There are companies and individuals operating all across the property industry, who will try to take advantage of investors and landlords. Although government legislation is gathering pace in its efforts to make it more and more difficult for these unscrupulous people to stay in business, it’s important as a landlord to know what potential scams are out there so that you can take steps to avoid getting caught up or caught out.

Rent-to-rent

This is where an individual or company rents a property from a landlord for a fixed amount, usually via a commercial tenancy, management agreement or lease scheme. They then essentially take over the landlord’s day-to-day duties, subletting the property for a higher amount than they’re paying.

For those landlords who want to be hands off, it can seem like an attractive proposition. They benefit from guaranteed rental payments with no voids and their tenant takes care of all the smaller ongoing maintenance jobs.

However, be aware of potential pitfalls:

•By letting to a rent-to-renter, you are creating a commercial tenancy, which is legally different to a residential tenancy. The biggest issue is that at the end of the sub-tenants’ tenancy, they have the right to demand a new one (under a law designed to protect commercial tenants such as shop owners), so a landlord can easily find they have lost control over their property.

•Given that letting properties by the room, rather than as a single unit, brings in far more rental income, a popular move by rent-to-renters is to turn the property into a House in Multiple Occupation (HMO). But if a licence is required and you as the landlord have not secured one, you could be subject to a fine of up to £20,000.

•You may have an unscrupulous person who never passes on any rent to you, leading to a long and complicated eviction process, during which time you not only lose rental income but incur legal costs.

•If your buy-to-let mortgage has been granted on the basis that the property will be let under a residential tenancy and you fail to ask your lender’s permission to rent-to-rent, you could end up in breach of your mortgage terms ad the lender would be within their rights to call in the mortgage.

•Similarly, this change in the type of let and loss of control over the property could invalidate your landlord insurance. And if they are cramming as many people into the property as possible, it is likely to suffer damage that you might end up having to pay for yourself.

Ultimately, unless you are sure that you are dealing with a professional landlord, who you have checked out and referenced properly, evidence suggests that rent-to-rent should be viewed cautiously and expert legal and financial advice sought prior to making any decisions.

Subletting without permission

Although subletting is not permitted as standard in an AST agreement, if your tenant makes a request to do so, you might be inclined to let them. However, some tenants simply go ahead and sublet either a room or the whole property without their landlord’s permission or knowledge and that can have huge implications. Research in 2015 carried out by the National Landlords Association found that almost half of tenants in the PRS who sublet their property were doing so without their landlord’s consent.

Here are the key points you need to know about subletting:

•As with rent-to-rent, if your property is sublet without your mortgage lender’s permission and without your insurance provider being informed, you could be in breach of your mortgage terms and have invalidated your insurance.

•If your property is leasehold, there may be a clause in the lease restricting you from subletting.

•If your tenant has not carried out right to rent checks on the person they are subletting to, and they are found to be living in the country illegally, you as the landlord can be held liable and can be fined up to £3,000 per tenant.

•If your tenant is subletting the property as an HMO and you do not hold any licence required, you can be held liable and could be fined up to £20,000.

If you discover your tenant is illegally subletting, you are within your legal rights to evict them, but this can take time and money.

Signs your tenant may be subletting:

•They want to rent a property that seems much larger than they need for themselves

•They offer to pay six or twelve months’ rent up front

•They make it difficult for you to visit the property

•You see the property being advertised online

•There are complaints from neighbours about high numbers of people coming and going from the property.

You can minimise the chance of ending up with a tenant who sublets illegally by taking proper references and making periodical visits to the property. Another useful way to keep a permanent eye on tenants is to develop a good relationship with neighbours so they alert you of any worries. If you let via an agent, they will make all the necessary checks on our behalf and, if you do run into any problems, they should have a process in place for resolving the issue as quickly as possible.

Property fraud

This is where someone, usually the tenant, steals your identity and sells the property without you knowing anything about it. They vanish with the profit, usually leaving the buyer significantly out of pocket and you with a nasty headache to resolve. Ultimately, it is a fraudulent transaction, so you will regain possession of the property, but it can take some time and incur a cost.

You can greatly reduce the risk of this type of fraud affecting you by:

1.Ensuring none of your personal post ever goes to the property, and

2.Registering with the Land Registry’s free Property Alert Service, under which you can monitor up to ten different properties and receive email alerts about any mortgage and change of ownership applications being made.

As long as you don’t live in the property yourself, you can also instruct the Land Registry – free of charge - to put a restriction on it, to stop activity such as a transfer of title or a mortgage. For more information, go to www.gov.uk/protect-land-property-from-fraud or call the Land Registry Property Fraud line on 0300 006 7030,

Rogue letting agents

Although there will be changes in the law in the near future, as it stands currently, anyone can set up as a letting agent. The worst offenders will take landlords’ business and let properties to tenants, then steal both the rents they collect and deposit funds.

While this is certainly a worrying practice, you can easily avoid being scammed by ensuring you only ever deal with agents who belong to either ARLA Propertymark or the Royal Institution of Chartered Surveyors (RICS), which both demand the highest professional standards. Member agents:

•Have properly trained staff and keep up to date with legislative changes

•Belong to an independent redress scheme

•Have Client Money Protection

•Hold professional indemnity insurance

•Abide by a recognised Code of Practice.

‘BMV’ deals that are not what they seem

The vast majority of investors have been offered a deal to secure a property at ‘below market value’ at some point. While it is certainly possible to buy for less than the true market value, these deals are not common and require a professional approach and good negotiating skills. Usually, when a discount is secured, it is because the vendor’s time pressure is greater than their need to get the full market price and an investor is able to give them a win-win solution.

You should be particularly wary of individuals and companies that quote discounts of 20%-25%, as these are virtually impossible to come by. Why would someone sell a good investment proposition at three-quarters of its real value? The truth is that this type of BMV property is usually in a run-down area where prices are below the UK average, therefore they don’t offer much scope for capital appreciation and there is little demand from the better-quality tenants.

Paul Shamplina, a legally-qualified certified bailiff and private investigator, who has been instrumental in bringing several high-profile property rogues to court, believes landlords should be extremely sceptical about BMV deals. “I have come across countless landlords who have been offered the opportunity to buy properties at a heavy discount, sometimes when they aren’t yet built. They invest their hard-earned savings and realise too late that in practice, the properties are near-derelict and the tenant’s non-existent. The simple truth is: if a deal seems too good to be true, it normally is.”

To avoid falling victim to any of these scams in the new year, make sure you always deal with qualified, respected professionals who have a good track record in the industry and if you have any concerns, take expert legal or financial advice as soon as possible.