The lack of regulation in the private rented sector has been a hot topic for several years now. Over-inflated pricing and low standards often leave tenants feeling hard done by and living in poor conditions. One step that has been taken to try and combat this is rented property licencing schemes. These are now appearing all over the country and are designed to help highlight bad landlords and raise standards for tenants. However, the schemes are also attracting criticism as a cynical money making exercise and there are claims that the worst of the UK’s bad landlords will still continue to operate as before under the radar.

What is rented property licencing?

Councils can make it compulsory for every private landlord operating within a specific area to have a licence to rent out their properties. Rented property licencing is selective and so can be applied to some areas and not others. This is different to the type of licence that would be required for a landlord of a house in multiple occupation, which previously was the only type of licence required in the rental sector.

What does the requirement for a property licence entail?

It gives councils the opportunity to police the rented property sector. Any landlord will need to have a licence to operate if they are within one of the defined areas. In order to get that licence – and to maintain it – they will need to allow the council to check whether they are a “fit and proper person” to be a landlord. There may also be other requirements to meet, such as health and safety standards – for example, the council may want to see copies of certain safety certificates and also be informed of the location of smoke detectors, as well as being shown details of tenancy agreements. Licences usually last for around five years and then must be reapplied for.

Who will these licencing schemes affect?

Any landlord within an area where a scheme is being run by the local council. According to the Residential Landlords Association, at least 55 councils currently have a licencing scheme in place or would like to set one up. For example, a new scheme in Bexley, London, now covers Thamesmead North, Abbey Wood, Lower Belvedere and parts of Erith. There are schemes across many London areas, as well as in other parts of the country, such as Gateshead, Liverpool and Nottingham.

How much does a licence cost?

The cost of the licence is set by the local council and so can vary depending on location. For example, obtaining a licence in Gateshead would cost £550 to £1,000 while in Nottingham it would be £780, or £480 for a locally accredited landlord.

It’s also worth noting that it will be expensive for landlords who breach their licences – this could result in criminal prosecution or a civil penalty of £30,000.

Are there any exemptions?

Not for most private rentals. Even though local councils have acknowledged that there are already landlords who are doing an excellent job of fairly managing their properties, no exemptions are allowed from the licencing schemes. However, there are some properties that don’t fall into this category and so will be exempt, including holiday lets, student lets if the university is the landlord, business premises and properties where the tenant is a family member.

What’s the problem?

The main issue is that many landlords feel that this is rather a cynical money making exercise on behalf of local councils. Councils have responded to say that the fees that are charged are purposely kept low and are designed to only be enough to cover the council’s costs in administering the scheme. Another issue identified by landlords is that the schemes rely on landlords making themselves known to local councils. The issue here arises because criminal landlords are highly unlikely to make themselves known to councils and so the scheme could completely pass over those who were actually its intended target.

What does this change for tenants?

It should mean that standards rise across the rentals sector around the country. It will also make it possible to check whether a property is licensed – by law, councils must keep a register of all the licences that they have issued. Most councils have a searchable online database. The effectiveness of the scheme will, in part, come from the way that tenants use it. If tenants no longer rent from landlords who are not licensed then those landlords will be forced to obtain a license in order to make money from their properties. This will bring them within the remit of the local council and should help to ensure that all landlords meet certain minimum standards.

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You're reading the blog post The rise of rented property licencing – How it works and who it affects that was written by and first published on Getting Loans and Credit & Managing Money.