Landlord licensing – everything you need to know
Tue 26 Oct 2021
Landlord licensing was introduced in England and Wales in 2006 with the original aim to raise safety standards and reduce the number of house fires in Houses in Multiple Occupation (HMOs). Over time, the government has adjusted the aim to raise “standards in HMOs more generally, so they are a safe place to live in and do not blight the neighbourhoods in which they are found.”
Originally, the only HMOs that required a license were those that met all of the following criteria:
· A property of three or more storeys,
· housing 5 or more individuals,
· forming two or more households,
· who share toilet, bathroom or kitchen facilities.
Changes in landlord licensing
However in October 2018, the rules changed. The number of storeys was removed as a factor, so any property housing 5 or more individuals forming two or more households required a licence.
As licensing rules and regulations have been adapted and added to over time, local councils have been granted additional powers to create two further categories of licensing. This allows them to capture more rental homes and raise standards across more of the sector:
1. Additional Licensing. This allows councils to vary the national rules for which HMOs must be licensed. For example, Oxford City Council requires landlords to have a licence for any HMO – i.e. any property housing three or more tenants that form two or more households.
2. Selective Licensing. This goes even further than additional licensing, as it allows councils to require a licence for any privately rented property – even those rented to a single family unit - and even restrict how many HMOs there are in an individual area.
Even if licensing doesn’t apply to you as a landlord currently, it’s worth investing a bit of time to understand how you might be affected if things change.
Why it’s important to stay up to date with licensing regulations
The biggest issue with licensing changes is that they can be introduced by local councils quite quickly. If you aren’t local or don’t regularly keep up to date with the council’s housing changes, it can be easy to miss new rules being introduced.
You need to not only know if a change is going to affect you, but when and how, so that you can plan ahead. You may have created a let or be running your HMO according to the national rules as they currently stand, but if the licensing conditions change – either nationally or locally – will that apply to you (a) immediately, (b) when the tenancy changes or (c) when you renew any current licence?
It could mean something as relatively straightforward as applying for a licence – for instance, Oxford has introduced a new ‘selective licensing’ scheme that means “all privately rented homes will need to be licensed”, although they are awaiting approval from the government to go ahead. Or it might mean you need to invest a significant amount of capital into making changes to the property so that it complies, so worth investigating how much this might cost.
Local councils can introduce quite stringent conditions themselves, on top of any national changes, so finding out exactly what applies for your specific type of let can be a complete minefield!
One of the most recent licensing changes is in Westminster, where they have just introduced the biggest additional licensing scheme for HMO properties. Under the previous scheme, just 300 properties needed a licence, but from 30th August 2021 this was expanded to 9,000 properties, to include all properties with three or more sharers from more than one household.
With changes being made at both a local and national level and potentially unlimited fines if you fail to secure a licence when it’s required, it really is vital you have a reliable way of staying up to date with the rules. Otherwise, not only could you end up with a hefty fine, but there might also be legal and court fees to pay, and your tenants may well be able to claim up to a year’s rent back from you.
How much does licensing cost?
Another reason to stay informed about licensing is so you can be aware of the likely costs involved - either from a budgeting perspective if you already need a licence, or a contingency basis if you currently don’t.
The fees can be quite significant. For example, in the new Westminster scheme, landlords and letting agents will need to pay £705 up front when submitting the application, then a further £270 on approval, so £995 altogether for a five-year licence.
If you’re in and around Leeds, it can be a lot more expensive, as they charge based on the number of tenants. The fee ranges from £825 for 5-6 tenants up to £1,350 for 9 or more, although there are discounts available.
In East Hampshire, costs range from £600 to £1,040, and in Nottingham for example you could be required to pay anything from £990 to a staggering £1720.
What’s the best way to keep track of licensing changes?
For those councils that are operating licensing schemes, the good news is many of them have some sort of ‘accredited landlord’ scheme. This can not only help you secure a discount on the license fee - which could save you hundreds of pounds - but also means you will be informed about any changes.
At Moginie James we keep up to date with the introduction of new laws, changes to licensing schemes – which can include them being cancelled! - and we make sure that our landlords are always letting legally and protected from potentially crippling fines.
If you’re thinking of creating a HMO or already have one up and running that you want to make sure is compliant, please do get in touch with us. We’ll happily check your property and can discuss any potential changes to licensing now and in the future that may affect your investment.