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How to guide your buy-to-let clients

How to guide your buy-to-let clients

With government giving landlords greater responsibility for checking tenants Simon Kenny, senior solicitor at Moore Blatch, looks at the impact this could have for advisers.

Mortgage brokers with any residential property investor on their client list need to watch out for new changes being rolled out, following the recent Immigration Act.

On 14 May this year, the Immigration Act became law and landlord clients will legally have to check the immigration status of their tenants before renting out a property to them.

Although landlords are not expected to have expert immigration knowledge, ignorance of the new rules will certainly not be a defence. Landlords may be fined up to £3,000 if they don't comply with the new legislation.

There are even instances where they may face the penalty of imprisonment if they know tenants to be in breach of immigration law and choose to help them.

Some measures included in the act regarding the immigration checks have yet to be implemented, so there is still time for brokers and their landlord clients to familiarise themselves with the regulations, although a pilot is proposed to start as early as October 2014.

Brokers do need to be clear on the legislation so that they can offer their buy-to-let clients sound advice and detailed guidance for landlords will be published before October.

Also, an online check, whereby the immigration status of a prospective tenant can be found, is likely to be introduced together with a free phone checking service. There are also methods to object to the penalty and to appeal via the courts.

If a tenant's immigration status has a time limit, the landlord must also make a new check every year on this, or to conduct the check prior to the expiry date if that is later.

Some property is exempt from the proposals, such as social housing, student and tourist accommodation, but most privately rented accommodation is impacted by this. If a landlord thinks illegal immigrants may be living in a property, there would be no liability to the penalty if it were reported to UK Visas and Immigration.

The responsibility to make the checks can also be transferred to a letting agent if this is agreed in writing.

If, however, your landlord client is going to take on the responsibility themselves, there are a few pitfalls to look out for.

Lack of knowledge or awareness is a key problem. Although immigration checks before employment starts have been required of employers for over 15 years, many people are still not aware of them.

Document checks are not quite as straightforward as presented. Even those who have substantial knowledge of the requirements can misinterpret immigration documents presented by a potential tenant. This is illustrated by the recent difficulties of the former immigration minister Mark Harper, who resigned in February this year, having employed a domestic worker without the correct permission.

Finally, you need to think about liability issues as there is at least some possibility that, in conducting these checks, landlords may become open to civil or criminal penalties.

Key advice to brokers working on behalf of their landlord clients is to remain aware of the status of the Immigration Act and its implementation dates. The guidance which will be published by UK Visas and Immigration also needs to be read and properly understood.

Landlords should also assess whether the current referencing checks they make cover this in order to protect themselves from any liability. Since there is a new financial penalty possible, we would also suggest brokers advise their landlord clients to consider taking out insurance against any possible liability.

Source: Mortgage Solutions




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