Landlord licensing schemes: A key weapon or a money making exercise?

Landlord licensing schemes: A key weapon or a money making exercise?

Published on 20th March 2019

Landlord licensing schemes: A key weapon or a money making exercise?

Landlord licensing schemes are continually being introduced across England, as local authorities attempt to clamp down on 'rogue' operators. It is estimated that 460,000 rental properties in England are now covered by the scheme. It allows councils to establish if landlords are a ‘fit and proper’ person to be a landlord and can include regulations concerning the management, upkeep and safety measures of a property. Licensed landlords’ properties must meet fire, electric and gas safety standards and be in a good state of repair. They must also be able to deal effectively with any complaints about their tenants.

All private landlords in England must obtain a licence for each of their rented properties. This scheme has been introduced under the government’s selective licensing laws and signing up for it is therefore compulsory. Local councils have been arguing that selective licensing schemes are a key weapon in the battle to improve standards in the private rented sector, however, many landlords believe these schemes are simply a money-making exercise designed to boost council coffers.

Fresh analysis of licensing charges between local authorities shows a large variance, with the cost of a new licence ranging from just £55 to £1,150. New research shows that the most expensive landlord licence costs 21 times more than the cheapest. The research from Direct Line for Business found that in Liverpool, the cost of a licence for a first property is £412, whereas in Salford just 30 miles away it is 51% higher at £625. The average landlord licence across the UK costs £591.

While in Scotland and Wales landlord licence schemes are mandatory, in England just one in six – 16% - of local authorities have a scheme in place. Local authorities are raising huge sums from additional landlord licensing schemes, with Liverpool City Council receiving over £4 million in a year covering over 42,000 properties. On average, each council with a scheme in place raised £144,629 from landlord licensing schemes in 2017 and the average fine for a licensing offence in 2017 was £926.

Some argue that the worst criminal landlords will simply carry on staying under the radar. But local authorities across the UK recorded an average 5,069 licensing offences in 2017, an increase of 46% since 2016 (3,476 offences).

Matt Boatwright, head of Direct Line for Business, said: “Our analysis shows landlord licensing is truly a postcode lottery, with a phenomenal range of costs for those that do have to sign up for a scheme.  “Anyone planning on becoming a landlord, or who already has a property portfolio, should contact their local authority to see if they have a scheme in place. Boatwright added: “It is vital that landlords comply with all appropriate legislation and take steps to protect themselves and their investment, including appropriate landlord insurance.”

Whatever the cost of licensing, it fails to provide any assurance about the quality of accommodation, according to David Smith, policy director for the Residential Landlords Association (RLA). He said: “The RLA’s own analysis shows that there is no clear link between a council having a licensing scheme in place and levels of enforcement against criminal landlords. “The fundamental problem with all schemes is that it is only the good landlords who come forward to be licensed. They completely fail to identify the crooks. They just mean landlords, and therefore tenants, having to pay more. Instead, councils need to be more creative in how they identify landlords by better using the powers they have to collect data using council tax returns and accessing information from deposit schemes.”

But will the scheme 'weed out' bad landlords? If someone cannot meet the 'fit and proper' landlord criteria the scheme sets out, they will be refused a licence. Bad landlords who do not invest in their properties or manage them properly will move out of the market making Liverpool an attractive prospect for good landlords. The scheme will improve the rental market in Liverpool by raising standards and helping to identify non-compliant landlords and management agents who do not invest in their properties.

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