How landlords in Labour councils can brace themselves for fresh licensing fees

In recent months, a trend has emerged in the private rental sector; Labour-led councils are increasingly implementing new licensing schemes. Between June and July 2023, six Labour councils in Birmingham City, Islington, Medway, Merton, Southwark, and Wirral have introduced or are considering introducing selective licensing.

Landlords will be familiar with Houses in Multiple Occupation (HMO) licensing, but in England and Wales, every council has the power to establish additional licensing in their area under the Housing Act 2004. Here, the tenancy and landlord experts at AST Landlord Assistance explore the intricacies of these licensing schemes, their ramifications for landlords, and the broader implications for the UK's private rental sector.

Background of the licensing schemes

The concept of licensing schemes for private landlords is not new, but their recent surge in Labour-run councils reflects a changing political and social landscape. The expansion to include thousands more properties signals a shift in housing policy, aligning with broader goals of improving living standards and tenant rights.

Selective licensing schemes apply mainly to smaller private rental properties outside the scope of HMO schemes. The fees, ranging from £650 to £800, vary across councils, with specific examples including Birmingham City's £700 charge and Islington's £800 fee. These licences typically last for five years, but councils have the discretion to issue them for shorter periods, reflecting the local housing needs and challenges.

Purpose and aim of the schemes

The primary objective of these schemes is to ensure landlords maintain properties to a liveable standard. However, political motivations cannot be ignored. The drive to enhance housing quality resonates with renters, potentially garnering support in upcoming elections. This alignment with tenant interests reflects a broader societal shift towards housing equality and tenant protection.

Additionally, the financial implications for landlords are profound. The fees, coupled with other financial pressures such as stamp duty surcharges and energy-efficiency targets, create a challenging environment for property owners. The argument that fees detract from home improvement funds adds complexity to the debate, raising questions about who actually benefits from these schemes.

The legal ramifications are equally significant; non-compliance can lead to criminal convictions and substantial penalties, creating a high-stakes environment for landlords. The severity of these consequences underscores the government's commitment to enforcing housing standards but also raises concerns about proportionality and fairness.

Landlords must invest time and effort in understanding the specific licensing schemes in their areas - and consider the political landscape of any area of their property portfolio. This includes not only analysing the specific local fees and requirements but also the underlying objectives and enforcement mechanisms driven by that council. A nuanced understanding will enable landlords to navigate the regulatory landscape more effectively.

Strategic planning and compliance are more important than ever. Landlords must assess their properties, identify potential shortcomings, and implement necessary improvements. This proactive approach can mitigate legal risks and align landlords with broader societal goals of housing quality and tenant welfare.

Engaging with local councils offers landlords clarity on implementation and enforcement. Building relationships with local authorities can foster collaboration and understanding, ensuring that regulations are met without difficulty.

Linking licensing schemes to breaches of tenancy agreements

Any new licensing schemes are not merely a separate regulatory requirement for landlords. They are intrinsically linked to the obligations and responsibilities outlined in tenancy agreements.

Failure to comply with the standards set by licensing schemes can lead to legal consequences for landlords, including substantial penalties. In turn, it could constitute a breach of the tenancy agreement; failure to maintain the property to the required standard may contravene the terms of the tenancy agreement. This could lead to legal action by the tenant, further compounding the legal and financial risks for the landlord.

The increased scrutiny and enforcement associated with the licensing schemes may lead to greater awareness and reporting of breaches of tenancy agreements. Tenants may be more likely to recognise and report violations, knowing that local authorities are actively monitoring and enforcing housing standards.

How landlords must brace for licensing expansion

New licensing schemes in Labour-led councils represent a complex and multifaceted development in the private rental sector. The interplay between financial, legal, and political considerations creates a nuanced and challenging landscape for landlords. As the situation continues to evolve, landlords must remain proactive, balancing their responsibilities with the changing regulatory environment, and aligning with broader societal goals of housing quality and tenant protection.