William Kay

The risks of being a modern landlord

The risks of being a modern landlord
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The spate of terrorist attacks in London and Manchester has made many landlords and their insurers nervous about the risks of letting strangers rent houses, flats or even rooms without even closer checks.

This is not about getting money upfront, though that can act as a deterrent. No, it is the still thankfully tiny but nevertheless horrific danger that your property will be used as part of a terrorist cell, exposing it to potentially huge damage if an explosive experiment goes wrong, along with the possibility that it will be out of bounds during a police investigation and the neighbourhood’s reputation blackened for years.

Until recently, the government was all for encouraging bedroom lets, and firms like Airbnb have introduced a degree of informality to the whole rental procedure. Social media, credit card details and smartphone photographs seemingly made it foolproof. All you had to do was collect the money.

Airbnb does conduct thorough background checks, including reference to the terrorist register of the US Office of Foreign Assets Control. But false identities are the bread and butter of intending villains, and Airbnb admits its checks 'are never a guarantee that a person won’t break the law in the future'. Several UK terrorists have had no previous convictions.

There is a clear incentive for plotters to gain an address and a base in a town or district with no previous links to anything untoward. We cannot assume that they are going to look like semi-militia with suspiciously bulky luggage. One of the London Bridge attackers wore an Arsenal shirt.

Bombs will continue to be a threat, but recent outrages have required no more than a van and several knives. The skills to use those items are considerably less than for making bombs.

Of course, there have been dodgy tenants since the beginning of time. In the nature of things, there are a high proportion of transients, often between jobs or marriages, frequently with uncertain sources of income and sometimes keen to disguise their identities.

Experienced landlords and ladies soon learn how to sniff out the wrong ‘uns, although that may not always be true of the more callow employees of managing agents.

It is always instructive to follow the money. Insurers are becoming more fussy about the types of residential property they will cover, and the uses to which they are put. And premium rates are rising, reflecting greater caution, which eats into property owners’ profits.

What can you do to protect yourself, as a landlord, in addition to the normal questions about keeping pets or playing musical instruments?

* Like insurance companies, put up financial barriers. Ideally, raise your rents but, if you cannot afford to risk losing business, demand higher deposits. Instead of demanding a month’s rent in advance, step it up to six months. That will not deter the wealthy, but terrorists tend to have limited resources.

* Ask where they expect to find the rent money. A recent wage slip will be highly reassuring, if it is about four times the commensurate rental period.

* Tenants can be asked to prove they have the right to rent, and to be in the UK. You can be fined or imprisoned for renting to someone who is not allowed to stay in England.

* Take your time over running a credit check. You have to obtain the would-be tenant’s permission, so they will know what you are doing. In the worst case they may have anticipated this. Nothing is foolproof.

* Demand the name and address of a guarantor. Again, this may have been built into a false scenario, but it gives you another set of claims to test and be convinced by - or otherwise.

* Demand a biometric residence permit or a birth certificate along with a Council Tax bill. The government website stresses that it is against the law to check only those people you think are not British citizens.

* Ask the Home Office for verification if the putative tenants hold identification documents, or if the applicant has an appeal pending.

* In the tenant’s presence, try to ensure that their documents are genuine, take copies, and satisfy yourself that the photos really are of the applicant. If names differ, examine a trail of supporting documents, such as marriage licences, to account for the discrepancy.

* Ask for their last three addresses, and take up references. If the applicants are young enough, you may have to resort to their parents or guardians. As some terrorists have proved to be acting behind their parents’ back, the attempted rental may be news to them.

* Don’t be afraid to find out about recent employers. This, too, may be fudged but will give you useful clues - if only on the negative side. It will be more telling if an applicant has been, or is, working for a blue-chip organisation, than a fly-by-night startup.

* Ask how many people, if any, will be sharing with the tenant. This will have a direct impact on your insurance - the fewer the better - but will also give you clues as to what sort of tenancy is being planned. Don’t be afraid to carry out spot checks to see that there are no more sleeping there than agreed.

* The National Landlords Association and private bodies such as the credit score company Experian will check tenants for renters, but don’t fall into the trap of thinking that you don’t have to do your own homework. Check the work of the checkers.

* If in doubt, call the government Landlord’s Helpline: 0300 069 9799.

William Kay is a financial journalist who was City Editor of The Times and Money Editor of The Sunday Times