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What is a landlord letting licence?

by | Nov 28, 2022

Home $ Property Documents $ Breakdown of The Four Types of Tenancy $ What is a landlord letting licence?

Introduction

A landlord licence is a type of licence that is able to be looked at by local authorities to prove that the landlord is able to let out the property legally and they have undergone the right check for a landlord to be able to let out the property safely.

In this article, information will be broken down about the different types of licences available in England, Wales and Northern Ireland. As a landlord, you already have a lot to deal with so setting your property up in the right way and not having licences to deal with is the best thing you can do for peace of mind.

In addition, this article covers what additional licensing is and the penalties and fines that are subject to landlords if they choose to not obey landlord licensing laws.

Landlord board for a landlord licence

What is a landlord licensing scheme?

A landlord licence scheme is what a local authority or council might enforce within a region in order for properties to comply with regulations. If the properties within a scheme have a licence then the property is compliant.

After 2004, with the introduction of the Housing Act 2004, a lot of landlords had to make changes as local authorities and councils started to include new schemes. Especially for HMOs. These schemes were sometimes selective licensing schemes or additional licensing schemes.

What do landlords need to do to get a licence?

In order for a landlord to get a licence, they have to make sure they comply with the regulations set out by the government of the local area. This is if there is a licence needed in the first place. In order to do this, find the local council that has the licensing in place and see if they have instructions on their website to gain a licence.

Often it will involve making sure your property is compliant and then applying for a licence from there. To make sure a property is compliant you may need to have certain safety features in a property such as making sure there are working fire alarms and escape routes in a property or the rooms in a property area of a certain size.

Once you have done this, some councils and local authorities may have a postcode search feature on their website which allows you to search to see if the property is now compliant with the features that are listed. 

What is selective licensing?

Selective licensing is a type of licensing scheme that is called selective because it is not a nationwide blanket rule and the local authority will “select” if they want to have these licences in place if they feel like the standard of the area isn’t up to scratch.

Reasons for bringing in selective licensing by a council can include them not thinking there are adequate fire safety regulations or that a lot of the properties in the areas do not need the basic living standards for tenants in terms of room size.

Because each area of the UK has a different type of property that has historically been built on the land, the development of a property should also be approached in a different way and this may impact the regulations of the area too.

It is useful to note that a selective licence is a licence granted to buy to let properties that aren’t HMOs. There are other licences in place for these properties that all have their own regulations but selective licences apply strictly to single let buy to let properties.

If interested, you can find a more detailed breakdown of how this would work on the government website here.

What is the price of a selective licence?

The price of a selective licence can vary quite a bit. First of all, it depends on the borough and also the city the borough is in. Typically, it may cost from £200 for a single licence or up to £1,000.

Money used to pay a landlord licence

What is additional licensing?

Additional licensing in licensing that applies to HMOs. Houses of Multiple Occupancy are those that have more than two tenants in one property that are all signed with separate tenancy agreements and have exclusive access to their rooms.

It also does not matter if the tenant is in a less secure tenancy agreement like a periodic tenancy or they have broken an agreement and are paying tenant fees. The landlord still has to make sure they provide additional licensing if it is required.

If a council feels like a HMO licence isn’t being regulated effectively, they can issue an additional licence that will help the landlord regulate the property. This will apply to all properties in the borough. This means they would have added another licence on top of any other licences already in place such as the mandatory licence which is where this licence gets its name, for being “additional”.

Having said this, it is against the law for a council to add in another licence whenever they feel like it. They have to conduct regulated assessments and draw a conclusion that the only way that the issues the borough faces can be tackled is by adding in another licence and there are legitimate processes in place for this to happen.

The council website of a landlord’s area should tell them all they need to know about the licences of an area and there should also be an additional price the landlord has to pay in order to have this licence in their property.

What is the price of an additional licence?

Additional licences are similarly priced to selective licences and can be anywhere in the region of the low three figures of £100 per property and up to £2000 for the largest of HMOs. In addition to this, the licence usually has to be renewed every five years.

How does licensing work in Wales?

In the legislation of Wales, it states in the Housing Act of Wales 2014, all landlords have to register with Rent Smart Wales and be licensed with the scheme if they are self-managing the property themself or using a letting agent. For more on how this scheme works click here.

Without registering for a licence with the scheme, the website here says that the landlord could face a fixed penalty fine. As well as this, if you are a landlord who is self-managing, the law also states that you should follow a code of practice. 

This is different from the additional and selective licences that are in place in England as the rules in Wales apply more generally. However, there are still borough-specific licensing laws in place for all rental properties so they can meet building safety requirements and ensure landlords are trained in the right way to manage a property.

How does licensing work in Scotland?

In Scotland, you will need a licence for a HMO known as a mandatory licence (same as in the UK). However, the difference is this licence lasts only for three years rather than five. In order to gain approval for this licence, it is mandatory a landlord provides the local council with the following information:

  • The landlord’s personal details
  • The location and size of the HMO that needs licencing
  • The copies of the tenancy agreements of the property
  • A valid gas safety certificate
A gas hob with a gas safety certificate a landlord must provide to get a landlord licence

After this, the council may or may not add additional standards to the licence and a fee will have to be paid.

If you do not have this licence in place in a HMO in Scotland, you could face a fine of up to £50,000 and if you do not meet the standards of the licence, even if it has been initially awarded to you but the standards of your property have since dropped, £10,000 fines are also possible.

Selective licensing in Scotland

In Scotland, there is no selective licensing because there is no need for single-let buy-to-let property to be regulated in the same way. This is just due to different legislation set out by the Government.

Mandatory and additional licensing in Scotland

In Scotland, there are mandatory licences for all HMOs. However, in Scotland, these licences aren’t typically called mandatory licences but in the same way, the local area and the local council will come together to determine a price for these licences.

However, there is no additional licensing in place unlike in England. This is where a council can ask landlords who have properties in the area to also provide a further licence on top of the mandatory licence in order for the landlord to meet additional regulations that are specific to the area.

What are the landlord licensing concerns?

Especially when it comes to HMOs, there are real concerns as to whether the licences in place are worth it for a lot of landlords and concerns that because of these additional regulations for landlords it is slowing down the economy because investors aren’t likely to invest in the area due to having to pay extortionate licensing fees.

Especially when each council and local authority can price their licences and set their regulations exactly how they want, the overall feeling is that landlords do not have much control anymore and are at the mercy of councils who will change more and enforce more regulations when they feel like it.

Are licences good for compliant landlords and agents?

It is up for debate but some landlords think that because licences are in place, it prices a lot of landlords out of the area who would have otherwise provided a high quality sauce.

On the other hand, if a landlord pays for a licence, it could show that they are able to take their business more seriously which could translate into a higher quality tenant because teens would be attracted to properties with licensing and because it shows their living standards are looked after.

How many councils are licensing?

All councils have to do mandatory licensing for HMos in their borough. However, it is up to the local authority to decide whether to do selective licensing for single lets or additional licensing on top of the mandatory licensing for HMOs.

It is hard to say how many councils have licensing in place because each borough changes their rules every year. Nonetheless, to put things into perspective, just under a third of all boroughs in London have additional licensing in place as of 2022 which specifically applies to HMOs.

The borough of London which has additional landlord licensing

Whether a borough actively enforces these regulations and makes sure that there are inspections in the property over time is a different question. It is likely that a lot of properties with licences would fail an inspection if there was a check to happen.

What are the benefits of selective licensing?

Selective licensing is in place to make the general area more desirable for tenants. If they know the area has regulations in place for tenants to have a safe and regulated living space they are more likely to stay there and pay rent on a long term basis, benefitting the area in years to come.

As well as this, because selective licence ensures there are safety checks carried out in the property and basic tests that assess a tenant’s standard of living, it is unlikely a tenant will face serious issues in the property which would result in the landlord having to rehome them or type of tenancy ending early and move out.

This, therefore, reduces the length of time a property is empty and when there is a void period in rent. Adding to this, all these factors combined make sure crime and antisocial behaviour is reduced as well as landlords holding their properties to a higher standard. Having great long term benefits.

In conclusion

Licensing in the UK is controversial for landlords because on one hand, it makes sure that they keep their properties up to a certain standard but on the other hand, it reduces the profitability of a rental property by adding in additional expenses. It is not clear what the rules are a lot of the time because each borough can change their rules all the time.

All in all, it is recommended for landlords check their local authority’s rules carefully and make sure they don’t end up paying fines or losing their property for not following regulations.

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