Selective Licensing Coming to an Area near You!

The 2004 Housing Act introduced a raft of new legislative frameworks and was arguably one of the most significant measures of Housing law of recent time.

One of the more significant matters to emerge from the Act was the introduction of Selective Licensing schemes, which were enabled from April 2006.
Government research had identified that there were approx. 128,000 dwellings in the rented sector in areas of low demand and/or areas where there is a high incidence of antisocial behaviour. The idea of Selective Licensing was to make the landlords’ management practice more professional, which would in turn mean that private rental would be a more viable long term option for people.

Since that time a great number of local authorities have introduced Selective Licensing schemes either for a specific defined area, as has been the case in Thanet, East Kent, or alternatively on a district wide basis, as is the case in Croydon. Some of the other towns to adopt the scheme include Blackpool, Newham, Leeds, Bristol, Wolverhampton, Margate, Sunderland, Salford and Stoke.

The schemes require landlords to obtain a licence from the local authority in order to be able to continue to let their property. There is a licence fee, typically around £500-£600 per property, with the idea being that the licence fees self-finance the running of the licensing scheme.

The idea is a positive one. As professional landlords we are presumably keen to see an improvement in the image of our industry and also keen that standards are improved. The question of course is whether these goals are being achieved.

Most of the licensing schemes are for a period of five years and therefore some of the early adopting local authorities are now considering renewal. I would be very interested to learn from one of these local authorities what benefits they have seen during the licensing period, and whether these benefits – assuming there are some – could have been achieved by alternative methods that would not have involved such a significant fee for landlords.

The question is whether enforcement action against known problem landlords using legislation that is already available would be a better and indeed perhaps fairer way as opposed to a blanket approach of all landlords in a given area.

Looking at the question of antisocial behaviour, many landlords believe that it is not they who can influence the incidence of antisocial behaviour, particularly when county courts appear unwilling to enforce Section 8 possession claims on the basis of such behaviour.

Indeed one of the national landlord groups has previously stated that the issue of antisocial behaviour cannot be addressed by licensing – as it does not deal with the underlying cause. And far from helping to regenerate areas, if Selective Licensing pushes too many landlords out of the market, councils may run the risk of creating ghost areas as community services and shops are reduced.

Furthermore some commentators have argued that introducing a licensing scheme can cause further problems in certain areas. Some landlords may choose to sell their properties or leave them vacant, and others may be put off investing in a Selective Licensing area due to the costs involved.

The net result could be a reduction in available rental property in a period of housing crisis, and reduced investment in an area where the original idea was to economically enhance that area. I have heard anecdotal comments that some mortgage lenders are unwilling to lend on properties in licensed areas, not least as there is an issue that the licence is not transferrable. That being the case, whilst the seller of the property could be licensed and permitted to let the property, if the buyer were unable to obtain a licence then they could not rent the property and presumably therefore would not be able to make the mortgage payments.

It seems that many of the pieces of legislation to assist the rented sector need to be funded directly from landlords. I would like to see a change in approach where the landlords can improve their property and management process without directly paying. To that end I wonder if grants on rented property improvement could be made available, whether interest free loans could be given where the funds would be to improve rented accommodation. Landlords are far more likely to want to improve the value of their investment than they would be to fund a licensing scheme, which causes them to spend on licensing fees money that they may otherwise have invested directly in their property.

Regardless of your views it is quite possible that a Selective Licensing scheme may start in your area – indeed it appears that this piece of legislation is here to stay. If that is the case, then do ensure that you apply for your licence and provide the local authority with the information they require. There have been over 200 prosecutions so far for non-compliance and with more councils introducing a scheme, this number is set to rise further.