of properties from the long-term market for use as short-term holiday lets.”

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Agents find themselves in the firing line for Rent Repayment Order

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The two tenant applicants, Jenny Dos Santos and Margarita Gandara brought the case against property agents L Hub London. The hearing was held by way of a remote video hearing, the only practical solution at the time, not being objected to by the parties.

The Applicants and Respondent (managing agents) each filed a Bundle of Documents of supporting evidence, references to which are made in this tribunal’s decision.

Applicant 1, Ms Dos Santos sought a Rent Repayment Order (“RRO”) in the sum of £7,260 against the Respondents pursuant to Part I of the Housing and Planning Act 2016. The Respondent being the Manager of the tenanted property at 22 Durham Road E16.

Applicant 2, Ms Gandara also sought a Rent Repayment Order (“RRO”) in the sum of £7,800 against the Respondents.

The applicants sought the rent repayments under Part 2 of the 2004 Act which relates to the designation of areas subject to additional licensing of houses in multiple occupation* (HMO).

Under section 56, a local housing authority (“LHA”) may designate an area of their district to be subject to Additional Licensing in relation to designated HMOs specified.

The London Borough of Newham, where the property was situated, introduced an Additional Licencing Scheme designating areas for Additional Licensing of all Houses in Multiple Occupation. The scheme came into force on 1 January 2018 and runs until 31 December 2022.

The tribunal was satisfied that the House required a licence under the Scheme as an HMO. It was common ground, the tribunal noted, that the rental property in question was not licensed.

Section 72 of the Act specifies that a number of offences in relation to the licencing of houses may be committed where a person having “control of or managing” an HMO which is required to be licensed, but is not so licensed.

A key point noted by the tribunal was that the section does not use the word “landlord” and section 263 defines the concepts of a person having “control” and/or “managing” premises. These definitions the tribunal concluded are wide enough to include a number of different people in respect of a property. “Where there is a chain of landlords, more than one may be liable. It may also extend to a managing agent.”

So in the tribunal’s interpretation of the Act “person having control”, in relation to premises, means (unless the context otherwise requires) the person who receives the rack-rent** of the premises (whether on his own account or as agent or trustee of another person), or who would so receive it if the premises were let at a rack-rent.

The tribunal relied on a previous Court of Appeal judgement in Rakusen v Jepson and Others (22 July 2021), which reversed an Upper Tribunal decision, concluding that section 40(2)(a) only enables an RRO to be made against an immediate landlord and not a superior landlord, a decision which the tribunal said was binding on the tribunal and that it was not open to the tribunal to make an order against the freeholder.

An exchange of emails between the Respondent (managing agent) and the freeholder in July 2016 was put forward referring to the need for a licence for the property, but no clear decision as to how this was to be handled was arrived at between them, and the Respondent continued to manage the property.

The Tribunal’s Decision

The Tribunal concluded that it was satisfied beyond reasonable doubt that the Respondents had committed an offence under section 72(1) of the 2004 Act of control of an unlicensed HMO.

The property required a licence under Newham’s Additional Licencing Scheme and at no time during both Applicants’ period of occupation, was it licenced or an application for a licence made.

The tribunal was further satisfied that the Respondents (managing agents) were “persons having control” of the property as they received the rack-rent of the premises from the Applicants.

The tribunal made a rent repayment order in favour of the Applicant 1 in the sum of £7260 and in favour Applicant sin the sum of £7800. The tribunal also ordered the Respondents to refund to the

Applicants the tribunal fees of £300.

The case highlights the importance of the need for both landlords and managing agents to check regularly with their local authority about any changes to local licencing rules.

*The Housing Act 2004 introduced licensing for houses in multiple occupation (HMOs). Licensing is mandatory for all HMOs which have three or more storeys and are occupied by five or more persons forming two or more households. Additional HMO licensing schemes enable councils to require licencing of HMOs which are not covered by mandatory licensing, i.e., an HMO where at least 3 tenants live, forming more than 1 household.

**In modern usage, the term rack-rent is usually a rent that represents the full open market annual value of a holding, often simply called the market rent. Less frequently, a rack-rent may also be “the maximum rent permitted by law”, or in an earlier interpretation, an extortionate rent.

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Agents find themselves in the firing line for Rent Repayment Order | LandlordZONE.

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Breathing Space scheme applications hit 17,000 three months after launch

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First figures for the government’s recently-introduced Breathing Space scheme which gives tenants greater protection from creditors including their landlords have been revealed.

Some 17,297 people registered for the scheme between May 4^th this year when it launched and the end of July, latest figures from The Insolvency service show.

For individuals, the Breathing Space scheme gives people legal protections from their creditors for 60 days, with most interest and penalty charges frozen, and enforcement action halted.

Those with mental health problems are given protection for the duration of their crisis treatment, plus another 30 days afterwards – although the latest data shows only 199 people took this up.

Rent arrears

The Insolvency Service figures do not separate out whether the Breathing Space scheme applicants included rent arrears in their agreements, but Shelter has said in the past that it is likely to be one of the key reasons.

This is because during the pandemic many tenants are likely to have prioritised paying off other debt such as payday loans, council tax arrears, gas and electricity arrears and personal loans or overdrafts, rather than rent while the eviction ban was in place.

The figures have been included in the government’s latest insolvency statistics which, despite the economic downturn during the pandemic, reveal that personal debt relief orders and bankruptcies have been climbing in recent months but are still lower than before the pandemic.

The Insolvency Service says this is not because people have been struggling less during Covid, but rather – it claims – that the government’s increased benefits and other financial support packages have been working.

As LandlordZONE reported in May HM Treasury warned tenants that the Breathing Space scheme was ‘not a rent payment holiday‘.

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The council that flouted policies to fine more landlords

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London Borough of Redbridge Council “secretly and informally” flouted its own policy in order to fine over 100 landlords in just six months.

Testimony from a senior officer in a 2019 court case reveals the council’s policy to try to resolve issues with landlords “informally” before issuing a fine was ignored “for a few weeks” that year.

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Splitting energy bills for tenants working from home?

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I’m posting this on behalf of an elderly landlord, who’s a friend. He owns a few 3-4 bed houses and rents it out by rooms to young professionals. All these years he has been splitting the monthly energy bills equally amongst the housemates

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