Thousands of landlords in England are facing increasing costs due to selective licensing schemes imposed by local councils, according to a Freedom of Information request.
The FOI request by insurer Direct Line revealed that landlords in areas which require a licence are being charged £700 on average to get one.
Councils in certain parts of England require landlords to get the selective licences in order to to rent out property, in the hope that this will improve standards and quality.
The schemes require landlords to meet certain standards of management and maintenance and are often accompanied with regular property checks.
Inconsistent: English councils are charging landlords almost £700 on average for ‘selective’ licences, which are mandatory in some areas, but some councils are charging hundreds more
A licence typically lasts for a maximum of five years once granted, but councils can opt to issue them for a shorter period.
Although only 47 of the 245 councils that responded to the FOI request currently have a selective licence scheme in place, Direct Line says this is a 10 per cent increase on those that reported having one in 2022.
Councils including Birmingham, Peterborough, Merton in South London and Charnwood in Leicestershire have introduced them within the last two years, according to Direct Line.
How much do councils charge for a landlord licence?
While councils are charging landlords £699.92 on average for obligatory selective licences, it found there is a huge variation across England.
The local authorities charging the most included Leicester City Council, which charges £1,290, Newcastle, which charges £900, and Greenwich in London, which charges £858.
Ashfield District Council in Nottinghamshire charges the least of any council at £350, and East Staffordshire Borough Council charges £507.
Last year, English councils generated over £20million in revenue from selective licensing schemes.
Sophie Lang, regional executive of the estate agent membership body, Propertymark, said: ‘Selective licensing is a growing entity, but expectations and costs to landlords dramatically vary from council to council, making the current setup a postcode driven and sometimes hugely inconsistent process.
‘There ideally needs to be a framework which is uniformly implemented to help ensure consistency and simplified compliance.’
Simon Wood, lettings and management services director at estate agent Hamptons also says that selective licensing is a growing phenomenon.
He said: ‘The number of local authorities applying selective licence areas to their patches seems to be increasing.
‘Additionally, the councils that have existing selective licencing are extending the size of the areas that fall within that category.
‘For instance, Southwark in London is practically all under selective licencing.
‘Every local authority has a different charging structure, but in London it is usually circa £600 for a five-year licence.’
Red tape: the number of local authorities applying selective licences to landlords in their patches seems to be increasing, according to property experts
What does a selective licence require?
Each local authority has its own rules, but in general a landlord needs to maintain certain safety and maintenance standards in order to get and keep a selective licence, according to Simon Wood of Hamptons.
‘The criteria placed on a selective licence is based on legal rules around gas safety, an electrical installation condition report, portable appliance tests, and smoke and carbon monoxide alarm reports,’ he says.
‘In addition, a floorplan and a copy of the tenancy agreement are required, and there is also a requirement for a ‘fit and proper person’ to oversee the property.’
What if landlords fail to comply?
Landlords failing to comply with licensing requirements incur significant penalties. At worst, they could face prosecution or large fines.
Burnley Borough Council, for example, issued fines up to £10,000 for selective licensing breaches last year.
In fact, last year, councils in England raised £2.5 million by fining landlords, according to Direct Line, almost double the previous year’s income of £1.4 million.
It revealed Waltham Forest and Middlesbrough recorded the highest number of licensing offences in 2023 and are also leading in 2024 so far.
Sarah Casey, head of landlord insurance at Direct Line business insurance said: ‘It’s important that landlords comply with all appropriate legislation as anyone not doing so could face a hefty fine.
‘Our analysis shows significant regional variations in landlord licensing costs and a growing burden from fines for non-compliance.
‘Anyone planning on becoming a landlord, or who already has a property portfolio, should check with their local authority to see if they have a scheme in place.’
Is a selective licence the same as a HMO licence?
Selective licensing is not to be confused with licensing for Houses of Multiple Occupation (HMOs).
Landlords who own HMO properties often need a separate licence altogether from their local council.
However, under current rules if a property has an HMO licence then they won’t have to pay for a selective licence on top.
Shared space: An HMO is when a property has at least three tenants living there who are not part of the same household. These homes could require a more expensive type of licence
An HMO is when a property has at least three tenants living there forming more than one household and if the toilet, bathroom or kitchen facilities are shared.
An HMO must have a licence if it is occupied by five or more people, but many councils often include other types of licensing – often if three or four tenants form more than one household.
HMO licences typically cost more than selective licences and require landlords to conform to additional regulations, fire safety measures and even minimum room sizes.
More costs and regulations ahead for landlords?
Landlords will be concerned that further regulations and costs may come in the near future, particularly via Labour’s Renters Rights Bill.
‘We’re likely to see a mandatory property portal introduced as part of Labour’s Renters Rights Bill which will incur an additional cost,’ adds Wood.
This is essentially a central database that will cover all landlords and their properties.
‘With all red tape, there’s a balancing act to be had to improve the security and quality of homes for tenants, without overburdening and increasing landlords’ costs too much,’ Wood says.
Sophie Lang of Propertymark adds: ‘There was a recent concern within the former Renters (Reform) Bill [under the Conservative government] that implementing a “decent homes standard” and a national property database would mean that administration and associated costs might be doubled up for landlords and have an adverse effect of driving good landlords out of the sector due to increased expenses.
‘As it currently stands many councils have the subject of selective licensing on their radar, but haven’t even started to fully consult on the matter – so ultimately it could be a while before many parts of the UK see movement on the matter.’
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