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Letting agents could face legal action under selective licensing laws

Legal experts are warning that letting agents, as well as landlords, could be held accountable if they fail to obtain licenses for rented properties subject to selective licensing rules. 

Indeed, failure to license properties could see agents face prosecution either alongside or instead of landlords, according to Kirwans law firm, which also warns that those found guilty would face crippling fines and a criminal record. 

‘Councils such as Liverpool have made it clear that they will go after managing agents that they deem to be flouting the rules and will not hesitate to prosecute where they feel it is appropriate,’ said David Kirwan.

A managing agent in the city was given a criminal record and fined almost £4,000 back in September 2018 after pleading guilty to renting out 12 unlicensed properties from Liverpool City Council. 

At that time, around 1,700 legal notices had reportedly been served by the council since April 2015, when the city’s licensing scheme came into effect. It was also said to be considering around 1,300 cases for prosecution. 

Additionally, Liverpool City Council was shown to be the most prolific prosecutor of letting agents, with a total of 13 prosecuted in the four-year period between 2014/2015 to 2017/2018, as revealed in a Freedom of Information (FOI) request by the National Landlords Association earlier this year. 

By contrast, no letting agents had been prosecuted in over half of the 20 council jurisdictions assessed, while 32% of those councils had prosecuted three or fewer.

However, it’s not only Liverpool City Council that is pursuing letting agents. In May this year, Canterbury Magistrates Court ordered a landlord and their managing agent to pay £1,000 plus costs of £120 and a victim surcharge of £100 for renting out flats without obtaining a license from Thanet District Council.

Kirwan pointed out that Section 88 of the Housing Act 2004 states that the ‘proposed licence holder is out of all the persons reasonably available to be licence holder in respect of the house, the most appropriate person to be licence holder.’ It also states that the proposed house manager is either ‘(i) the person having control of the house, or (ii) a person who is an agent or employee of the person having control of the house.’

‘Clearly, the legislation anticipates that someone managing property, the subject of licensing, can also apply for and be granted a licence instead of the owner. In my opinion, many of the managing agency agreements operated by estate agents, etc. all over the country come within this bracket,’ he explained.

‘It is, of course, a matter for the property owner who can, and often does, obtain the registration in his name, particularly in cases where there is only a small portfolio of properties,’ he said.

‘Alternatively, if the property is being managed in every sense of the word by a letting agent, there is nothing to prevent the owner from delegating this function to the managing agent, who then applies for the licence. This surely is what an owner/landlord is looking for when he pays his commission to the managing agent,’ he added.

Kirwan also pointed out that according to Section 95 of the Housing Act, a person commits an offence ‘if he is a person having control of or managing a house which is required to be licensed under this part but is so not licensed.’ 

However, he adds that a managing agent, as well as an owner landlord, can claim ‘reasonable excuse’ if the landlord is registered under the Act, despite the potential for prosecution. 

‘Managing agents need to be on their guard and ensure that all properties on their books are covered by the relevant licences to safeguard themselves against legal action, while landlords should check the agreements and terms of business set out in the contracts with their agents,’ he added.

‘However, if the agent has agreed to apply on behalf of the owner of the registration, then it does not matter if that is not specifically referred to in the agreement. It would be better, though, to have such a provision that in terms of the management of the property, the application for and compliance of all the terms and conditions of any subsequent registration licence is included as an agent’s responsibility,’ he concluded.

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