Licensing schemes for landlords: could you be affected?

For more than a decade, councils have had the power to ask private landlords to apply for licences to rent out their properties. Selective licensing schemes are designed to tackle problems such as antisocial behaviour or poor property conditions.

Since rule changes in 2015 made it easier to impose licence requirements, this type of scheme has become increasingly popular with local authorities around the country. In July 2018, Nottingham became one of the latest to introduce a citywide selective licensing scheme. Meanwhile, Brighton and Leeds are in the process of having similar programmes approved.

Up and running

Selective licensing is already well established in parts of London, as well as in Liverpool and Peterborough. Under these schemes, landlords must apply for a licence and show that they have complied with certain requirements.

Licences typically last for five years, and cost between £400 and £1,000, depending on the council; usually, a licence must be obtained for each property owned. Penalties for landlords who fail to comply can include fines of up to £30,000.

“Online sources suggest that at least two thirds of London boroughs operate selective licensing; however, the area requiring licensing may not be the whole borough and may focus solely on a specific area within it,” says Steve Matthews, head of buy-to-let sales at Octopus Property. “Landlords are required to check with their local authorities as to whether they operate selective licensing, and councils have the authority to introduce licensing as and when they see fit.”

Check up

Alexandra Morris, MD of online letting agent Makeurmove, says: “When a scheme is established, all privately rented property in the designated area must have a licence. This licence can be applied for by the landlord or a letting agent.”

Morris adds that while local authorities can to some extent impose their own conditions under which licences are granted, there are a number of mandatory requirements that landlords must meet in order to obtain one.

“Landlords must present a gas safety certificate annually to the local authority if gas is supplied to the property; keep electrical appliances and any furniture supplied under the tenancy in a safe condition; keep smoke alarms in proper working order; supply the occupier with a tenancy agreement; and demand references from prospective tenants.

“Also, if the local authority determines that the landlord or letting agent is not ‘fit and proper’, it can refuse to grant a licence, although this decision can then be appealed.”

Licence fee

Victoria Barker, spokesperson for the Residential Landlords Association (RLA), says schemes such as the one currently being proposed for parts of Leeds risk placing an “unnecessary financial burden” on landlords.

The RLA feels the £825 licence fee planned by Leeds City Council is too high, Barker adds. “Good landlords will apply for licences and likely pass the cost on to tenants in the form of increased rents, which does nothing to address affordability, while the worst landlords will continue to operate without a licence, below the radar,” she says.

“We believe that Leeds City Council, and other councils that are consulting on introducing selective licensing, should fully use the enforcement powers already granted to them by the Housing and Planning Act 2016, ranging from civil penalties, rent repayment orders and banning orders, rather than rely on licensing schemes to regulate landlords in addition to these powers.”

In Brighton, selective licensing had been due to come into effect in February 2019. But the government withdrew its approval for the programme in late 2018, and the city is currently reviewing its plans with a view to introducing an amended scheme at a later date.

Redressing the balance

In Peterborough, selective licensing has been in operation since December 2016. Mark Homer, co-founder of investment company Progressive Property, which is based in the city, explains: “Properties in Peterborough that have been chosen for selective licensing are inspected by a housing officer from the local council; a fee of £600 for five years is payable. Post-inspection, a list of remedial works may be issued to ensure the property meets the management regulations that become a condition of the licence being issued.

“We’ve certainly noticed in areas where this scheme exists that better-quality properties are being offered for rent, which has somewhat levelled the playing field in favour of compliant landlords.”

Homer adds that councils list the requirements for their individual schemes on their websites, and says landlords – in particular those who are about to acquire a new property – should check with the relevant local authority to see whether or not selective licensing applies to that house or flat.

Matthews says that, while these schemes force less professional landlords to “smarten up”, one of his main concerns is how licensing programmes are being introduced.

“The biggest improvement needed is consistency,” he says. “All too often, a council introduces licensing without any consideration as to how they will implement and manage applications, which result in significant delays and can, in turn, result in declined mortgage applications for landlords.”

In focus: Nottingham City Council

Nottingham City Council introduced its licensing scheme in August 2018. A licence will last for up to five years; one licence is required for each private rented property and not for each landlord.

The early stages of the scheme have, however, been marred by reports of administrative delays. In November, reports suggested that the local authority was struggling to cope with an influx of licence applications.

For more information about the selective licensing process In Nottingham, download the booklet.

Selective licensing areas

Northern Ireland, Scotland and Wales each run their own landlord licensing schemes; England does not have a countrywide list of schemes, so landlords will need check with the local council. For London boroughs, click here.