What is Property Licensing?

A license to rent a private property is given by Local Authorities to landlords with HMOs (House in Multiple Occupation) or in areas covered by Selective Licensing Schemes.

Under The Housing Act 2004, it is a legal requirement to hold the correct property license and demonstrate that the property is kept to a good standard. This is to protect the health and safety of tenants and improve the quality of rented homes. There are three schemes under which landlords may need a licence:

• Mandatory HMO licensing
• Additional HMO licensing
• Selective licensing scheme

By law, councils must keep a register that tenants can access and search. This can result in landlords being hit with hefty penalties for not having a licence and fines up to £30,000 if found in breach of the license.

Mandatory HMO licensing

A HMO must have a licence if five or more people occupy it, and it includes two or more households where some individuals share facilities like a kitchen and bathroom.

Additional HMO licensing

Section 56 of The Housing Act 2004 states that the local authority may implement additional licensing if it considers that a significant proportion of HMOs are being managed insufficiently and if particular problems, either for those occupying the HMOs or for members of the public, may arise. Additional Licence criteria may reduce the number of occupants from five to three.

Selective licensing schemes

This scheme is not only relevant to HMOs, it also relates to privately rented properties in a specific area. Local Authorities have the power to introduce this scheme whereby a landlord’s property in a particular area is required to obtain a licence before renting.

‍Selective licensing may be introduced where one or more of the issues below are present:

• Low demand for housing
• Anti-social behaviour
• High turnover of tenants in rented areas
• Houses that are in a poor condition

‍The scheme can be applied to a whole area or specific streets, and you will need to contact your local council to find out if there is a particular license requirement in your area. Before introducing a Selective Licencing, councils must consult everyone affected and, in some cases, even the government.

Penalties

According to The Housing Act 2004, the local council can enforce penalties of up to £30,000 for breach of the legislation. It could also result in a criminal conviction. Any conviction can affect the ‘fit and proper person’ test required to hold the licence and, therefore, affect the ability to manage a licensed property. If the HMO is not licensed, landlords can be subject to a rent repayment order requiring them to repay up to 12 months' rent. It can also invalidate a Section 21.
 

This Licencing landscape is very complicated, not helped by most Local Authorities interrupting and applying their own version of Licencing legislation, to aid our managed clients navigate this, Hamptons have a specialist compliance team who monitor Local Authority Licencing schemes, staying abreast of new and expiring schemes, along with regular changes.

Within the Hamptons network, 2023 saw 10 new Licencing schemes, made up of 4 Additional schemes and 6 Selective schemes. 9 schemes came to an end during 2023, however it is worth noting that many of these will go under consultation and will be re-instated. With that in mind, 7 schemes are being planned for in 2024, with 5 schemes approved and going ahead in 2024.