Househunters looking to buy a property with a rental unit must comply with the Landlord and Tenant Act 1991 to legally own the flat
Are you looking to buy a house with a rental unit? Check that it’s legal
In May last year, the Office of Fair Trading said it had heard concerns that six out of 10 landlords, housing associations and housing trusts were trying to illegally “strangle” the sector with rent control measures that had no place in law. It was also very worried about the fact that at least nine out of 10 landlords didn’t comply with the Landlord and Tenant Act 1991, which was meant to govern how a flat, flat or house is let.
We saw enough examples to believe that it was right to question if some measures in the law – such as the introduction of rent control – were being implemented in a “timid, cautionary” way. We decided to look at every case where we were asked to decide whether a flat was a property with a rental unit (Unit 005) or a property with a rental unit (Unit 001). If a person was buying a flat with a unit but they weren’t a landlord, the legal owner of the unit wasn’t required to disclose whether the property had been let or not. But if a flat was bought by a landlord with a unit but the landlord wasn’t buying it as a property (Unit 005), the legal owner of the unit was required to disclose, under the Landlord and Tenant Act 1991, whether they owned the flat or unit.
How the Landlord and Tenant Act works
The fundamental rule of the law is that the person who actually owns the property has an obligation to inform the next occupier, who, in this case, would be the landlord who sublet the property to another person. So it’s illegal if the landlord doesn’t have the legal right to let out the property they’re buying.
It also matters if a property is advertised as having a rental unit (an “Office”, Unit 005) or as having no rental unit (a “Live”) – that is, it would be illegal if the ad said “There is no rental unit,” even if the property was being rented out.
Some landlords use the word “no” to describe any tenancy that isn’t signed. However, this can be used as a euphemism for a clause where the landlord says: “I will refuse to sign the tenancy contract unless you offer me a fair price.” This is a form of a “rent-on-release” clause which would be illegal if advertised. So if a landlord wrote “There is no rental unit” on a public advert, then they could be in trouble for illegally taking your money to buy the property.
This includes “no one can stay in this property”, which is a clause to which the Office of Fair Trading has challenged in a number of instances. It is illegal if the advert promotes that this is a property that is not under occupation or remains unoccupied.
And an “Office” isn’t under occupation if you go on holiday and it doesn’t show up on a tenancy agreement. If you are renting to someone who has left and hasn’t returned, then that would be illegal because the landlord is breaching the Act.
It also matters if you find the property advertised as “The owner of the property is listed as Number 111” but it is in fact been bought by Unit 001 and the name has been changed.
Finally, as part of the rule-making process, the OFT investigated to see if it had found any evidence that tenants were being misled by advertisements. It found no evidence of this happening so landlords can advertise and sell a flat without worrying that it isn’t registered or is a “family home” even if it’s been sublet.
So what’s the good news? You shouldn’t be worried about all this. The point is that if you’re buying a flat with a rental unit (Unit 005), you don’