There has been a good deal in the media recently about landlord licensing, both with the announcement by David Cameron in the Queen’s Speech in May and the introduction of several schemes by local authorities.
The reasons behind these schemes vary. The principal one for local authorities is to crack down on criminal or rogue landlords. For the Government, the driver is to prevent migrants who have been refused permission to stay from gaining employment and accommodation after that point.
Eviction of migrants who have lost the right to rent
The Government proposal is to make it easier for landlords to evict tenants who have lost their appeal to stay in the UK and therefore have no “right to rent”. This will form part of the new Immigration Bill, although, as you can read in an earlier article, there is no clarity as yet as to how this will be achieved.
The penalties for landlords who do not comply seem to be further thought through than the process of eviction!
Since the Queen’s Speech, where very little detail on the licensing proposals was given, there has been further clarification from the Department for Communities and Local Government. The nationwide scheme will relate to HMOs, or houses in multiple occupation. However, it appears that the definition of HMO will change to widen the scope of properties that fall under that category.
The current definition is properties of three or more storeys lived in by five individuals making up two or more households. This might be reduced to fewer stories, possibly even just one, and the requirement for there to be more than household may be removed. If this were the case, this might cover a large proportion of larger properties let in the private-rented sector.
Local authority schemes
The Housing Act 2004 introduced three forms of licensing:
- Mandatory licensing of HMOs
- Additional licensing of HMOs – a discretionary licence applied at the discretion of local authorities
- Selective licensing – also at the discretion of local authorities
Since the General Approval order in 2010, local authorities have been putting in place increasing numbers of discretionary licensing schemes (additional and selective).
The charges vary, but tend to average £500 for five years, although many local authorities offer an initial discounted rate.
According to a report by the National Landlords’ Association in February 2015:
- 45 councils already have a scheme
- 18 consultations had recently taken place
- 30 councils had schemes under development, either new schemes or extensions of existing ones
The likely impact
While I totally endorse a drive to ensure that landlords are applying best practice and professionalism, I feel that this increased use of licensing is a heavy handed way of dealing with rogue landlords. There are many more “good” landlords than there are “bad”, so why not develop an approach that just targets the bad?
These schemes are not only onerous and expensive for landlords – who are likely to pass the cost on to tenants – they are also onerous and expensive for local authorities to set up and manage, especially at a time when their budgets have been cut to the bone.
In the NLA report, they mention a scheme set up by Swansea City and Borough Council that cost more to manage than it generated in income (from fees)!
If this is true of other local authority schemes, where will they find the budget to enforce against rogue landlords? This is because, if the scheme is not enforced, it becomes powerless – a financial burden on landlords with no action to stop the rogues. What you might call a lose-lose.
Article Courtesy of: David Carter, David is the CEO of The Sheriffs Office.