London is famous for its booming property market. Because of buoyant rents and rising property prices people with money find it easy to profit from buying to let residential property in London. Landlords value rent and anyone who is able to pay high rent will find it easy to get accommodation in the metropolis. Agents generally only ask to see a UK bank account and a valid ID, like a provisional driving licence, for money laundering purposes. Other than that property firms know people value their privacy and find nosey agents off-putting. Therefore, operating in a competitive market, landlords and agents do not investigate their customers’ immigration status. Nearly all the provisions of the Immigration Act 2014 (“the Act”, which aims to create a “hostile environment for illegal migrants”) have raised eyebrows. António Guterres, UN High Commissioner for Refugees denounced the legislation as creating a “climate of ethnic profiling”. The requirements regarding renting property (in Part 3 (Access to Services), Chapter 1 (Residential tenancies), sections 20 – 37) will inevitably stifle business in the property market and have also been condemned as a “valuable tool for racist landlords”.
It had been initially reported that the scheme for landlords to verify tenants’ immigration status will run in just one area before 2015 and the Home Office claimed that:
The measures are intended to make it more difficult for illegal migrants to rent property and thus encourage illegal migrants to regularise their stay or leave the UK.
Further to the above, the scheme is in the process of being rolled out and as of 1 December 2014, landlords in Birmingham, Walsall, Sandwell, Dudley and Wolverhampton should carry out right to rent checks for new tenancy agreements to determine whether tenants have the right to rent in the UK.
The property provisions under the Act stem from David Cameron’s 25 March 2013 Immigration Speech and the Home Office’s Tackling illegal immigration in privately rented accommodation consultation. Subject to Schedule 3 (Excluded residential tenancy agreements) of the Act, section 20 (Residential tenancy agreement) sets out the type of circumstances to which the new restriction on letting applies.
Unless the arrangement falls into one of the exclusions set out in Schedule 3, all arrangements where a person is permitted to occupy a property as their only or main residence in return for the payment of rent are residential tenancy agreements. The wording of section 20(3) renders any lease, licence, sub-lease or sub-tenancy to fall within the meaning of a “tenancy”. So long as a right of occupation of premises for residential use exists and provides for payment of rent (whether or not a market rent and including any sum paid in the nature of rent) and creates a right of occupation (not excluded by Schedule 3) the provisions of the Act shall apply. Under section 20, subsections (2) and (3), where a landlord (L1) grants a tenancy to a tenant (T1) who then grants a licence to a lodger (T2), L1 will be the landlord in respect of T1 and T1 will be the landlord in respect of T2.
The provisions of the Act exclude leases where the lease agreement grants a right of occupation for a term of seven years or more and agreements to which the Mobile Homes Act 1983 applies. Moreover, Schedule 3 also excludes agreements which:
- grant a right of occupation in social housing, where the landlord or a local authority is already subject to an obligation to check the immigration status of prospective occupants, or the tenant has an existing tenancy and is seeking to exchange their home for an alternative tenancy
- grant a right of occupation in a care home
- grant a right of occupation in a hospital or hospice
- grant a right of occupation in any circumstances where the accommodation is arranged by a relevant National Health Service body which is acting in response to a statutory duty owed to an individual
- grant a right of occupation in a hostel (a building, or part of a building which is used to provide residential accommodation otherwise than in separate and self contained premises and board or facilities for food preparation, for persons generally or a class of persons) or refuge (a building which is used wholly or mainly to provide accommodation for persons who are seeking protection from abuse, such as a refuge for those who have fled domestic abuse or the victims of trafficking)
- grant a right of occupation in any circumstances where the accommodation is arranged by a local authority which is acting in response to a statutory duty owed to an individual, or is exercising a relevant power with the intention of providing accommodation to a person who is homeless or is threatened with homelessness
- grant a right of occupation that is provided to an individual by virtue of any of the specified provisions of the Immigration and Asylum Act 1999; the specified provisions empower the Home Office to provide accommodation for certain asylum seekers, failed asylum seekers and persons who have been granted temporary admission to the UK under paragraph 21 of Schedule 2 to the Immigration Act 1971, or temporary release under that paragraph
- grant a right of occupation in accommodation that is provided by an employer to an employee, or by a body providing training to an individual in connection with that training
- grant a right of occupation in a building which is used wholly or mainly for the accommodation of students and is either a hall of residence or is a building owned or managed by a higher educational institution or a body established for charitable purposes only; all halls of residence are therefore exempt, as is any accommodation provided for students directly by a higher educational institution
- are residential tenancy agreements where a student has been nominated to occupy it by an educational institution
Section 20(7) contains the power to amend Schedule 3, in case further categories of agreement need to be excluded from these provisions, or some should be brought within the scope of the restriction. Section 74(2) prescribes that an order under section 20(7) shall be subject to the affirmative resolution procedure.
Section 21 (persons disqualified by immigration status or with limited right to rent) specifies persons who are “disqualified persons” and therefore may not occupy privately rented property as their only or main home as a result of their immigration status. This provision also lays down those persons who have a “limited right to rent property” owing to their immigration status and generally illegal entrants to the UK and overstayers are “disqualified”. Moreover, those with a limited rights of entry or remaining in the UK have a limited right to rent.
Section 21(1) sets out those persons who are disqualified from occupying property. “Relevant nationals” as defined in section 21(5), namely British citizens, EEA nationals and Swiss nationals, have the right to rent property. By section 21(2), persons who need leave to enter or remain to be lawfully in the UK but do not have leave (or their leave is subject to a condition that would prevent them from taking up occupation at the premises) do not have a “right to rent”, i.e. are disqualified from occupying property under a residential tenancy agreement. Moreover, persons whose leave to enter or remain invalid, has ceased to have effect (whether by reason of curtailment, revocation, cancellation, passage of time or otherwise) will not have leave to enter or remain in the UK and so will not have a right to rent. Furthermore, a person who has leave subject to a condition that they reside at a specific address, which is not the address of the premises which are the subject of the agreement, will not have a right to rent that property.
However, section 21(3) allows the Home Secretary discretion to grant a person the right to rent notwithstanding his disqualification as a result of irregular immigration status.
Section 21(4) explains that certain persons – those who have been granted leave to enter or remain in the UK for a limited period of time, those persons who do not require leave to enter or remain as the qualifying family members of EEA nationals, or persons who enjoy a right to reside in the UK which derives from the EU Treaties – have a “limited right to rent”.
Section 22 precludes persons disqualified by immigration status from being leased premises. Section 22(1) demands that a landlord must not allow (“authorise”) occupation of property under a residential tenancy agreement by an adult if they are a disqualified person. Section 22(2) states that the preceding subsection will only – “if and only if” – be contravened by a landlord where the circumstances envisaged in section 22(4) and (5) are engaged, i.e. (i) where a landlord enters into an agreement which allows a disqualified person to occupy the property; (ii) and while at the time the landlord enters into the agreement the tenant has the right to rent but that right extinguishes while he remains in the property.
Section 22(6), read together with section 22(4), makes it clear that a person does not have to be named in a tenancy agreement for these provisions to apply. A landlord is expected to make reasonable enquiries regarding the persons who will take up residence under an arrangement before entering into an agreement and even if the individual is not specifically named in any written agreement, the landlord will be responsible for them if they have authorised their occupation or should have been aware of their occupation, from the making of reasonable enquiries.
An anti-avoidance provision is found in section 22(7) whereby a landlord cannot escape liability for a penalty by relying on a provision in a residential tenancy agreement which states that a disqualified person is not permitted to occupy the premises if he later enters into a side agreement allowing a disqualified person to take up residence without undertaking the required checks or if the landlord otherwise waives a breach of such a provision. Section 22(9) confirms that the restriction housed in section 22 does not aim to affect the validity or enforceability of any provisions of a residential tenancy.
Section 23 (Penalty notices: landlords) sets out the penalty for landlords who allow disqualified persons to take up residence in a property as their only or main home. Under section 23(1) and (2) the Home Secretary is empowered to impose a penalty of up to £3,000 on a landlord for each disqualified adult that they allow to occupy property.
Section 23(3) determines which landlord is responsible for a penalty. In instances where liability for a penalty arises because the landlord entered into the agreement which allowed occupation by a disqualified person, then the landlord who entered that agreement will always be responsible. This aims to stop landlords selling property with sitting tenants from transferring the burden of a penalty onto the new owner who had no involvement in selecting or checking the occupants. Moreover, in situations where a penalty is imposable because a tenant was allowed to occupy premises at a time that they had a right to rent, but has subsequently become a disqualified person who remains in occupation, the landlord at the time of the contravention will be responsible. The result is that in instances where a landlord buys the freehold of a property with sitting tenants, responsibility will vest in them for (i) ensuring that any checks are undertaken in respect of occupants who have a limited right to rent at the required intervals and (ii) taking the prescribed steps should those occupants subsequently become disqualified persons.
Section 23(4) and (5) provide for the transfer of responsibility from an immediate to the superior landlord. Section 23(5) allows a landlord to pass responsibility for a breach to a superior landlord where the latter is willing to accept that responsibility. For example:
A landlord (L1) who grants a tenancy to a tenant (T1) who then grants a licence to a lodger (T2), if T2 is a disqualified person, T1 will be the responsible landlord, unless L1 and T1 have agreed between them in writing that L1 will accept responsibility for T2 for the purposes of this scheme. L1 and T1 may determine the extent to which L1 will accept responsibility; for instance, L1 could agree to undertake responsibility only for specifically named occupants, or only for pre-grant, and not post-grant, contraventions.
Section 23(4) provides that where such an agreement has been made between the landlords regarding the transfer of responsibility, the superior landlord will be the responsible landlord for the purposes of the scheme, and references (in Part 3, Chapter 1 of the Act) to the landlord should be read as referring to the superior landlord.
By section 23(6) the Home Secretary may amend by order, which under section 74(2) is subject to the affirmative resolution procedure, the sum (i.e. pecuniary value) of the penalty expressed in section 23(2).
Section 24 (Excuses available to landlords) contains statutory excuses landlords can rely on to avoid a penalty for renting to a disqualified person. An excuse can be established where a landlord can show that he carried out the checks specified under the prescribed requirements which demonstrated that the prospective occupant was not disqualified. Moreover, a landlord, including a superior landlord who accepts responsibility on behalf of an immediate landlord under section 23(5), also has an excuse if he arranges for an agent to do the checks for him (section 24(2)).
Section 24(3) and (4) expresses the duration before a tenancy commences within which the checks must be carried out. As regards settled persons in the UK, the checks may be carried out at any time prior to the tenancy being created. In respect of persons subject to immigration control and/or persons with a limited right to rent, the checks must be conducted within a set period (to be specified by order) before the tenancy commences. This is a preventative measure designed to preclude a “perverse” situation whereby inquiries disclose that a person’s leave will expire before the tenancy begins but a landlord is nevertheless able to rent to them because they had valid leave at the time the check was undertaken.
Section 24(6) provides that where an occupant’s visa expires during the course of a tenancy, the landlord can establish an excuse by carrying out repeat checks at the specified intervals, (or arranging for an agent to do so), and by subsequently informing the Home Secretary that a disqualified person is in occupation in their property if the repeat check confirms that the person’s limited right to rent has been invalidated. The landlord, or their agent, must make report this to the Home Secretary as soon as reasonably practicable after making the repeat check.
Section 24(7) explains the circumstances where a landlord can be said to have notified the Home Secretary “as soon as reasonably practicable,” i.e. complied with the prescribed requirements in relation to each limited right occupier at the end of the eligibility period, and notified the Home Secretary of the contravention without delay on it first becoming apparent that the contravention had occurred. Section 24(8) stipulates the notification to the Home Secretary to be made in the prescribed form and manner which will be specified by order and section 24(9) defines “limited right occupier” to mean an occupier who had a limited right to rent when first granted a right to occupy the premises.
Section 25 (Penalty notices: agents) contains the circumstances in which a landlord’s contractual agent conducting checks on an occupant’s right to rent can incur liability for any breach of the restriction regarding renting to disqualified persons. By section 25(2) an agent may be liable where he acts in the course of a business and entered into a written agreement with the landlord that he was under an obligation to comply with the prescribed requirements on behalf of the landlord. Under section 25(3) and (4) the Home Secretary can impose a maximum penalty of £3,000 on an agent for each disqualified adult who is allowed to occupy property but section 25(5) allows the maximum amount of the penalty specified in section 25(4) to be varied by order (which is subject to the affirmative resolution procedure).
Section 26 (Excuses available to agents) provides statutory excuses to agents in case they are engaged to check an occupant’s right to rent, but a disqualified person is allowed to occupy a property. It applies where an agent is given notice under section 25 requiring payment of a penalty. By section 26(2) and (5), the agent has an excuse either where they can demonstrate that they carried out relevant checks and the checks did not show a person to be disqualified or where the agent told the landlord that the occupant was disqualified before the tenancy commenced. As regards the latter situation, the particular arrangements expressed in the agency agreement may govern the relevant landlord the agent must report to. Where the agent has been instructed by a superior landlord who has accepted responsibility for compliance with the scheme under section 23(5), in order to ensure that a residential tenancy agreement which breaches the prohibition in section 21 is not granted, they may be instructed to provide a report to the immediate landlord as well as the superior landlord. Section 26(3) and (4) provide the duration before a tenancy commences within which the checks must be carried out, applying the same rules as in section 24 (Excuses available to landlords).
Under Section 26(6), as regards an occupant who became disqualified during the tenancy, the agent has an excuse where he did carry out repeat checks in relation to the occupant at the specified intervals, and informed the Home Secretary that a disqualified person is in the property if the repeat check identifies that the person’s limited right to rent has been invalidated. An agent must make this report as soon as reasonably practicable after making the repeat check. Section 26(7) explains that an agent can be said to have notified the Home Secretary and the landlord of a contravention “as soon as reasonably practicable” if he complied with the prescribed requirements in relation to each limited right occupier at the end of the eligibility period, and notified the Home Secretary and the landlord of the contravention without delay on it first becoming apparent that the contravention had occurred. Section 26(8) requires notification to the Home Secretary to be made in the prescribed form and manner that will be specified by order.
For a landlord or agent to rely on the excuses provided for in sections 24 or 26, they must comply with the times at which repeat checks must be undertaken within the timescales set out in section 27 (Eligibility period). A landlord renting to a person with limited leave in the UK should check that the tenant has not become disqualified from either before their leave is due to expire, or one year after the tenancy begins, whichever is the longer period.
Practically, where a landlord grants an agreement allowing use of a room to a visitor who has six months’ leave to remain in July 2015, the landlord will not need to undertake a repeat status check until July 2016 to maintain a statutory excuse against a penalty. Similarly, where a landlord lets property to a student a four years visa in July 2015, a repeat status check need not be undertaken until July 2019. Where the tenant has indefinite leave to remain, a repeat check not need be undertaken by the landlord despite the fact that the tenant’s biometric residence permit may need to be renewed within a period of 10 years and the landlord can rely on the fact that the tenant holds indefinite leave to remain and therefore no further check is required.
Section 28 (Penalty notices: general) sets out the requirements for Home Secretary as regards the issuing of a penalty notice to a landlord or agent. Section 28(1) explains that as a matter of law, prior to serving a penalty notice the Home Secretary does not have to establish whether the landlord or agent can prove an excuse. “Landlord” includes a superior landlord who has accepted responsibility in relation to compliance with the scheme under section 23(5). In line with the provision laid down in section 23(4), the superior landlord will be the responsible landlord. Under section 28(3) a separate penalty notice can be given for each disqualified adult occupying the premises.
Section 28(2) prescribes the contents of a notice which must specify why the Home Secretary considers the landlord or agent liable and provide particulars of the amount of the fine, how it should be paid and set out a deadline for payment that is more than four weeks away. The notice should specify the manner in which the landlord or agent can enter an objection and pursue an appeal to the penalty. No notice can be given if a year or more has passed since a disqualified person occupied a property, unless a new notice is being issued under section 29(6) following consideration of an objection made by a landlord or agent and the original notice was given within that 1 year period. Section 28(4) states that in circumstances where a penalty notice is given to two or more persons who jointly constitute the landlord or agent, then those persons are jointly and severally liable for the penalty.
The procedure by which a landlord or agent may object to a penalty for renting property for use by a disqualified person and by which the Home Secretary must consider objections is set out in section 29 (Objection) and section 29(1) and (2) provide that a landlord or agent may object to his liability to the imposition of a penalty and its sum. A landlord or agent may also object on the basis that he is not liable, is excused payment because he has complied with their obligations – section 24 for landlords or section 26 for agents – or that the fine imposed is excessive.
Section 29(3) explains that an objection to the Home Secretary must be made in writing within a timeframe that will be clarified in an order and must provide reasons. For her part, by section 29(4), the Home Secretary is obliged to consider the objection, in light of the Code of Practice issued under section 32 and in line with section 29(5) she may decide to cancel the penalty, change the amount which must be paid as a result of the objection either by reducing or increasing it, or take no action and leave the penalty notice as it stands. Under section 29(5) the Home Secretary must notify the agent or landlord of the decision within a set period that will be prescribed by order.
Section 30 (Appeals) enables the landlord or agent the right of appeal where they want to challenge decision on their objection to a penalty and it also ensures a right of appeal should the Home Secretary fail to respond to an objection within the required timeframe. Section 30(1) provides that a landlord or agent who receives a penalty may appeal to a court on the grounds that they are not liable to the penalty, the penalty is excessive, or he or she is excused from payment having complied with the specified requirements. By section 30(2) the court may allow the appeal and cancel the penalty, allow the appeal and reduce the penalty, or dismiss the appeal.
By section 30(3), appeals are to be determined in light of the code of practice under section 32 and may include matters that were unknown to the authorities. Under section 30(5) a landlord or agent must already have made an objection under section 29 before an appeal may be brought and section 30(5) and (9) set out the time limits within which an appeal must be brought.
Section 31 (Enforcement) enables the Home Secretary to take action to recover money owed under a penalty notice without first issuing a substantive claim with a court. A penalty due may be recovered as though it were due under an order of a court and the sum owed may be registered with the court, and enforcement action pursued without further order.
- the criteria to be applied in deciding whether to impose a penalty and the amount of that penalty
- guidance regarding when a person will be considered to be using premises as their ‘only or main residence’ for the purposes of these provisions, with particular emphasis on holiday lets and lets made in connection with business travel
- details of the steps landlords (including superior landlords who accept responsibility for compliance with the scheme under section 23(5), following the glossing provision at section 23(4)), and agents will reasonably be expected to take to determine who will be occupying the premises under the terms of a residential tenancy agreement.
Section 32(5) stipulates that the code of practice should be periodically reviewed and section 32(6) prescribes that the code, and any amendments to it, may not be issued unless a draft has been laid before Parliament and comes into force by order of the Home Secretary.
Section 33 (Discrimination) provides that the Home Secretary must issue a code of practice to landlords and agents setting out how to avoid contravening the Equality Act 2010 or the Race Relations (Northern Ireland) Order 1997 while avoiding liability for a civil penalty. Like the code of practice in relation to the residential tenancy provisions, the Home Secretary must review the code of practice on discrimination and any amendments must be laid before Parliament.
Section 33(3) and (4) mandate that prior to issuing the code of practice, the Home Secretary must consult with the Commission for Equality and Human Rights, the Equality Commission for Northern Ireland and those representing landlords and tenants’ interests as considered appropriate before issuing or reissuing the code. After consultation, a draft code must be laid before Parliament and consideration of representations made under section 33(3) (4)(b), with or without modifications to reflect the representations, and the code will come into force by order of the Home Secretary. Under section 33(6), a breach of this code will not make a person liable to civil or criminal proceedings, but may be taken into account by a court or tribunal. A prototype code of practice on anti-discrimination has been published by the Government.
Under section 35 (Transitional provision), subsections (1) and (2), landlords who allowed tenants to occupy their premises prior to these provisions’ entry into force are not required to conduct checks in relation to the immigration status of their tenants. Any new arrangements made between landlords and tenants where they were previously parties to another agreement and the tenant has enjoyed a continuing right of occupation of the premises will also not be subject to the restrictions. To aid flexibility section 35(3) enables the Home Secretary to pick by order the commencement day for the purposes of this section, and allows different days to be appointed for different purposes or areas. The provision is subject to the general commencement powers set out in section 75(3) and so will be brought into force by an order made under the procedure specified for that provision.
Implementation of the provisions in Chapter 1 (Residential tenancies) of Part 3 (Access to services etc) relating to residential tenancies will be implemented on a phased geographical basis across the UK. Initial implementation will be commenced by order (which is not subject to any parliamentary procedure). Set out at the final provisions in Part 7, section 74(7) provides that any subsequent order made under section 75(3) putting the provisions of Chapter 1, Part 3 is subject to the negative resolution procedure.
Under section 36 (Crown Application), save where the Crown is itself the responsible landlord, the restrictions on letting apply to residential tenancy agreements made in respect of premises which are on Crown lands. In cases where property on Crown land is tenanted to someone who is not a Crown body, the tenant will be bound by the scheme in the event the elect to sub-let the premises.
Section 37 (Interpretation) defines the terminology used. With a view towards empowering the Home Secretary to deploy anti-avoidance measures that ensure that illegal migrants are not able to escape the law by claiming that their only or main residence is overseas, section 37(6) allows the Home Secretary to lay down by order scenarios which will or will not be treated as entering into a residential tenancy agreement and situations whereby a person will or will not be considered to be occupying premises as their only or main residence for the purposes of the Act. Under section 74, the order is subject to the negative resolution procedure.
Because it remains impossible to know someone’s right to remain in the UK without looking at their papers, these provisions will apply to everyone who rents property and of course non-whites will be singled out for discrimination. Thus, it is unsurprising that Liberty’s director Shami Chakrabarti – who is an expert on the Home Office’s endless “bad legislation” – chose to these describe these provisions as “nasty”.
Given that the penalties for employers as regards employing illegal immigrants are virtually ineffective as one can see the same people working illegally in the same restaurants and shops for years and years, it will be interesting to see whether the requirements regarding residential tenancies actually amount to anything.
The Residential Landlords’ Association (RLA) – which voiced “serious misgivings” with the government – described the new laws as “bureaucratic and overly cumbersome” and in its Response to the Home Office’s consultation on immigration checks for tenants, the RLA was concerned that the provisions of the Act:
- put the onus on untrained civilians not officially trained staff
- will not be effective
- are bureaucratic and overly cumbersome
- will lead to increased discrimination – on this point the RLA said that there is no doubt that implementing the provisions will lead to unintended, but increased, discrimination against migrants, with some landlords refusing to house migrants for fear of falling foul of the new rules
- lead to further friction in the landlord/agent relationship
- place an additional burden of cost on landlords
- may also lead to “increased activity in the hidden economy”