If you’re a landlord, there’s a chance that your local council requires you to hold a landlord licence.
While licensing is compulsory in Scotland and Wales, individual councils in England can currently decide whether landlords have to obtain a licence or adhere to a code of practice.
And, new research has found that the cost of landlord licensing varies significantly from council to council. Keep reading to find out whether you need to get a landlord licence, and why the cost of such a licence has been called a ‘postcode lottery’.
As a landlord, do I have to have a licence?
Licences are currently mandatory for landlords in Scotland and Wales, but just one in six English local authorities operates a licensing scheme – estimated to cover 460,000 rental properties.
Schemes allow councils to establish whether you are a ‘fit and proper’ person to be a landlord. They can include regulations concerning the management, upkeep and safety measures of your property.
If you’re renting out an HMO (shared by at least three people not from the same family) then you’ll need to have a licence.
If you rent out another type of property, then it depends on whether your local authority operates a licensing scheme. Councils are increasingly introducing their own additional and selective schemes, and as well as ensuring that landlords are ‘fit and proper’, these schemes can also raise valuable revenue – as you’ll see next.
What does a landlord licence cost?
New research from a leading insurer has found that the cost of landlord licensing schemes in Britain are a ‘postcode lottery’.
Direct Line for Business has analysed the costs levied by local authorities to obtain a landlord licence and found that the cost ranges from £55 to £1,150 – an incredible 21 times more expensive.
The research found that the average cost of a new licence in the UK is £591 but there can be significant differences even between neighbouring councils.
For example, the cost of a licence for a first property in Liverpool is £412. However, just 30 miles away in Salford, the cost of an equivalent licence is more than 50% higher at £625.
The research also identified that, in recent years, there has been a dramatic increase in the costs that local councils charge for landlord licences.
For example, under the additional licensing scheme in the London Borough of Newham, the cost of a licence increased by 150% in just three years, from £500 in 2014/15 to £1,250 in 2017/18.
Charging methods vary between authorities
Local authorities are raising huge sums from additional landlord licensing schemes. On average, each council with a scheme in place raised £144,629 from landlord licensing schemes in 2017. Liverpool City Council received over £4m in a year from more than 42,000 properties.
The way that costs are calculated also varies from authority to authority. For example:
- Tiering the cost of a licence based on the number of rooms in a property
- Charging by the type of property
- Charging by the number of occupants of a property
Matt Boatwright, head of Direct Line for Business, says: “Our analysis shows landlord licensing is truly a postcode lottery, with a phenomenal range of costs for those that do have to sign up for a scheme.
“Anyone planning on becoming a landlord, or who already has a property portfolio, should contact their local authority to see if they have a scheme in place.”
Landlord? Make sure you adhere to all legislation
The research by Direct Line also found that local authorities across the UK recorded an average 5,069 licensing offences in 2017; an increase of 46% since 2016.
If you’re a landlord, you can commit an offence if:
- you don’t have a licence in place
- you breach the terms of the licence, such as allowing more people to occupy a property than permitted.
If you fail to comply with a scheme it is a criminal offence that can result in prosecution and a civil penalty of up to £30,000. The average fine for a licensing offence in 2017 was £926.
What is the situation in Wales?
If you’re a landlord in Wales, then you have to register with Rent Smart Wales. You must either be licensed yourself (if you're ‘self-managing’) or use a licensed agent.
Since the start of 2017, there have been a total of 11,392 successful landlord licence registrations in Wales, generating over £1.54m in revenue from successful applications.
If you don’t register, you are unlicensed, or you use an unlicensed agent, you can be issued with a fixed penalty.
Since the start of 2017, there have also been 1,625 licences granted to agents, those who let or manage a rental property in Wales. These registrations generated £211,321 in revenue.
What is the situation in Scotland?
As a landlord you’re obliged to register with a local council in Scotland if you want to rent out a property. You also have to sign onto the Landlord Registration central online system. Fines of up to £50,000 apply for non-compliance.
Since the start of 2017, there have been over 22,000 new landlords registered and over 46,000 successful renewals. Everyone carrying out letting agency work also must apply to join the Scottish Letting Agent Register.
Matt Boatwright from Direct Line adds: “It is vital that landlords comply with all appropriate legislation and take steps to protect themselves and their investment, including appropriate landlord insurance.”