A guide to landlord licensing
Thinking of letting a property? Read property expert Kate Faulkner's guide to landlord licensing in the UK.
- Landlord licensing in the UK
- Landlord licensing schemes:
- Selective licensing in England
- HMO licensing in England
- The implications of increased licensing
- If your application for a licence is rejected
- 5 things for landlords to watch out for
Landlord licensing in the UK
Licensing is a means by which councils can exert a certain level of control over the quality of landlords and rented properties in their area. While that seems like a fundamentally good idea, the UK's current licensing rules can be hard to wrap your head around.
The UK is a very mixed picture when it comes to licensing for landlords, with each country having its own policies and regulations. Sometimes landlords themselves are required to be licensed or registered with a scheme; other times, it's the buy to let property that must have a licence or be registered; in some cases, it's both.
The most complicated approach is in England, where local authorities have the power to impose their own rules on licensing, making it hard for landlords - particularly those that have investment properties in a number of different areas - to keep up with legislation.
Landlord licensing schemes
Wales
Under the Housing (Wales) Act 2014, every landlord must be registered with Rent Smart Wales and anyone who wants to manage a property - landlord or agent - has to be licensed. Landlords must complete a licence application, which involves:
- Providing details of themselves and their properties
- Providing evidence that suitable training has been completed (with either Rent Smart Wales or another approved training provider)
- Making a declaration that they are a 'fit and proper person'
- Paying a fee of £144 for an online application or £186 for a paper one
- The licence is valid for five years
In addition to this national regulation, 15 of the 22 local authority areas in Wales are operating 'discretionary schemes'. If you let property in Wales, you should speak to your local council housing department to confirm whether you are affected.
Scotland
While it's not a licence as such, every landlord in Scotland must register both themselves and each of their properties with their local council, with details being entered on the Scottish Landlord Register. Key points about the scheme:
- The application process makes checks to ensure the landlord is a 'fit and proper person'
- Every advertisement for the rented property must display the landlord's registration number
- The register can be searched by the public
- The cost is £55 for the principal registration and then £11 per property, although discounts may be available
- Landlords must renew their application every three years
- It is illegal to operate as an unregistered landlord, with a maximum fine of £50,000 and the threat of being banned from registration for up to 5 years
Northern Ireland
Since February 2014, all landlords in Northern Ireland have been required to provide information on themselves and their properties to The Landlord Registration Scheme.
- The cost is £70 for an online application, £80 for paper
- People can search the register by landlord or by property
- HMOs are subject to a separate registration scheme, which has been in place since April 2013
England
The only mandatory (countrywide) licensing scheme in England is for HMOs (Houses in Multiple Occupation) - see below for details - but under the Housing Act 2004, local authorities have the power to assign their own licensing requirements to particular areas, meaning every landlord must apply for a licence, regardless of the type of property.
This is known as 'selective licensing' and it is an ever-changing picture.
Selective licensing in England
Research and analysis by software company GetRentr, reveals that in 2018, a new selective licensing scheme was introduced in England every 13 days. At the start of 2019, there were already 541 schemes in existence, with 31 new schemes either in consultation or awaiting approval.
So, make sure you know about your local authority's rules on licensing and check periodically to stay up to date with any proposed and upcoming legislation that might affect you.
The cost of licences is set by each local authority but, as a guide, you can expect to pay around £500-£700 every five years.
While selective licensing is very inconsistent around the country, it has proved successful in some areas, such as Newham, which was the first local authority in the country to introduce it in 2013. Under the terms of the scheme, every property offered for private rent in the borough must be licensed. In the first five years, and as a direct result of the scheme, Newham council has:
- Instigated 1,225 prosecutions for housing crimes (60% per cent of all those in London)
- Served 2,834 notices to address and tackle serious hazards in rented property
- Banned 28 of the worst landlords from operating
- Recovered more than £3.1m a year in unpaid council tax
HMO licensing in England
While England is the only country in the UK that doesn't yet have mandatory requirements for all private landlords, those that have HMOs are liable to both mandatory and additional licensing of their properties. It should be noted that a property can only be licensed once, so if it meets the requirements for mandatory licensing, there is no need for landlords to apply for any other licence.
Mandatory licensing
Until October 2018, HMOs only had to be licensed under national law if they had:
- five or more residents,
- forming two or more households and
- the property had three or more storeys
However, since October 2018, any property housing five or more people, forming two or more households, must be licensed - regardless of the number of storeys.
The cost ranges from £500 to £1,000, depending on location, and licences are usually valid for five years, meaning an annual cost of just £100 to £200.
At the time of the changes, housing minister Heather Wheeler said the number of HMOs in England requiring mandatory licences would rise from 60,000 to an estimated 220,000 properties. Some local authorities will be more affected than others, with the RLA suggesting that Boston in the East of England will now move from 22 licensed HMOs to 1,400. That clearly represents a lot of additional administration for the council.
Selective licensing
Under this scheme, where every property in a certain area may be required to have a licence, this naturally applies to HMOs. So, if the property doesn't already need a licence under the mandatory rules, it may need one under the local authority scheme.
Additional licensing
If there is no selective licensing scheme in place, the local authority can still impose a level of regulation on smaller HMOs in their area by using their 'additional' licensing powers to require all HMOs - that's properties with three or four occupants - to have a licence.
Oxford council was an early adopter of the additional licensing scheme, requiring every property rented by three or more people (including children), forming two or more households, to have an HMO licence. The cost for a standard 5-year licence is £315, but the amount payable can vary from £197 for a one-year renewal to £1,550 for a higher-rate new application.
The implications of increased licensing
For HMO landlords, there are certainly additional financial consequences, over and above the cost of the licence itself, given the extra works that the terms of the licence might require them to undertake. That is likely to include:
- upgrading the fire alarm system
- installing basins in all bedrooms
- providing additional household toilet facilities
- providing additional kitchen and communal facilities
Depending on the layout of the property and particularly the existing plumbing system, the cost could be significant.
Read our guide for more information on letting HMOs.
For local authorities, the more properties that require a licence, the more work is required and some are finding it hard to cope. In addition to administration of paperwork, there is the matter of having sufficient resources to enforce the terms of licences. Some licenses are taking up to two and a half years to be issued and, despite property visits being considered one of the best ways to assess a property, very few visits are being undertaken in some areas.
If your application for a licence is rejected
If your application is rejected you will be told the reason(s), which could include:
- Not being considered a 'fit and proper person'
- Unsatisfactory management arrangements
- The people involved in the management are not considered competent
- The licence holder is not the most suitable person
You will also be given details of how to appeal the refusal, which is likely to be via a First Tier Residential Property Tribunal. Be aware that if your application is rejected - or even delayed - and you move tenants into the property before your licence has been granted, you may be prosecuted.
5 things for landlords to watch out for
1. Giving full information
Make sure you disclose everything that is asked of you, particularly in relation to you being a 'fit and proper person'. If your application were to be rejected, your appeal is likely to have more chance of success if you can show that you did not try to conceal anything.
2. Ensuring you comply with all conditions of the licence
For example, there will be numerous health and safety requirements you have to satisfy, so make sure you know those and remain compliant by obtaining required certification and making periodical checks, etc.
3. Timescale
If your local authority is receiving a high number of applications, there may be a significant delay in your licence being granted. If you move tenants into the property without having secured a licence, you may be liable to fines and prosecution.
4. Cost
Be aware that it is often not as simple as paying a one-off standard fee. The amount you pay overall to secure your licence may vary, depending on:
- whether it's a new application or renewal
- how long the property has previously been let
- the size of the property
- additional training required
- how many properties you own
- whether you are already registered with another landlord scheme
5. Keeping your details up to date
You must inform the local authority licensing scheme of any changes in your personal circumstances or the properties you let.
Speak to your local authority to find out exactly what their current policy is regarding selective and additional licensing and ensure you comply with it. With councils now able to impose a civil penalty on landlords of up to £30,000 and issue banning orders for the worst offenders found to be flouting the law, the consequences of not meeting the terms of your licence conditions could be severe and it simply isn't worth the risk.
Sources
https://www.gov.uk/registration-for-private-landlords-scotland
https://www.rentsmart.gov.wales/en/landlord
https://www.getrentr.com/news/simplifying-rental-property-sector
https://www.oxford.gov.uk/info/20113/houses_in_multiple_occupation
Kate Faulkner is one of the UK's leading, independent property experts and regularly features in major newspapers, on the BBC and ITV, as well as regularly co-hosting the Property Show on LBC.
Visit our landlord hub for more of Kate's tips and advice, or click here if you'd like some more information about our landlord insurance.
Kate Faulkner
Added: 5 Jun 2019
Find out more about this author