Each country in the UK has its own national mandatory licensing requirements for the private rented sector:
England: Any ‘large HMO’ must be licensed. That’s a property housing five or more people from more than one household, who share toilet, bathroom or kitchen facilities.
Wales: Large HMOs must be licensed. That’s the same definition as for England, but with the additional condition that the property has three or more storeys.
Anyone (landlord or agent) letting and/or managing property must apply for a Rent Smart Wales licence.
Scotland: Every HMO must be licensed. That’s any property rented out by three or more unrelated people who share the bathroom or toilet and kitchen.
Northern Ireland: All HMOs require a licence. That’s any property occupied by three or more people forming more than two households.
England: additional and selective licensing
While Scotland, Wales and Northern Ireland only have national licensing laws, it’s more complicated in England, as each local authority can also impose its own licensing requirements. There are two categories:
‘Additional licensing’ powers mean councils can extend the ‘large HMO’ mandatory licensing requirements to smaller HMOs. So the council can require any property shared by three or more people forming more than one household to be licensed.
Then ‘selective licensing’ powers allow the council to require any rented property to be licensed, and it can be incredibly difficult for landlords to know about schemes and keep up with changes:
- Schemes can apply to the whole local authority area, specific wards or boroughs, or even just parts of certain streets
- More than one scheme can be in operation at a time, each with different start and end dates
- Although schemes run as standard for 5 years, they can be introduced, replaced or scrapped with very little notice or publicity.
If you’re found not to have a licence when it’s required, that’s classed as a criminal offence. And although the penalty is unlikely to be severe for a first-time breach, if the council considers it serious enough, they could fine you up to £30,000, issue a rent repayment order or even prosecute you in court.
Some examples of schemes that have recently changed or are due to do so:
- In Greenwich, London:
- The current borough-wide additional licensing scheme for HMOs is coming to an end on 1st October this year.
- Also on 1st October, a new selective licensing scheme is coming into force for all private rented homes in five wards in the east of the borough. The council estimates that it will receive 4,400 licence applications at a cost of £780 per property, although they’re planning to run an ‘early bird’ discount period, reducing the cost by 60% to £312.
- In the London Borough of Redbridge:
- The additional licensing scheme ended on 12th April this year, but the council is currently considering responses to a consultation on the introduction of a new one to replace it.
- Two selective licensing schemes are currently in operation: one covering two wards, which ends on 12th July this year, and another covering 12 wards, which runs until 30th October next year.
- An added complication is that some ward boundaries have changed since the schemes were introduced!
- In Bristol:
- Two separate additional licensing schemes covering 15 wards are in operation for HMOs housing 3 or 4 people
- On 6th April this year, a selective licensing scheme came into force for all privately rented properties in the Bedminster and Brislington West wards.
To help you stay up to date, your local authority may have a mailing list for landlords, so check and make sure you’re on it! And if you’re in Greater London, the London Property Licensing website should be very helpful.
But councils in some areas simply aren’t very good at publicising changes. In that case, having a good local agent, who can keep you up to date and help make sure you stay compliant with licensing requirements, can be invaluable.
If we already manage your rental, we’ll let you know as early as possible about any licensing changes in the area. Meanwhile, if you have any questions about licensing or you’d like to find out more about our Fully Managed service, just get in touch with your nearest Your Move branch and speak to one of the team.
The Department for Levelling Up, Housing and Communities has confirmed that the Leasehold Reform (Ground Rent) Act 2022 will come into force on 30th June this year. Key points:
- Ground rent on new leases for residential property will be restricted to a ‘peppercorn’ rent – i.e. zero
- For lease extensions, the current ground rent will continue until the end of the old lease period, then it must be zero for the additional period
- The rules won’t apply to retirement properties before 1st April 2023.
Mark Chick, Director of the Association of Leasehold Enfranchisement Practitioners (ALEP) has commented:
“The Act goes some way to addressing the issues arising out of the ‘leasehold scandal’, where doubling of ground rents on newly-created leases created an iniquitous situation for homeowners who had been sold leasehold houses with an escalating ground rent. In due course, this may help to pave the way for commonhold [under which] there will be no ground rent income from a building [so] investors and developers may feel less inclined to use leasehold structures.”
We’ve been waiting for progress on the Renters’ Reform Bill for several years. And finally, the Government has confirmed it will be brought forward this autumn, in the third session of parliament.
We’ll cover the Bill in more detail in our next newsletter, meanwhile here’s a reminder of the four key reforms being proposed for the Private Rented Sector in England:
- Abolishing section 21 evictions
- Introducing a landlord registration scheme
- Introducing a new Ombudsman covering all PRS landlords
- Making the Decent Homes Standard applicable to the PRS for the first time.
More information is available at GOV.UK.