Landlords are being warned not to assume that appointing a letting agent automatically transfers responsibility for complying with rental regulations.
The warning follows the introduction of major tenancy reforms under the Renters’ Rights Act.
New tenancy rules took effect in England on 1 May. They increased the compliance burden on landlords and agents, with penalties of up to £7,000 for certain breaches. More serious or repeated offences can attract penalties of up to £40,000 as an alternative to prosecution.
However, liability depends on the particular legal obligation and circumstances. Government guidance says landlords can use agents to carry out their duties. Agents acting on their behalf can also be liable for breaches.
Paul Endacott of 1st Avenue believes landlords need to pay closer attention to how their agents manage compliance.
He said: “If your agent gets it wrong, the agent you pay to make sure you’re compliant and legal, you could be on the hook for non-compliance which carries severe consequences.”
Compliance becomes bigger part of agency role
Endacott argues that the changing regulatory environment is altering what landlords should expect from managing agents.
He said: “For years, landlords mainly judged agents on what rent they could get and how quickly they could find a tenant.
“That’s just nowhere near enough anymore, because property management is becoming a compliance risk management job.”
Landlords and agents now operate against a growing list of requirements covering tenancy management, deposits, safety, licensing and property standards.
Endacott said evidence of compliance was becoming increasingly important.
He added: “Right to rent checks, deposits, safety, licensing, legislation, more scrutiny from the local authority, and increasingly it’s the evidence you need to prove you’ve done everything properly.”
Who carries the risk?
However, the position is not identical across every area of regulation.
Right to Rent provides an important example. A landlord can appoint an agent to undertake the checks. If the agent accepts responsibility in writing, liability for a Right to Rent civil penalty rests with the agent rather than the landlord.
The Renters’ Rights Act also allows enforcement against landlords and people acting on their behalf. Government guidance says authorities should establish where responsibility for a particular breach lies and take action against the appropriate party or parties.
Endacott nevertheless urged landlords to scrutinise their agents’ procedures rather than assuming compliance has been dealt with.
“But outsourcing the job doesn’t automatically mean you’ve outsourced the risk,” he said.
“So, the question isn’t just, can this agent let my property?
“It’s, if something goes wrong, can I trust my agent has done everything correctly and prove it? Because a weak managing agent isn’t just frustrating anymore, it’s a financial risk.”
Penalties increase the stakes
Under the Renters’ Rights Act, councils can impose penalties of up to £7,000 for specified breaches of the tenancy rules.
Certain offences can instead result in prosecution or a civil penalty of up to £40,000. Repeat or continuing breaches can also escalate into offences.
Endacott said: “The biggest risk facing landlords today isn’t necessarily a bad tenant. It may be assuming someone else is managing compliance when, legally, the responsibility still comes back to the landlord.”
