‘Who agreed to an illegal HMO – agent or landlord?’ – LandlordZONE

Suzy Hershman (main picture), Resolution Department Lead at HFIS, examines a shocking case her team dealt with recently and highlights what landlords can learn from it.

The case

A landlord with a four-bedroom property in East London alleged that his agent had rented the house to approximately 12 tenants, exposing him to a potential fine or prosecution as his HMO licence only allowed four people to live within it. 

Although he signed a guaranteed rent contract with the agent which was straightforward (albeit skewed in the agent’s favour), what’s disputed are the negotiations that took place before the tenancy started.

The landlord claims he did not agree to it being operated outside its licence conditions, while the agent says it was already over-crowded when they took on the property.

The agent has since refused to relinquish the house despite the landlord giving notice under the terms of the contract.

The local agent that the landlord used was a member of the Property Redress Scheme and therefore the landlord’s complaint came to us.

What happened?

This case began last year when, after finding that the property was overcrowded and that local people had been complaining about the tenants, the landlord asked that it be returned to him once the contract with his agent expired in April this year.

The second issue was that the agent had paid the landlord £300 a month less than agreed. Our case officer suspected that the landlord didn’t want to take all the money because he knew the property was being rented out illegally, but it was only a hunch.

Nevertheless, the agency took almost twice as much in rent as they are paying the landlord.

We felt that although the landlord and agent did have a written agreement, the agent behaved unreasonably and continues to do so by not relinquishing the property.

Therefore, an award has been given to the landlord for the poor conduct of the agent.

Agents should always keep good records of their dealings with landlords particularly when they are changing, agreeing or discussing important features of a tenancy. 

We felt this agent considered the landlord somewhat naive and that they could get away with taking advantage of him.

An example of this is that when the landlord gave notice under the terms of the rent guarantee contract, the agent claimed they couldn’t return the property to him until the tenants moved out – which is likely to be a long time – and that’s exactly what’s happened.

What are the key lessons here?

• Landlords and agents should record all their discussions and negotiations prior to signing contracts in writing – otherwise working out who’s telling the truth in a dispute can be difficult later on.
• Vet your agent very carefully – for example what’s their office like? How do their staff talk to people on the phone? Are they accredited and do they have valid redress membership displayed in their windows?
• Don’t assume rental contracts are balanced – some agents write them to be in their favour and not so much in your interests.
• If you’ve signed an agreement with an agency, it is possible to negotiate if you feel they are unreasonable – but very few landlords do.