UK Property Rental: Navigating Licensing Requirements

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Certain privately rented homes in some London areas require a property license, the landlord’s legal responsibility. This license is not a mere formality; it’s a legal mandate, signifying the property’s suitability for occupation and adherence to acceptable management standards.

As a tenant, ensuring your landlord meets legal obligations is crucial. Verify if your rented property has the required license. If not, or if you suspect non-compliance, you might have grounds to claim a rent refund.

What is property licensing?

Property licensing plays a crucial role in tackling rogue landlords, ensuring tenant safety and improving the quality of private rented homes. There are three key types of property licenses:

1. Mandatory HMO (Houses in Multiple Occupation) Licensing:

Applies to most properties shared by 5 or more individuals from 2 or more households.
Relevant when some or all tenants share facilities like bathrooms, toilets, or kitchens.

2. Additional HMO Licensing:

Typically covers smaller properties shared by 3 or 4 people from 2 or more households.
Applicable when some or all tenants share facilities like bathrooms, toilets, or kitchens.

3. Selective Licensing:

Can extend to all privately rented properties within a specific designated area.
Aims to ensure standards and compliance across the board.

Licensing is a method employed by local authorities to monitor the quantity and quality of rented properties in their jurisdiction. Its primary objectives are to ensure that tenants have access to safe and adequately maintained accommodations and to minimize potential adverse effects on neighborhoods, especially from multi-occupancy lets.

Licensing was first introduced in England and Wales in 2006 under the Housing Act 2004, primarily to enhance safety standards in Houses in Multiple Occupation (HMOs), which were particularly prone to house fires. Over time, licensing’s scope and conditions have evolved to improve standards in HMOs and other rented properties in general.

Not every rented home requires licensing, but for those that do, a valid license from the local council is a legal prerequisite before they can be let.

Does my rented property need a license?

Understanding the significance of a property license is vital for tenants. If your landlord issues a section 21 possession notice without the required license, it may be deemed invalid. Section 21 notices often precede eviction proceedings.

In such cases, you may have the right to pursue a Rent Repayment Order for the period without the necessary license. This order, a financial judgment from a tribunal, mandates the landlord to reimburse up to 12 months’ rent. Organizations like Justice for Tenants provide free guidance on Rent Repayment Orders.

Landlords lacking the proper license may also face enforcement actions from the local council. It emphasizes the importance of ensuring your rented home complies with licensing requirements.

Do I need a landlord licence?

The requirement for a property license depends on the size and type of the let, as well as your location within the UK.

As a general guideline, ‘mandatory’ licensing laws typically dictate that you may need a license if you’re renting to more than two sharers:

In England and Wales, all large HMOs (with five or more unrelated sharers) must be licensed. Smaller HMOs may also require a license if your local authority has an ‘additional licensing’ scheme in place.
In Scotland and Northern Ireland, every property classified as an HMO must be licensed.

For specific details on mandatory licensing for HMOs, please refer to the next section. It’s important to note that in England and Wales, local authorities can also establish their own additional licensing rules under a ‘selective licensing’ scheme, which can apply to any rented property, not just HMOs.

If you’re considering property investment in England or Wales, it’s advisable to contact the relevant local council before purchasing to ensure you are aware of and understand the specific licensing regulations for the area.

Mandatory HMO licensing

The one type of rental property that falls under mandatory licensing conditions across the whole of the UK is a House in Multiple Occupation (HMO). However, it does depend on the size of the HMO and where it’s located:

England and Wales

National licensing regulations stipulate that every large HMO, defined as a property where five or more individuals from multiple households live together, sharing toilet, bathroom, or kitchen facilities, must obtain a license that is valid for five years.

To secure this license, several key conditions must be met:

The house must be suitable for the number of occupants.
The property manager, whether the landlord or an agent, must be deemed ‘fit and proper,’ meaning they have no criminal record and have not violated any codes of practice.

Additionally, landlords must:

Provide the council with an annual copy of the gas safety certificate.
Install and maintain smoke alarms.
Furnish the council with safety certificates for electrical appliances upon request.

The council may impose additional conditions on the license, which could involve upgrading facilities.

The cost of a five-year license varies across local authorities, typically ranging from £500 to £1,000. However, landlords in London may face fees up to 50 percent higher.

For more detailed information, you can visit GOV.UK. In England, smaller HMOs and other types of rented properties may also require a license, depending on the policies of your local authority.

Scotland

Every property that accommodates a minimum of three unrelated tenants who share bathroom, toilet, and kitchen facilities must obtain a license, which remains valid for three years.

To secure this license, you need to provide the local authority with the following:

Your personal details and property information.
Copies of the tenancy agreement(s).
The gas safety certificate.

Similar to the regulations in England and Wales, the council may impose additional conditions on the license.

The licensing fee is calculated based on the number of tenants and typically falls within the range of £200 to £300 per tenant, depending on the policies of the local council.

For more comprehensive information, you can visit the GOV.UK website.

Northern Ireland

Any property that serves as the primary residence for three or more individuals from more than two households necessitates a license, which holds a five-year validity.

The licensing fee is determined by the number of tenants and currently stands at £185 per person.

For further details, you can refer to the Belfast City Council website.

Please note that landlords in Wales, Scotland, and Northern Ireland must also be registered with an appropriate scheme, in addition to obtaining the necessary licenses for their properties.

Different types of licensing scheme from different councils

In addition to the national HMO licensing requirements, every council in England has the power to introduce its own licensing rules, which fall into two categories:

1. Additional licensing

The national law pertains to ‘large’ HMOs, but councils have the authority to implement licensing regulations for smaller HMOs. These smaller HMOs are properties occupied by at least three tenants from more than one household who share toilet, bathroom, or kitchen facilities.

2. Selective licensing

Local councils have the authority to mandate licensing for various types of privately rented homes. However, if a council intends to implement a licensing scheme that covers more than 20 percent of their area or rental properties, they must obtain government approval. These selective licensing schemes typically have a duration of five years.

For example, Hammersmith and Fulham previously had a selective licensing scheme that applied to all rented properties in 128 streets within the borough from 2017 to 2022. However, their current scheme, running from 2022 to 2027, only covers 24 streets.

Croydon also revised its landlord licensing requirements after an initial scheme that encompassed all privately rented properties in the entire borough. Between October 2015 and September 2020, 38,596 licences were issued, and approximately 40 percent of licensed properties underwent inspection.

Under selective licensing, councils have the authority to assess whether an individual qualifies as a ‘fit and proper’ landlord and can impose various safety and property management requirements.

This decentralization of licensing rules has both advantages and disadvantages. On the positive side:

It enables each council to maintain a suitable balance of housing stock and prevent over-saturation of HMOs in a neighborhood.
Councils can ensure rental properties meet safety and condition standards before letting, with periodic reviews at each license renewal.
Councils can more easily identify and prosecute landlords who violate the law.

However, there are challenges:

Processing license applications and investigating violations can be time-consuming, and many councils face staffing limitations.
License fees are an additional cost for landlords.
The variation between different council schemes and their potential amendments or discontinuations can create confusion for landlords, potentially leading to unintentional non-compliance.

To determine if any additional or selective licensing schemes are in effect in your area or are planned for the near future, contact your local council’s housing department.

How can I report an unlicensed property?

When your landlord rents a property without the necessary license, it’s an offense. Additionally, if they violate the license terms, such as overcrowding, mistreating tenants, or neglecting urgent repairs, they could be committing an offense. If you suspect that your home lacks a license, has an incorrect one, or if your landlord might be in breach, you can utilize our tool to report this to your local council for investigation.