Despite dawn raids and legal action, the number of unlicensed rentals in houses of multiple occupation continues to grow

It was before sunrise on a wintry morning that we gathered on a street corner in north London – a clutch of council officials, two police officers and myself. At a signal, the officials hammered on the doors of two tatty maisonettes above a surgery and waved warrants at the bleary faces that appeared in the windows.

This was a dawn raid on two of the myriad houses in multiple occupation (HMOs) being let without a licence in London and was part of a council crackdown on landlords and lettings agencies that flout the law to exploit tenants.

The flats, off a walkway strewn with abandoned furniture, had been operated by Lifestyle Club LSC, a lettings agency exposed by the Observer last year that got around tenancy laws by styling itself a “membership club”. Instead of tenancy agreements, the occupants signed up to club “membership”, which exposed them to unannounced inspections, fines for untidiness and eviction without reason with seven days’ notice.

Inside the flats, conditions showed the hazards faced by young tenants on low incomes seeking to make a life in the capital. Electrical wires sprouted from the hall wall in one and snaked across the floor, and the boiler bore an Elastoplast scrawled with the date of the last safety inspection a year previously.

Next door, the sole smoke alarm didn’t work, the poorly fitted doors were a fire risk and a lounge had been converted into two bedrooms so crudely the partition divided the radiator and window, so the occupant of one half could not adjust the heating or ventilation.

The nine tenants sharing the cramped conditions were all in their 20s and from overseas. Those I spoke to had jobs but could not afford the average London rent and had little understanding of tenancy rights.

One, who paid £585 a month for her small room, told me that she had never received a contract and that the agents carried out inspections without notice, using screwdrivers to get into locked rooms. The previous occupant had, she claimed, been evicted after agents arrived in her room and demanded she pay more rent than agreed.

A notice taped to the wall of a room next to her own stated it would be considered “abandoned” unless the occupant got in touch with the “host” within 24 hours. The five sharers were “fined” £60 when an inspection deemed the place untidy.

Last month, Lifestyle Club LSC was itself fined £22,299 by magistrates for breaching a statutory requirement to provide Camden council with details of the property management and the tenancy contracts for one of the raided properties and for a second flat in the borough.

Tiina Lehtla, the 30-year-old Lithuanian who founded the company with £1 of capital in 2017, was fined £7,983 plus costs for the same offences. The owner of the raided flat was fined £6,223.

In his summing up, the judge accused the defendants of putting safety at risk to maximise revenue. “They did not apply for licences to avoid an inspection, which would have resulted in expense to bring the properties up to standard,” he said.

“The tenants were from abroad and the most in need. They were given ‘membership’ agreements instead of tenancy agreements to try and curtail their rights.

“The obstruction of the local authority by not returning the statutory notices was deliberate, and a commercial decision to try and frustrate the investigation by environmental health officers.”

The case was a small victory for Camden council, which has brought 132 prosecutions against landlords and lettings agents in the past five years. It’s currently preparing legal action against LSC and the landlord of the second raided flat.

However, authorities across the land are fighting a losing battle. Camden’s attempt to prosecute LSC for operating the raided flats as an unlicensed and unsafe HMO fell through when only one tenant was willing to testify in court.

Companies found to have breached the law often resurface under a different name or with a different director, and some directors register multiple companies to avoid detection.

There are four Lifestyle Club companies registered with almost identical names and three different directors. Neighbouring Islington council is bringing charges of fraudulent trading against one, Lifestyle Club Ltd, which, before it ceased trading this year, operated from the same address as Lifestyle Club LSC but with a different director.

Abuses are on the rise as landlords and agents profit from those shut out of an overpriced property market. Typically, tenants are lured by photos of an attractive, affordable room on social media platforms and pressured to sign up before it vanishes, only to find the actual room is greatly inferior.

A former sales agent of Lifestyle Club LSC, who wishes to remain anonymous, has told the Observer how new recruits were instructed to sign up tenants before they’d had a chance to approve the accommodation. Lower-quality rooms were reserved for tenants from overseas, she says, and certain nationalities and profiles were banned.

Workers at rogue lettings agencies may be similarly exploited in order to pressure prospective tenants. LSC’s contractor’s contract, seen by the Observer, includes a raft of “fines” levied on self-employed agents who fail to meet specified targets and timescales aimed at hustling uninitiated young tenants – the contract excludes anyone over 35 – into hard-to-let rooms as fast as possible.

Agents are charged £50 per unlet room if they fail to meet their monthly quota of 15 and the same sum if they sign up a tenant who proves unreliable, “out of profile” or “complicated”. Further charges are levied on those who omit to give an hour’s notice if an “absolute emergency” prevents them working, or who check in for work late on the company’s online registration system. LSC declined to comment.

Cash-strapped local authorities, who try to crack down on rogue agents, had their hand strengthened by the Housing and Planning Act 2016. It allows them to impose civil penalties of up to £30,000 and to seek banning orders against landlords and agents who break the rules. Councils and tenants can reclaim rent paid if a lettings agent breaches the law.

The problem is, councils can only take action once crimes have been committed because, while lettings agents in Scotland and Wales are regulated, those in England do not have to have a qualification or a licence, which means anyone can set up in business.

LSC and Lehtla have been placed on the Rogue Landlord and Agent Checker set up by the mayor of London, Sadiq Khan, and the LSC website has disappeared.

Councillor Meric Apak, cabinet member for better homes at Camden council, pledges that rogue operators will be pursued. “Landlords and lettings agents need to play by the rules and ensure if they are running an HMO it is properly licensed,” he says.