Are you a landlord letting out domestic properties in the U.K.? Have you heard about the property licensing scheme for landlords? Well, if your let properties are located in the London Borough of Newham you will already know about this – but if not, beware, as a trend is about to start I suspect, across the whole of the U.K., adding yet more levels of financial and administrative burden to private landlords (whether you let as an individual landlord or through a limited company).
Many councils up and down the country are eagerly watching the growing success (including, dare I mention it, the revenue earning potential) of the property licensing scheme being run by Newham council.
Did Newham just invent their property licensing scheme? No, they used the provisions of the Housing Act 2004 – Part 3 – Section 88 – “Selective Licensing of Other Residential Accommodation”.
In 2012, Newham decided to launch the very first borough-wide property licensing scheme, primarily to eradicate rogue landlords. They were becoming concerned about so called “sheds with beds” – illegal ramshackle buildings, often built at the bottom of gardens and housing multiple tenants living in squalid conditions.
Newham promoted the scheme and assured all the good landlords in the borough that they would have “…nothing to fear”. Now where have I heard that term recently?
Fall foul of the Newham scheme, i.e. fail to apply for a licence and you, as the landlord, could be facing fines of up to £20,000 per property. Also if you breach any of the conditions of a licence which has been issued, the fines are up to £5,000 and will result in the loss of the licence.
Is the Newham property licensing scheme a success?
Their plan seems to be working. Basically you cannot let a domestic property in Newham without a council licence – which has a cost attached to it.
The estimated revenue earned by Newham for their property licensing scheme, since it launched on 1 January 2013, is north of £8M, but could be higher, depending on whether applications were made by their extended deadline of 31 January 2013. Fees up to this deadline were £150 for online applications (or £200 via paper forms). For all applications after 31 January 2013, then the fee rose to a staggering £500 per property for online or £550 for paper forms.
[Note: Newham have recently published on their website that they received 19,000 applications before 31 January and 11,000 thereafter]
Is the property licence per property or per landlord?
The licence fee is per property and not per landlord. So, even if you have a Ltd company which holds some or all of your let properties in Newham, you still have to pay a licence fee per property.
How long does the property licence last for?
The good news is that the licences being granted (assuming you get approval), usually last for up to 5 years – so at least the fee is not an annual recurring one, which would severely dilute the rental return yield.
Are there any conditions attached to the licences?
Yes, all licences issued by Newham are conditional and all Licence holders must comply with those conditions. The conditions run to about 5, A4 pages with 5 main clauses and almost 40 sub-clauses to catch the unwary. I have set out a few of the conditions below which the licence holder must adhere to:
• Obtaining references for all occupiers of the let property (before the tenancy starts);
• Provision of a 24 hour emergency contact number (can include managing agent);
• Inspect the property every 6 months and keep written records of such inspections;
• You must not ignore or fail to take action re any complaints of anti-social behaviour;
• A copy of the licence, once granted, must be given to the tenants or displayed in a common parts of the property
• Install and maintain smoke alarms in the property
The Newham scheme statistics as at 31 May 2013 included:
• 30,000 separate property licensing applications by landlords
• 750 enforcement visits by the council
• 1,200 warning letters issued by the council
• 50 cautions handed out by the council
I would like to offer some brief words of guidance as best practice if you ever have to register with Newham, or any other council for that matter who adopt this scheme in future:
• Complete the application form accurately and early
• Pay the correct fee when applying
• Let your tenants have a copy of the licence (or display it at the property), once granted
• If you have a mortgage on the let property you must write and advise your lender that you are applying for a property licence
• Visit the property every 6 months and keep a written record of each visit
If you would like any help on legal issues concerning your let properties, please feel free to contact me and I will put you in touch with the right team here at Bowling & Co. You can email me at: firstname.lastname@example.org or alternatively please take a tour of our website at www.bowlinglaw.co.uk
Article by David Downham, ACIS, CTA, Practice Director, Bowling & Co, Solicitors