Selective Licensing and the Buy to Let Market: Landlords Take Note!

The Housing Act 2004 permits councils to enforce selective licensing schemes which aim to improve living standards for tenants in privately rented properties within designated areas.

For selective licensing to be introduced, a designated area will need to have above 19% of privately rented housing and must also meet at least one of the following factors:

• low housing demand;
• significant and persistent problems of anti-social behaviour;
• poor property conditions; or
• high levels of migration, deprivation or crime.

Should a selective licensing scheme be in place in the location where your buy to let property is situated, you will need to apply to the council for a licence for the property. To obtain a licence, you must meet certain criteria and the property must meet certain safety standards.

There will be compulsory conditions attached to the licence including:

• A gas safety certificate (where applicable) must be obtained annually and provided to the council;
• Any electrical appliances or furniture supplied by the landlord must be kept in a safe condition;
• Smoke alarms must be installed in the property and be well maintained;
• The tenancy agreement must be supplied to the occupiers of the property; and
• The licence holder must demand references from prospective tenants.

The relevant council may also attach other conditions to the licence such as requiring the licence holder to undertake property management courses or prohibiting the property from becoming overcrowded. Or upon each new tenancy, the property is provided in a clean and tidy condition and decorated to a reasonable standard.

It is a criminal offence to let a privately rented property in a designated area without a licence and failure to apply for one could lead to an unlimited fine. Failure to comply with a licence condition could result in a fine of up to £5,000.

With the growing number of privately rented properties and approximately 300 councils with a scheme already in place or at least consulting upon one, selective licensing is likely to become an increasingly prevalent requirement in the buy to let market.

Please do not hesitate to contact us should you have any queries relating to the business licensing issues above or the legal aspects of buy to let transactions generally.

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