Rental dream that turned into a nightmare

Rent-to-rent, a contractually agreed form of subletting where the landlord authorises a company to let a property on his behalf, has ballooned because it often involves letting individual rooms rather than whole properties — big business now rents are so high. London rents rose by 12 per cent last year alone.

The benefit for busy landlords is that they aren’t responsible for managing the property and have a guaranteed rent, even if there are void periods. The company makes money by charging tenants more than it pays the landlord.

Gary and Susan Bailey, both 46, and first-time landlords, found themselves in a “nightmare” scenario after opting for rent-to-rent. Within days of advertising their three-bedroom flat in east London, the Baileys came across an agent named Jerome Baker offering a reassuring guaranteed rent through his company Rent Sparrow.

They weren’t sure but Mr Baker upped his bid. He sent them details of his website, which had glowing testimonials and quotes from pieces about the business in newspapers including The Times. Then he emailed them a contract — an Assured Shorthold Tenancy (AST) agreement typical of regular tenancies — and they signed it.

When Mrs Bailey looked up the company, alarm bells started ringing. It had only been set up in December, despite Mr Baker’s claim that he had been operating for years. When she asked him about it he said they had previously been operating as sole traders.

But something still didn’t sit right. Mrs Bailey tried to call the number on the website and couldn’t get through. She discovered a virtually identical website for a company called Fixed Rent, with the same text throughout and the same newspaper quotes, just with different company names. The Times did write in 2009 about Fixed Rent but has never written about Rent Sparrow. “Landlord Action told us that rent-to-rent schemes should not be using an AST as it wouldn’t cover us if the company went into liquidation,” says Mrs Bailey.

Eventually they told Mr Baker that they wished to pull out. Lawyers advised them that without an exchange of keys and a deposit, and with the level of apparent misrepresentation, the contract would probably be viewed as unfulfilled. However, eight days after they had last heard from Mr Baker, the couple found that he had called a locksmith, changed the locks at 3am and, soon after, moved in tenants.

“We knocked on the door and Jerome answered, but the minute he saw us he slammed the door and yelled to us out the window that he would call the police. When the police arrived Jerome produced the contract and they said that it was a civil matter and there was nothing they could do,” says Mrs Bailey.

Mr Baker, who spoke to The Times, says he rang the Baileys several times to ask them for the keys, calls which they say they never received. The Baileys have not received a deposit, though Mr Baker has asked for their bank details, which their lawyer has instructed them not to give. It is easier to begin eviction proceedings with two months’ rental arrears and Mr Bailey could pay by cheque. Mr Baker says: “I have a lawful right to the property. They signed a contract. I told them we would take appropriate action if they did not give us the keys. We will not back down.”

The Baileys potentially face months of court action to try to have Mr Baker and the tenants removed. If they don’t win the Baileys could be stuck with a man they don’t trust for three years, since their contract has no break clause. Much of their case rests on the fact that they felt misled about Mr Baker’s credentials, particularly the false information on Rentsparrow.com.

The case highlights the difficulty of removing tenants and the importance of checking credentials before signing anything, says Chris Norris, head of policy at the National Landlords Association. “Disputes are considered a civil matter so you are unlikely to get police assistance and can pay hundreds of pounds going to court.” A judge will often order the tenant to pay any rent due. But if that person refuses to pay and has no assets to sell it can be difficult to reclaim the money. If they disappear, as many do, it can be impossible to get your money back.

Landlord Action put The Times in touch with Raquel Cruz, who says she lost thousands of pounds to a man called Jerome Baker, with a physical description similar to the one in this case. She said she took him to court three years ago after he illegally sublet her property and then never paid rent. Mr Baker was ordered to pay nearly £9,000. “But he disappeared and we’ve not seen any of the money. I had just had a baby and the stress was awful,” she says. “If someone steals a bag of crisps they get prosecuted. But if they illegally sublet your property and don’t pay you, nothing happens.”

Mr Baker refused to speak to The Times about Ms Cruz’s allegations. He also claims that he paid a freelancer in India to create a website and that the doctoring was done without his knowledge. He did not agree to take the current site down straight away, saying: “We are seeking legal advice to begin a case against this freelancer for deceiving us. We are now totally rebranding Rent Sparrow with a completely different name, logo and a brand new website which will be up very shortly.” He is still advertising rooms on sites such as Gumtree.

Here are some things to consider before you sign on the dotted line:

· Does the lettings company belong to a regulated redress scheme such as the Property Ombudsman?

· Have a lawyer check over your contract before you sign. If things such as Houses in Multiple Occupation (HMO) liability aren’t included you could face huge fines.

· Can you afford the mortgage if the rent stops? Remember to have a back-up plan.