Seventy councils in England have launched licensing schemes designed to improve the privately rented residential sector. There are now three types of licensing schemes that affect landlords:
1. Mandatory
Licensing is mandatory on large houses of multiple occupancy (HMO). From April 2018, all rented houses with shared bathroom facilities need to be licenced by the local authority. Previously landlords only needed licences for properties over three storeys high. Landlords have been given a six-month period to conform to the mandatory licencing regulations.
2. Additional licensing
If a council believes that it needs stronger rules because HMO’s in their region are not been managed properly, it can apply stricter additional licencing rules that go further than the mandatory licences.
3. Selective Licencing
Selective licencing involves checks to make sure the landlord is a” fit and proper person”. Landlords need to comply with stricter regulations on property management and tenant safety.
The difficulty for landlords is that licensing is not mandatory in all areas. Where additional or selective licences are required, councils may apply different criteria in one area than another. Licences cost between £500 and £600, which is an additional cost to landlords on top of commercial mortgage interest increases, extra stamp duty and reduction in tax relief.
The licencing rules are designed to protect tenants. The National Landlords Association is working with the Government on its review of how the licencing system is working. They want to encourage decent professional managed shared housing.
