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What is landlord licensing?

03 July 2020 / Landlord News

Every private residential landlord should know that their property might require a licence from the local authority. Although licensing only applies to certain house types and areas, the most important message is to always comply. 

The penalties for not having the correct licence can be huge. The Government describes the fine that relates to mandatory HMO licensing as ‘unlimited’ and landlords have been known to pay out large five-figure sums in penalties.  

In a nutshell, there are three types of licensing: mandatory, additional and selective. Mandatory and additional licensing only relate to houses in multiple occupation (HMOs), so we’ll start there with this guide… 

Mandatory licensing

The official definition of an HMO is a property rented by at least three people who are not from one ‘household’ (for example, a family) but share facilities like the bathroom and kitchen. You must have a licence if you’re renting out a large HMO in England or Wales. If you’re letting a property as a house share, it’s likely you have a large HMO, but check to see if the following apply to your property:

  • it is rented to five or more people who form more than one household
  • some or all tenants share toilet, bathroom or kitchen facilities
  • at least one tenant pays rent (or their employer pays it for them)

Even if your property is smaller and is rented to less people, you may still need a licence depending on the area, so always check with your local council. Once you’ve got an HMO licence, it’s usually valid for a certain period of time, such as three or five years. However, mandatory licensing is ongoing, so if your property is still an HMO, you’ll need to renew the licence before it expires.  

There are two main conditions to remember with HMO licensing. You need to make sure the house is suitable for the number of occupants and that the manager of the house (i.e. the landlord or agent) is considered to be ‘fit and proper’. For example, they must not have a criminal record or have broken a landlord code of practice. 

Those managing HMOs must also stick to the following conditions. Property managers must make sure they:

  • send the council an updated gas safety certificate every year
  • install and maintain smoke alarms
  • provide safety certificates for all electrical appliances when requested

The fee for an HMO licence will be set by the council, but they are usually a few hundred pounds. The penalties for letting out an unlicensed HMO are high, so make sure you know whether your property needs a licence. You can read more on the Government’s website here. If an agent manages a property on your behalf, they will be able to apply for an HMO licence for you.

Additional licensing 

Beyond the mandatory HMO licence, councils also have the power to introduce additional measures to help deal with problems that aren’t covered by the mandatory scheme. For example, they could extend licensing to all HMOs in a specific area to include properties not covered by the mandatory scheme. Each additional licensing scheme usually lasts for five years. 

Additional licensing was introduced via the Housing Act 2004, but councils can introduce the scheme within a certain area at any time. Like mandatory licensing, the fee is usually a few hundred pounds and the cost varies by location, although with all licences a council can only charge a fee which covers the cost of running the scheme. 

Check with your local authority to see whether your property is within an additional licensing area. 

Selective licensing

If your property isn’t an HMO, it may still be within a selective licensing area, although if you need a mandatory HMO licence, you won’t need a selective licence as well.  

Local authorities can opt to introduce selective licensing if there is a problem with low housing demand or persistent problems of anti-social behaviour. Introduced in 2006, selecting licensing gives councils the power to introduce licensing for all privately rented properties within a certain area. This means that all landlords within the area must obtain a licence or risk enforcement action. 

It’s important to check whether your properties are in a selective licensing area. Currently, there isn’t a countrywide list of schemes, so it’s best to check with your local authority. It’s worth knowing that a scheme will sometimes only include certain wards or areas of a city. 

The licensing fees typically run into hundreds of pounds, but as with mandatory and additional licensing, the cost varies and the penalties for non-compliance are high, so keep an eye out for new schemes. 

Talk to a local letting agent…

If you’re still unsure which licence might apply to your property, speak to the expert lettings team at your local Stirling Ackroyd branch about our Fully Managed Plus service. 

This service provides peace of mind for landlords as we’ll manage every aspect of your property on your behalf. Visit this page to find out more.

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