Landlord licensing update – overview for letting agents
As a letting agent, it’s your duty to ensure your landlords remain fully compliant with all regulation and legislation.
One area which might potentially slip under a landlord’s radar is licensing – which is broadly split into three categories: selective licensing, HMO licensing and additional licensing.
Here, we briefly explain what each type of licensing involves, analyse the attempts to strengthen landlord licensing even further and explore some case studies of places where landlord licensing has been introduced.
What are the different types of landlord licensing?
Under the Housing Act 2004, selective licensing – designed to try and stop socially unacceptable behaviour from occurring as well as stamping out rogue landlords – and licensing for certain houses in multiple occupation (HMOs) were introduced in April 2006 in an effort to raise standards in the private rented sector.
There is also what is known as additional licensing – introduced on a discretionary basis by some councils to cope with the issues caused by HMOs that are not covered by mandatory licensing.
When it comes to selective licensing, local authorities have the powers to implement a selective licensing scheme covering nearly all private rented properties within a defined geographical area. Typically, they will target places with low housing demand or serious/ongoing issues with anti-social behaviour that are directly linked to homes which are privately rented. Some schemes are borough-wide, while other schemes only cover certain problematic wards.
These powers were widened in March 2015, albeit with caveats. Local authorities needed to justify the introduction of selective licensing schemes by satisfying at least one of four criteria: poor housing conditions, migration, deprivation or crime. As well as proving the need is there, councils must also take reasonable steps to consult for a minimum of 10 weeks with everyone potentially impacted by the introduction of a scheme.
In London, where twelve boroughs have introduced selective licensing schemes (both borough-wide and ward-specific) since 2013, new rules were introduced in April 2015 to make it more difficult for councils to implement borough-wide schemes. Central government approval now needs to be received for any selective licensing scheme covering more than 20% of a borough or 20% of the privately rented homes on offer in a defined geographical area.
With regards to HMOs, the original mandatory licensing meant large HMOs – defined as homes with five or more tenants forming more than one household, sharing facilities such as kitchens, bathrooms, and/or toilets, over three or more floors – had to be licensed to be rented out on a legal footing.
This was extended on October 1 2018 to include all large HMOs, regardless of the number of storeys they have.
When the new regulations were implemented last year, predictions suggested that an extra 177,000 HMOs would be subject to mandatory licensing in England, on top of the 60,000 properties that were already under the banner of mandatory licensing.
There are certain exemptions, including student halls of residence owned by the university and situations where the landlord is a resident with up to two tenants. Full definitions of a HMO and exemptions to the HMO regulations can be seen here.
Government review could lead to tighter licensing
The government insisted last year it was committed to improving guidance for letting agents, landlords and local authorities when it comes to selective licensing, and with this in mind it commissioned Opinion Research Services to carry out a thorough review of the existing system.
The review highlighted that selective licensing is an effective tool when implemented in the correct manner, but at the same time there are a number of areas where the operation or implementation of selective licensing schemes could be upgraded.
Such improvements, according to the report, could include the creation of a landlords register, changes to the way licensing proposals are consulted upon and a ‘light touch’ easier renewal of licensing regimes when they expire. The full findings and recommendations from the independent review into the use and effectiveness of selective licensing can be viewed here.
A spokesperson for the Ministry of Housing, Communities and Local Government said, when announcing the release of the report, that selective licensing had made a real difference to areas across the country.
“With proper planning, consultation and implementation, these schemes can make a real difference to the quality of homes people live in,” they added.
Further schemes in the offing
Landlord licensing has been in the news plenty of late, with Islington and Enfield councils both opening consultations on additional and selective licensing, while the London Borough of Havering is looking to extend an additional and selective licensing scheme to include the six remaining wards currently not covered – although the RLA has warned this could push up rents.
Meanwhile, a senior Labour politician and campaign group in Sheffield have called for a selective licensing scheme to be extended across the whole city, and it’s been claimed that Nottingham City Council’s 5-year selective licensing scheme has added £40pcm to the average tenancy.
In Nottingham, licensing regimes cover 90% of the city’s privately rented properties, equating to some 32,000 homes – making it the largest scheme by property volume outside of London.
While licensing schemes are at their most common in London – where the private rented sector is huge and the largest single form of tenure – they are also found across England, from Durham to Bristol and Blackburn to Gateshead.
How can you help landlords to be compliant?
You can make sure your landlords are remaining compliant with landlord licensing law by getting to grips with the different types of landlord licensing and working out if a) the type of property they have is licensable and b) if they are in a particular area which requires a privately rented home to be licensed.
The local authority website for the area you cover will provide you with all the information you need on what licensing schemes are enforced. It then falls on you to inform your landlords of how they can remain complaint, or take on this responsibility for them as part of the overall property management service you offer.
On a basic level, if your landlord has an HMO with five or more tenants, it will fall under the banner of mandatory HMO licensing. Meanwhile, if your landlord has an HMO with three or more tenants, you may need an additional licence but this will depend on the location of your property and whether or not your local council has introduced these measures.
If your landlord doesn’t have an HMO but is operating in an area where a selective licensing scheme is in play, they may also need to licence their rental property.
If unsure, contact your local authority for more information.