WHAT IS A LANDLORD SELECTIVE LICENCE & WHY WAS IT INTRODUCED?
Tom Condon
November 1st, 2023
Share this post
Start your property portfolio today!
A landlord selective licence is a legal requirement introduced under Part 3 of the Housing Act, aiming to regulate the management of privately rented properties. It means landlords need to obtain a licence before renting out their properties in designated areas. The introduction of selective licensing schemes emerged from the need to address specific economic and social conditions prevailing in certain local authority areas.
The process of making a selective licensing scheme involves strict criteria, as outlined by the Department of Levelling Up, Housing, and Communities. The criteria includes the need for the scheme to cover more than 20% of privately rented homes in the local authority area.
Additionally guidance emphasises the importance of the scheme in ensuring the safety and well-being of tenants, with expectations set for the scheme to deliver significant improvements.
In this article, we will cover what selective licences are, how they work, if they work, the licence exemptions and what you need to know before applying.
A selective licence is part of a licensing scheme (SLS) introduced by the Government in which all private landlords within a designated area must have a local authority licence to rent out a privately-rented property.
Selective licences vary in cost depending on the local authority you reside in, with local councils like Leeds offering licences at £825 per private rented property or unit, Manchester local council offering £800 per property or unit and Liverpool city council offering £583 per privately rented property or unit.
The selective licence fee is used to fund the scheme and enforcement. Local authorities have the ability to apply landlord selective licensing schemes for five years, but they must demonstrate why they have concerns, and look at alternative approaches before implication of selective licensing.
If the selective licensing is proposed for over more than 20% of area of a total local authority, then the designation must be approved by the Secretary of State.
Why was selective licensing introduced?
Local authorities have been able to apply selective licensing schemes in England and Wales since April 2006 under the Housing Act 2004.
Selective licensing was introduced as part of the UK Government’s anti-social behaviour agenda, which was brought in to tackle anti-social behaviour by enforcing management standards.
The anti-social behaviour agenda was brought in amongst concern that in areas of low housing demand, landlords were buying properties to let without investing in proper standards of property management.
As a result, there were concentrations within low housing demand areas where the properties were poorly maintained and tenants exhibited anti-social behaviour.
A local authority has the option to designate either the entire district or a section of it for landlord selective licensing of residential accommodation. Nonetheless, properties rented out by local authorities and privately registered social housing providers are not subject to these licensing obligations.
Before implementing selective licensing, the local authority is obligated to consult with those likely to be affected, including residents, workers and business operators in neighbouring areas. The authority must also explore other effective methods to achieve its intended objectives.
Any decision to designate an area under selective licensing must receive approval from the Secretary of State, unless it falls under general approval or the area falls below 20% of the total geographical area.
Local authorities have the authority to designate an area for selective licensing without requiring the Secretary of State’s approval, provided there is a minimum 10 week consultation period. It’s important to note that this period doesn’t start until the local authority presents a draft proposal detailing the designation and its potential impacts.
Areas that can be subject to selective licensing must have a significant proportion of properties in the private rented sector under assured tenancies.
Additionally, the area must meet specific conditions, such as being an area of low housing demand, experiencing persistent anti-social behaviour, having a high number of poorly maintained private rental properties, facing significant migration, experiencing high levels of deprivation, or suffering from a high level of crime.
Before granting a licence, the local authority must ascertain that the proposed licence holder is a fit and proper person and the most suitable individual to hold the licence. The authority must also ensure that the proposed property manager, if different from the licence holder, is also a fit and proper person.
Mandatory conditions, including the production of a gas safety certificate, maintenance of electrical appliances and furniture, installation of functional smoke alarms, and provision of written occupancy terms to occupants, must be attached to every licence.
Additionally, the local authority can impose discretionary conditions to regulate the management, use, or occupation of the dwelling.
Failure to obtain a licence or breaching its conditions can result in various penalties, including unlimited fines, civil penalties, rent repayment orders banning orders and restrictions on serving a Section 21 notice.
Tenancies granted by landlords who have committed offences related to property licensing remain legally binding and the landlord must follow the proper procedures to end the tenancy.
What if a landlord does not have a selective licence?
In cases where a landlord does not possess the required selective licence despite being obligated to have one, or in situations where a landlord holds a licence but breaches its terms, local authorities are empowered to take the following actions against the landlord:
- Impose a fine upon conviction.
- Issue a civil penalty of a maximum of £30,000.
- Apply a rent repayment order (RRO) for the duration during which the property was rented out without the necessary licence.
- Enforce a banning order.
- Restrict the landlord forms serving a Section 21 Notice during the period of non-compliance with licensing requirements.
What is the fine for not having a selective licence?
Failure to obtain a selective licence or neglecting to submit an application within the designated time frame constitutes an offence that may lead to an unlimited fine or a civil penalty of up to £30,000.
Selective licensing schemes have gained significant attention in the UK amongst landlords and investors, with local authorities indicating their varying degrees of effectiveness.
According to a recent review (2019) conducted by the UK Government, 274 out of 326 local authorities participated, demonstrating a strong belief in the efficiency of their selective licensing schemes in addressing various social and housing challenges.
The surveyed local authorities highlighted the positive impact of these schemes in tackling issues such as:
- Anti-social behaviour.
- Low housing demand.
- Poor housing conditions.
- Migration.
- Deprivation.
- High areas of crime.
The overwhelming majority, accounting for 92% of the respondents, rated the landlord selective licensing schemes as either daily effective or very effective in addressing the specified issues. This finding suggests a widespread recognition among local authorities of the positive outcomes facilitated by these schemes.
However, the study also identified areas where certain schemes were deemed less effective. One local authority reported that its licensing scheme exhibited marked inefficiency in addressing the prevalent challenges within its area.
Additionally 9% of the local authorities collectively categorised their schemes as either daily ineffective or very ineffective, indicating that there is room for improvement in certain cases.
Furthermore, the review revealed that the effectiveness of the selective licensing schemes were often contingent upon the specific issues they were designed to address.
Local areas that had introduced the schemes to combat poor property conditions, anti-social behaviour and low housing demand were more inclined to perceive the schemes as highly effective, pointing to the targeted nature of the schemes.
Certain types of rental properties are exempt from selective licence schemes. These exemptions may include:
- Holiday lets.
- Commercial premises.
- Socially let properties.
- Student accommodation owned by a university.
- Accommodation where the tenant is a family member.
- Any property that is empty.
Any property owner which holds a HMO licence must still get a selective licence if the property is in an applicable area.
Are there any selective licence temporary exemptions?
There are some temporary 3 month selective licence exemptions, like if you are wanting to stop renting out your property, you have sold your property subject to contract or if you have permission to change your property from residential to another use.
These temporary exemptions will only be granted if you can prove you are actively taking steps to achieve the criteria, and you will need to complete an application form to your local authority council.
Can selective licences be revoked?
In exceptional cases, selective licences can be revoked, particularly when there has been a substantial or persistent violation of the licence conditions. This could occur if the landlord, as the licence holder, is no longer deemed a “fit and proper person”, or if the property has undergone significant structural deterioration.
A HMO licence will usually be needed if a property owner rents out a property to two or more households, whereas property owners that live within a landlord selective licensing area will need a selective licence, regardless of how many tenant households the property has.
Due to a lack of uniformity in regulations and fees across different geographical areas, there is a certain level of complexity surrounding the different licences landlords need in the UK.
This, paired with the fact you could be hit with fines as much as £30,000 for not having the correct licence, means that non-compliance with the correct licensing could result in significant financial losses for landlords.
What are the mandatory HMO licensing requirements?
Landlords of specific shared homes have been obligated to adhere to licensing regulations since 2006, which replaced the initial registration scheme outlined in the 2004 Housing Act.
If a property is classified as an HMO, then the property owner must have a HMO licence from the Local Authority. Usually landlords will be required to pay an administrative fee and ensure that the property passes an inspection for any potential health and safety risks before the licence is granted.
Continuous obligations include providing the Local Authority with copies of annual Gas Safety Certificates, conducting Electrical Safety Tests and installing smoke alarms on each floor.
Also, in the case where any of the rooms include a wood-burning stove or coal fire, the rooms must have a carbon monoxide alarm installed to reduce the risk of fire and the buildup of carbon monoxide within the property.
Do you need a HMO licence and a selective licence?
If your HMO property resides in a selective licence scheme designated area, then you will need both a HMO licence and a selective licence.
How do selective licences differ?
Similar to the mandatory HMO licensing, selective landlord licensing was introduced in 2006 and empowered local authorities with greater authority to address the repercussions of substandard private landlords and disruptive tenants.
Initially, these licences were seen as a positive step, aiming to enhance living standards for tenants in well-maintained homes.
The absence of a nationwide licensing scheme was intended to provide specific councils in severely affected areas with the power to take enforcement action without burdening the majority of landlords across the country.
In line with HMO licences, landlords operating in areas with selective licences must acquire a licence before renting out a property, granting the local authority the power to ensure the property meets the necessary standards and that the landlord effectively manages the rented property.
White the expectation was that only a limited number of local authorities would implement selective landlord licensing schemes; the number of councils opting for such schemes has significantly increased.
Before you apply for a licence, there are a few things you will need to ensure you have to hand, like the property details and personal information. In this section we will cover all the things you need to know about the application process.
Checklist for application
When applying for landlord selective licensing of privately rented homes, you will need to have some vital information to hand before you start the application process.
Here is a checklist of the key requirements for completing a Selective Licence application:
The names, date of birth, and contact details of the applicant, property manager, proposed licence holder, property owner and the person having control of the property subject to the application.
The National Insurance (NI) number of the licence holder, along with the NI numbers for the applicant, property manager, property owner and the person having control of the property.
Proof of identification for the applicant, proposed licence holder, and the property manager, including photo ID (e.g. a current signed passport or a UK or EEA photocard driving licence) and an official document as proof of identity (e.g. a utility bill issued within the last three months or a council tax bill for the current year).
Details of Houses in Multiple Occupation (HMO) or properties licenced or due to be licensed.
Property details including the address, the number of toilets, washbasins, and sinks, the type and location of smoke and heat alarms and details of the fire escape routes. As well as mortgage details, including the name of the provider and the mortgage company address.
How do you apply for a selective licence?
Applications can be submitted and paid for online via the local council where your property resides in or through a paper application form which can be posted to their stated address.
Anyone can apply for a selective licence, however, the proposed licence holder must be a fit and proper person and the most suitable for the role. The proposed property manager must also be a fit and proper person. Individuals subject to a current banning order under the Housing and Planning Act 2016 will not be considered suitable for these roles.
The law requires you to inform certain individuals in writing about your intention to apply for a selective licence. These individuals include mortgagees, property owners, tenants, proposed licence holders, property managers, and any person agreeing to be bound by the licence conditions.
Each property must have its own licence, and in the case of self-contained flats, each unit requires a separate licence. Properties that are unoccupied do not require a licence, but an application should be made as soon as the property is occupied.
Property owners are advised to consider the costs of an empty property against the benefits of having a selective licence for occupied properties.
Start your property portfolio today!
A landlord selective licence is a legal requirement introduced under Part 3 of the Housing Act, aiming to regulate the management of privately rented properties. It means landlords need to obtain a licence before renting out their properties in designated areas. The introduction of selective licensing schemes emerged from the need to address specific economic and social conditions prevailing in certain local authority areas.
The process of making a selective licensing scheme involves strict criteria, as outlined by the Department of Levelling Up, Housing, and Communities. The criteria includes the need for the scheme to cover more than 20% of privately rented homes in the local authority area.
Additionally guidance emphasises the importance of the scheme in ensuring the safety and well-being of tenants, with expectations set for the scheme to deliver significant improvements.
In this article, we will cover what selective licences are, how they work, if they work, the licence exemptions and what you need to know before applying.
A selective licence is part of a licensing scheme (SLS) introduced by the Government in which all private landlords within a designated area must have a local authority licence to rent out a privately-rented property.
Selective licences vary in cost depending on the local authority you reside in, with local councils like Leeds offering licences at £825 per private rented property or unit, Manchester local council offering £800 per property or unit and Liverpool city council offering £583 per privately rented property or unit.
The selective licence fee is used to fund the scheme and enforcement. Local authorities have the ability to apply landlord selective licensing schemes for five years, but they must demonstrate why they have concerns, and look at alternative approaches before implication of selective licensing.
If the selective licensing is proposed for over more than 20% of area of a total local authority, then the designation must be approved by the Secretary of State.
Why was selective licensing introduced?
Local authorities have been able to apply selective licensing schemes in England and Wales since April 2006 under the Housing Act 2004.
Selective licensing was introduced as part of the UK Government’s anti-social behaviour agenda, which was brought in to tackle anti-social behaviour by enforcing management standards.
The anti-social behaviour agenda was brought in amongst concern that in areas of low housing demand, landlords were buying properties to let without investing in proper standards of property management.
As a result, there were concentrations within low housing demand areas where the properties were poorly maintained and tenants exhibited anti-social behaviour.
A local authority has the option to designate either the entire district or a section of it for landlord selective licensing of residential accommodation. Nonetheless, properties rented out by local authorities and privately registered social housing providers are not subject to these licensing obligations.
Before implementing selective licensing, the local authority is obligated to consult with those likely to be affected, including residents, workers and business operators in neighbouring areas. The authority must also explore other effective methods to achieve its intended objectives.
Any decision to designate an area under selective licensing must receive approval from the Secretary of State, unless it falls under general approval or the area falls below 20% of the total geographical area.
Local authorities have the authority to designate an area for selective licensing without requiring the Secretary of State’s approval, provided there is a minimum 10 week consultation period. It’s important to note that this period doesn’t start until the local authority presents a draft proposal detailing the designation and its potential impacts.
Areas that can be subject to selective licensing must have a significant proportion of properties in the private rented sector under assured tenancies.
Additionally, the area must meet specific conditions, such as being an area of low housing demand, experiencing persistent anti-social behaviour, having a high number of poorly maintained private rental properties, facing significant migration, experiencing high levels of deprivation, or suffering from a high level of crime.
Before granting a licence, the local authority must ascertain that the proposed licence holder is a fit and proper person and the most suitable individual to hold the licence. The authority must also ensure that the proposed property manager, if different from the licence holder, is also a fit and proper person.
Mandatory conditions, including the production of a gas safety certificate, maintenance of electrical appliances and furniture, installation of functional smoke alarms, and provision of written occupancy terms to occupants, must be attached to every licence.
Additionally, the local authority can impose discretionary conditions to regulate the management, use, or occupation of the dwelling.
Failure to obtain a licence or breaching its conditions can result in various penalties, including unlimited fines, civil penalties, rent repayment orders banning orders and restrictions on serving a Section 21 notice.
Tenancies granted by landlords who have committed offences related to property licensing remain legally binding and the landlord must follow the proper procedures to end the tenancy.
What if a landlord does not have a selective licence?
In cases where a landlord does not possess the required selective licence despite being obligated to have one, or in situations where a landlord holds a licence but breaches its terms, local authorities are empowered to take the following actions against the landlord:
- Impose a fine upon conviction.
- Issue a civil penalty of a maximum of £30,000.
- Apply a rent repayment order (RRO) for the duration during which the property was rented out without the necessary licence.
- Enforce a banning order.
- Restrict the landlord forms serving a Section 21 Notice during the period of non-compliance with licensing requirements.
What is the fine for not having a selective licence?
Failure to obtain a selective licence or neglecting to submit an application within the designated time frame constitutes an offence that may lead to an unlimited fine or a civil penalty of up to £30,000.
Selective licensing schemes have gained significant attention in the UK amongst landlords and investors, with local authorities indicating their varying degrees of effectiveness.
According to a recent review (2019) conducted by the UK Government, 274 out of 326 local authorities participated, demonstrating a strong belief in the efficiency of their selective licensing schemes in addressing various social and housing challenges.
The surveyed local authorities highlighted the positive impact of these schemes in tackling issues such as:
- Anti-social behaviour.
- Low housing demand.
- Poor housing conditions.
- Migration.
- Deprivation.
- High areas of crime.
The overwhelming majority, accounting for 92% of the respondents, rated the landlord selective licensing schemes as either daily effective or very effective in addressing the specified issues. This finding suggests a widespread recognition among local authorities of the positive outcomes facilitated by these schemes.
However, the study also identified areas where certain schemes were deemed less effective. One local authority reported that its licensing scheme exhibited marked inefficiency in addressing the prevalent challenges within its area.
Additionally 9% of the local authorities collectively categorised their schemes as either daily ineffective or very ineffective, indicating that there is room for improvement in certain cases.
Furthermore, the review revealed that the effectiveness of the selective licensing schemes were often contingent upon the specific issues they were designed to address.
Local areas that had introduced the schemes to combat poor property conditions, anti-social behaviour and low housing demand were more inclined to perceive the schemes as highly effective, pointing to the targeted nature of the schemes.
Certain types of rental properties are exempt from selective licence schemes. These exemptions may include:
- Holiday lets.
- Commercial premises.
- Socially let properties.
- Student accommodation owned by a university.
- Accommodation where the tenant is a family member.
- Any property that is empty.
Any property owner which holds a HMO licence must still get a selective licence if the property is in an applicable area.
Are there any selective licence temporary exemptions?
There are some temporary 3 month selective licence exemptions, like if you are wanting to stop renting out your property, you have sold your property subject to contract or if you have permission to change your property from residential to another use.
These temporary exemptions will only be granted if you can prove you are actively taking steps to achieve the criteria, and you will need to complete an application form to your local authority council.
Can selective licences be revoked?
In exceptional cases, selective licences can be revoked, particularly when there has been a substantial or persistent violation of the licence conditions. This could occur if the landlord, as the licence holder, is no longer deemed a “fit and proper person”, or if the property has undergone significant structural deterioration.
A HMO licence will usually be needed if a property owner rents out a property to two or more households, whereas property owners that live within a landlord selective licensing area will need a selective licence, regardless of how many tenant households the property has.
Due to a lack of uniformity in regulations and fees across different geographical areas, there is a certain level of complexity surrounding the different licences landlords need in the UK.
This, paired with the fact you could be hit with fines as much as £30,000 for not having the correct licence, means that non-compliance with the correct licensing could result in significant financial losses for landlords.
What are the mandatory HMO licensing requirements?
Landlords of specific shared homes have been obligated to adhere to licensing regulations since 2006, which replaced the initial registration scheme outlined in the 2004 Housing Act.
If a property is classified as an HMO, then the property owner must have a HMO licence from the Local Authority. Usually landlords will be required to pay an administrative fee and ensure that the property passes an inspection for any potential health and safety risks before the licence is granted.
Continuous obligations include providing the Local Authority with copies of annual Gas Safety Certificates, conducting Electrical Safety Tests and installing smoke alarms on each floor.
Also, in the case where any of the rooms include a wood-burning stove or coal fire, the rooms must have a carbon monoxide alarm installed to reduce the risk of fire and the buildup of carbon monoxide within the property.
Do you need a HMO licence and a selective licence?
If your HMO property resides in a selective licence scheme designated area, then you will need both a HMO licence and a selective licence.
How do selective licences differ?
Similar to the mandatory HMO licensing, selective landlord licensing was introduced in 2006 and empowered local authorities with greater authority to address the repercussions of substandard private landlords and disruptive tenants.
Initially, these licences were seen as a positive step, aiming to enhance living standards for tenants in well-maintained homes.
The absence of a nationwide licensing scheme was intended to provide specific councils in severely affected areas with the power to take enforcement action without burdening the majority of landlords across the country.
In line with HMO licences, landlords operating in areas with selective licences must acquire a licence before renting out a property, granting the local authority the power to ensure the property meets the necessary standards and that the landlord effectively manages the rented property.
White the expectation was that only a limited number of local authorities would implement selective landlord licensing schemes; the number of councils opting for such schemes has significantly increased.
Before you apply for a licence, there are a few things you will need to ensure you have to hand, like the property details and personal information. In this section we will cover all the things you need to know about the application process.
Checklist for application
When applying for landlord selective licensing of privately rented homes, you will need to have some vital information to hand before you start the application process.
Here is a checklist of the key requirements for completing a Selective Licence application:
The names, date of birth, and contact details of the applicant, property manager, proposed licence holder, property owner and the person having control of the property subject to the application.
The National Insurance (NI) number of the licence holder, along with the NI numbers for the applicant, property manager, property owner and the person having control of the property.
Proof of identification for the applicant, proposed licence holder, and the property manager, including photo ID (e.g. a current signed passport or a UK or EEA photocard driving licence) and an official document as proof of identity (e.g. a utility bill issued within the last three months or a council tax bill for the current year).
Details of Houses in Multiple Occupation (HMO) or properties licenced or due to be licensed.
Property details including the address, the number of toilets, washbasins, and sinks, the type and location of smoke and heat alarms and details of the fire escape routes. As well as mortgage details, including the name of the provider and the mortgage company address.
How do you apply for a selective licence?
Applications can be submitted and paid for online via the local council where your property resides in or through a paper application form which can be posted to their stated address.
Anyone can apply for a selective licence, however, the proposed licence holder must be a fit and proper person and the most suitable for the role. The proposed property manager must also be a fit and proper person. Individuals subject to a current banning order under the Housing and Planning Act 2016 will not be considered suitable for these roles.
The law requires you to inform certain individuals in writing about your intention to apply for a selective licence. These individuals include mortgagees, property owners, tenants, proposed licence holders, property managers, and any person agreeing to be bound by the licence conditions.
Each property must have its own licence, and in the case of self-contained flats, each unit requires a separate licence. Properties that are unoccupied do not require a licence, but an application should be made as soon as the property is occupied.
Property owners are advised to consider the costs of an empty property against the benefits of having a selective licence for occupied properties.
Large discounts on property
Completely transparent
Tailored investment opportunities
We’ll handle everything for you
Looking for hassle free property?
We’ve got you! Whatever your motivations as a landlord or property owner are, we can help source and match property with you.
When the foundations of your company are built upon industry knowledge and experience, you can’t help but be a self-confident company.
Here at The Property Sourcing Company, we are led by a roster of industry experts who have over 50 years of combined experience in doing BMV property deals, as well as packaging them up for investors.
Quality sits at the heart of our team, who go the extra mile to tailor our service to you. We pride ourselves in our ability to source you a wide variety of high-yield property investments.
Get in touch and we’ll establish what type of property you’re searching for, before talking you through our current investment opportunities. We’ll also keep you posted as we acquire new deals.
When you buy your investment property through us and we’ll take care of solicitors, surveys – everything – all to ensure you have a stress-free property purchase. It’s just one of the ways we make investment work for you.
Why invest with us?
Simply put, we’ll get you the best possible deal. Our sister company, The Property Buying Company, have been in the property buying industry for years & we have access to all their stock which is at a price point that is ready for investors to buy and make a great return on.
No middlemen, no stress & no hassle. We make investing in property and growing your portfolio as easy as it possibly can be.
