Selective Licensing was introduced by Tony Blair’s Government in 2006 in an attempt to ensure the high quality of accommodation in the private rented sector.
Legislation in part 3 of the Housing Act 2004 gave local authorities the powers needed to introduce licensing schemes for private sector landlords in selected defined areas.
Many selective licensing schemes are now being operated across the country.
An overview of selective licensing
A local authority can introduce a selective licensing scheme into an area for two reasons.
Firstly, if it is satisfied that there is a problem with low housing demand in an area, they can introduce selective licensing in order to contribute to the improvement of its social or economic conditions.
When deciding if an area is or is likely to become an area of low housing demand the local authority must consider the value of property in the area, the turnover rate of residents, the number of unoccupied residential properties in the area, and the duration they remain unoccupied.
Second, if an area is experiencing a significant persistent antisocial behaviour problem, and some or all of the private landlords in the area are failing to take appropriate action to combat this problem, the local authority can introduce a selective licensing scheme.
To do this, a local authority needs to believe that taking this action could help resolve the area’s antisocial behaviour problem.
Antisocial behaviour can include the intimidation and harassment of tenants or neighbours, noise, rowdy and nuisance behaviour, animal related problems, vehicle related nuisances, anti-social drinking, prostitution, the presence of illegal drugs, graffiti and fly posting.
Once a local authority introduces a selective licensing scheme it will put forward conditions for landlords operating under it.
These vary from council to council but are often quite extensive.
If a landlord fails to comply with a selective licensing scheme or its conditions the local authority can levy a fine of up to £30,000 on them.
Once a local authority has put a selective licensing scheme into effect, it will last for five years.
What do landlords need to do to comply
Firstly, a prospective landlord needs to find out if their property is in a selective licensing area. They can do this by checking with their local authority.
If the property is in a selective licensing area, the local council will have a license application form available. The fees for this can vary but can be more than £1000. You must complete this application and prove yourself to be a “fit and proper person” to hold a license.
A fit and proper person is defined here but in short, is someone who has not been found guilty of unlawful discrimination, any offence involving fraud, other dishonesty, sex, violence or drugs and who has not contravened any provision of housing, landlord and tenant law.
Getting a license can be an onerous process.
The council may want to see safety certificates and know the location of smoke and carbon monoxide detectors, as well as seeing details of your tenants and their tenancy agreements.
If a landlord lives aboard the council may require that someone else holds this license. They will check that this person is appropriate and is involved in the day-to-day management of the property.
Licenses set out as part of a selective licensing scheme have conditions. These will vary from council to council but can be extensive.
Here are some example conditions from a scheme active in Greater Manchester. Landlords must:
- Ensure that their premises and its grounds are in a clean, safe, and habitable state prior to new occupiers moving in.
- Supply Electrical Installation Inspection Certificates and Portable Appliance Test Certificates on demand.
- Ensure that all important information is included in the tenancy agreement, that tenants are aware of any conditions of habitation, and that they are aware of how to report faults with the property.
- Ensure that the property is adequately secured with suitable locks on the doors and windows.
- Take reasonable steps to deal with nuisance and antisocial behaviour perpetrated by the occupants of the premises. This includes contacting and cooperating with relevant authorities if necessary, including the police and city council.
- Provide suitable accommodation for tenants during major works to their premises.
- Provide contact details to the property’s neighbours in case of an emergency.
Why do landlords dislike the selective licensing system?
Landlords have a few reasons to dislike selective licensing schemes.
Firstly, local authorities can charge hundreds of pounds for a license.
One of the more expensive selective licensing schemes, active in Gateshead in Tyne and Wear, can cost landlords who are not accredited with the council as much as £1000, while new schemes are being introduced elsewhere with even higher fees.
The money raised with such license fees is intended to pay for the selective licensing schemes enforcement, but some landlords believe that councils are using the schemes to fill their coffers.
While the Guardian reported that a scheme in Nottingham could raise tens of millions of pounds, councillors claim it is not intended to make a profit.
Some landlords object to the fact these schemes are seemingly very poorly run, with the Telegraphs Secret Landlord complaining that they had paid for three such schemes, and had not heard back from a single council.
This is indicative that the schemes have another problem.
The Secret Landlord said only 66% of landlords in their area had signed up for the local selective licensing scheme and posed the argument that the remaining 33% were probably the ones renting out substandard accommodation.
David Smith, policy director for the Residential Landlords Association offered a similar point of view, saying selective licensing schemes rely on landlords making themselves known to the local authority, and that “criminal landlords… will not come forward.”
While the penalties for not complying with selective licensing can be enormously high, with fines of up to £30,000 being levied on “rogue landlords”, many landlords question whether much enforcement is being carried out.
Will the government do anything about it?
A 2019 report from the Ministry of Housing, Communities and Local Government adds to the impression enforcement is spotty at best, indicating that local authorities often struggled identifying the full extent of their private rented sector, particularly when the area of the selected licensing program was large.
The report also identified that local authorities struggled with methods of enforcement and found the door knocking approach used by many was ineffective.
It added that in its current form, selective licensing was sometimes ineffective at ensuring an areas residential rental properties quality was up to standard, as it did not offer the powers to enforce this issue properly.
While the report noted that selective licensing could improve the quality of a localised areas housing and reduce anti-social behaviour, it generally only worked well if it was used in concert with other measures. In addition, it found that schemes which were self-funding and had effective enforcement were much more effective at improving housing quality.
Three years following the report, the UK Government is still considering the results, and has seemingly yet to decide if selective licensing schemes are worthwhile.
However, there is occasionally talk in the House of Commons about extending a similar scheme across the country. In early 2022, Michael Gove spoke of introducing a landlord register and holding all private rental properties to the Decent Homes Standard.
While in theory, this would not be a problem for good landlords, the reality of how selective licensing has worked up till this point indicates that good landlords will be footing the bill while rogues simply hide in the shadows.
In conclusion
Selective licensing legislation was introduced with lofty ambitions to improve the UKs housing stock but often proves to be a burden for legitimate landlords while failing to achieve this goal and letting rogues slip through the net.
The substantial extra cost and hassle this causes good landlords gives them yet another reason to want to get out of the private rental sector.
If you are looking to sell a buy to let property quickly, with or without tenants in place, you should contact one of our experts at National Property Buyers.
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