Landlord Fined £7,500 Due To A Breach By Rent To Rent Operator

Hello readers,

As I plan for growth strategies that will support Home-Share in 2025, something that I regularly discuss with landlords is rent to rent (or guaranteed rent) schemes. It’s also the most common reason landlords do not choose to appoint Home-Share as their managing agent.

Simply put, rent to rent is where a landlord lets their property to a tenant for a given period (say five years) at a reduced rent on the premise that the tenant will be responsible for upkeep, finding tenants and managing them.

I can see how this approach is attractive for landlords. It appears to be hands off, you get rent whether the property is occupied or not and you don’t need to worry about the maintenance or management.

Whilst this might be how rent to rent is sold (and often understood), it’s actually a huge risk for landlords as they remain ultimately responsible for compliance.

I wrote about this back in 2021, under the title ‘Medway’s Rent To Rent Landlords & Operators Are Putting Themselves At Significant Risk’ and I recently came across an example of these risks from an HMO in Portsmouth.

In this case, a landlord was fined £7,500 for operating an overcrowded HMO even though it was being run by a local lettings agency using a guaranteed rent scheme.

The landlord, Iqbal Miah had signed a guaranteed rent arrangement with Elite Rooms Portsmouth Limited, operated by Shahed Ahmed. The guaranteed rent agreement even included a clause specifically prohibiting the agency from breaching HMO rules!

The property in question which is based in Manners Road, Portsmouth originally had a license for five people living in five separate rooms and an application was made to increase this to six people. As part of the application process, a housing regulation officer visited the property and what they found was a family of three living in one room, making a total of seven people living in the property – in breach of the license that was in place.

After the court ruling was made, the landlord Mr Miah made an appeal on the basis that his agreement with Elite Rooms stated that the agency would ‘not do anything in relation to the property which would cause the applicant to be in breach of any licence or other consent and ensure that nothing unlawful was done with respect to their management of the Property’, however it was not overturned.

The reason that the fine was upheld was that Miah was the one who held the license for the property and nothing had been done to ensure Elite Rooms was complying with HMO rules.

This is the problem with guaranteed rent arrangements and just one example of why I do not recommend them. For landlords, the risk around compliance is high and they remain responsible for the property even though they have signed that responsibility away and for guaranteed rent operators, margins are thin with significant financial risk.

What if there was a fire, a tenant died, and it was found that the guaranteed rent operator had not checked the fire system? In that instance, the landlord could even end up in prison!

Examples of other issues that could occur include unchecked maintenance leading to significant property problems, not properly vetted tenants including right to rent checks not being carried out and inspections / regular checks (such as fire alarm tests) not being carried out.

My recommendation is that landlords stay well away from these guaranteed rent schemes and if they would like to operate a single let or HMO, they work with a reputable lettings agent.

One red flag for Elite Rooms is that they appear to have very little online presence to back up their claims. Looking at companies house, they appear to have around nine members of staff, so seem to be a fairly large operation however since the ruling I wonder how their business has been affected. For example, I have seen that their manager Samad Khan has an open to work banner on his LinkedIn profile.

If you have any questions or comments regarding this, I’d be keen to hear them! The best way to reach me is by email on hasan@home-share.co.uk.

Hasan