Rent-to-Rent is where an individual or organisation leases the property from the property owner / superior landlord and then rents it out, sometimes on a room-by-room basis which could result in converting communal rooms into bedrooms and installing partition walls, to increase revenue. The full market rent or slightly above is ‘Guaranteed’ to the owner.
Property owners are being incentivised by promises of full market rent, no agency fees, no void periods, and no maintenance costs. The practice is legal as long as minimum legal housing standards are observed, the property has the necessary HMO license and deposits are protected.
However, the reality for tenants in unlawful cases is overcrowding, lack of fire safety features, loss of money and deposits and increased risk of suffering physical and mental health issues. Some tenants who live in Rent-to-Rent properties and have struggled to pay rent during the pandemic have fallen victim to unlawful evictions, harassment and properties in disrepair.
Al Mcclenahan from Justice for Tenants points out that there are many reputable Rent-to-Rent companies in the market which provide an excellent service but landlords must do their due diligence, as they could fall victim to an unscrupulous organised gang and later be held responsible if the property is used as an unlicensed HMO. Agents can play their part too by highlighting the dangers to their landlords. Mr Mcclenahan says “The main issue is that this business model is most successful when operating unlawfully. Criminal gangs are exploiting tenants by offering sub-standard accommodation in overcrowded conditions. The pandemic has brought more of these cases to the fore, as tenants who have then struggled to pay the rent are being unlawfully evicted or harassed for the money. The superior landlord’s name does not appear on any tenancy agreement and is not disclosed to the tenants so if the property falls into the wrong hands, they have nowhere to turn.”
Mark McLaren, Chair of The Property Ombudsman’s Consumer Forum, which meets three times a year to discuss emerging issues giving rise to consumer detriment, says: “Consumers only have access to redress if the Rent to Rent agency is a member of a redress scheme such as The Property Ombudsman. If it is a rogue company which operates as a landlord rather than an agent, it is unlikely to have this safeguard. Furthermore, criminals often set up as Limited companies, providing them protection as the business will shut down and reopen under a different limited company when challenged.
This is not only an issue of great concern for tenants, but also landlords who may struggle to get their properties back and could find them in a state of disrepair when they do.”