How landlords can comply with licensing schemes

April 18, 2019

From ARLA PropertyMark

The Private Rental Sector (PRS) is undergoing a revolution. Key to this sector are Houses in Multiple Occupation (HMOs): properties with 3 or more people, forming 2 or more households. HMOs often have the potential to generate higher yields for landlords than standard single dwellings and as such attract investors into the sector. They can also offer more affordable accommodation to tenants than single bed flats or studios thereby serving an important role in the PRS.

There are over 4.7 million households in the UK PRS. Some of these properties are unsuitable to rent; not correctly complying with standards, not having the right licenses in place to prove they have been inspected and granted suitability for tenancy or habitation. Let alone environmental inspection for health and safety checks by Local Authorities.

HMO regulations were updated in October 2018 to increase the reach of Mandatory Property Licensing. Prior to this point, only large HMOs comprising three floors, or more were licensable, but this storey requirement has been removed, increasing the number of properties requiring a Mandatory licence from circa 60k to 220k. The housing minister has also announced a new scheme to help those who are homeless or at risk of becoming homeless to secure their own home via a funding pot of £19.5 million.

Know what licensing regulations apply in your local authority

There are many different licensing schemes and regulations that apply to properties across the UK. Local Authorities offer varying degrees of transparency making it difficult for landlords, letting agents, and managing agents to understand and keep up with the current regulations and which licenses to apply for.

Adding complexity to this, there is a combination of nationwide Mandatory licensing, and discretionary Additional and Selective licensing which varies by Local Authority. These regulations do not only diverge council to council, but sometimes even by street within the same Authority. Discretionary schemes run for five-year periods, creating a dynamic architecture of regulation as schemes constantly come in and out of existence over various part of the country.

Know the property licensing schemes and follow the process

Property licensing comprises of three different types of scheme: Mandatory, Additional and Selective.

Mandatory licensing is a national scheme for large HMOs which are occupied by five or more people with at least two households. This definition was updated in 2018 by The Licensing of Housing in Multiple Occupation Order. Mandatory licensing is regulated under the Housing Act 2004 and has been in force since 2006.

Once a Mandatory licence is approved for a large HMO, the property is deemed fit for rental based on the specified conditions of that licence. However, the licence is only valid for a maximum of 5 years, and during that time, any changes to the configuration of tenants in the property or changes to the property can potentially breach the conditions of that licence and become illegally let.

Additional licensing schemes are adopted by councils to extend the scope of licensing to more or all HMOs within a scheme, rather than only large HMOs. These schemes are generally more targeted than Mandatory, covering certain wards, or only HMOs above commercial premises etcetera. This is the joint responsibility of the property owner and property manager to understand, manage, and comply with.

Lastly there are selective licensing schemes which councils apply to all properties in a specific geographic designation. Selective licensing is designed to target less affluent areas in the PRS where tenants are deemed to be particularly vulnerable to rogue landlords. By virtue of applying to all rental properties rather than only HMOs, the reach of Selective licensing is broader than Additional and Mandatory. Again, the landlord and agent hold joint responsibility for compliance with Selective licensing.

It pays to use a Lettings company such as Upstix that is an ARLA member because of the regulated support we can offer. With the GetRentr platform, which is accessible to ARLA Propertymark members in the resources area, simply add your property portfolio to receive instant, accurate licensing determinations for every individual property. Furthermore, given the ever-changing nature of property licensing, GetRentr monitor and aggregate changes to the law daily, scanning portfolioS in real time to ensure ongoing compliance. Furthermore, users receive automatic notifications by email of any changes to licensing affecting their properties, totally removing all the stress and complexity for agents and landlords. GetRentr ensures maximum protection from fines or prosecution allowing you to focus on completing deals, safe in the knowledge that compliance is taken care of.