To Sublet or Not to Sublet

You may have spotted the case of a tenant ordered to repay more than £100,000 in profits he’d made by unlawfully letting the council property he tenanted. It made the headlines because of the eye-watering sums involved, but the detail is also revealing. The subletting had been going on since 2013, and the vehicle used was Airbnb.

Airbnb makes the process of subletting remarkably easy, and as the platform is growing, it’s easy to see why tenants can be tempted to make a bit of extra cash on the side by letting a room or two for the odd weekend. After all, they’ve rented the space from you, so why not use it? If you’re still getting the rent in full, on time, what’s the problem?

Councils have obvious reasons for opposing the practice of subletting, but for private landlords, there can be benefits. There’s a substantial and growing market in Rent to Rent, where official tenants guarantee landlords full rental income for a period, removing the risk of arrears and non-payment, and the hassle of finding suitable tenants. Even without a Rent to Rent arrangement, subletting can work well. Say, for example, your original tenant wants to spend a few months travelling. By subletting to a reliable friend for that period, you can keep your rental income without incurring the costs of finding a new tenant or having a void period.

It’s also possible that subletting could turn out to be a nightmare. As in most things, there are extremes. Subletting could involve anything from giving an unofficial tenant sole occupancy, to renting a single room to a lodger throughout the working week. But, in the most extreme cases, some landlords have discovered their properties have been turned into unlicensed HMOs without their consent or knowledge.

So, where do you stand legally?

It depends upon what’s in your tenancy agreement. If you specifically state that the property cannot be sublet without your permission, then you’ll have the protection of grounds under Section 8 should the tenant breach the terms. If you don’t, it can get complicated.

Firstly, your legal obligations relate to the official tenant, not a third party. The actual occupiers assume your tenant is the landlord. Simple things like repairs and maintenance tasks become problematic, safety checks aren’t carried out. If your official tenant is trying to make as much money as possible, they might cram in more beds, damage can be caused, conditions can become unsafe and unsanitary.

Under these conditions, your investment property can become a liability. That’s why most mortgage lenders specifically ban subletting in buy-to-let arrangements. It’s why your insurance cover can be invalidated.

Every so often a case comes up where a landlord is left seriously out of pocket, so our message is to be vigilant. If a potential tenant comes along to view a property much larger than they would seem to need, be suspicious. Always have thorough referencing carried out. Build good relationships with your property’s neighbours. They’ll let you know if there are strange things happening. Do your regular inspections, and make sure it’s your tenant who meets you at the property. If they’re full of excuses why they can’t be there, be warned.

There’s no single answer as to whether you should allow subletting. It can work well. It can be a real headache. As an absolute minimum, we’d say, you should always be the one who gives permission.