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2.11 Licensing of Private Rented Properties

The Housing Act 2004 introduced licensing of private rented premises. It is compulsory to license larger, higher-risk dwellings, but local authorities are also able to license other types of rented premises, including other lower-risk HMOs and individual houses and flats, if they can establish that other avenues for tackling problems in these properties have been exhausted.

2.11.1 Purpose of Licensing

Licensing is intended to make sure that:

  • a landlord is a fit and proper person (or employs a manager who is)
  • each premises is suitable for occupation and
  • the standard of management is adequate.

This is to ensure tenants are protected and that the risk of anti-social behaviour is reduced. High-risk premises can be identified through licensing and targeted for improvement by a local authority under the Housing Health and Safety Rating System (HHSRS).

The landlord of a licensable dwelling must apply to the local authority for a licence. The local authority can clarify whether a property is licensable. If the landlord refuses to apply for a licence (or cannot satisfy the ‘fit and proper’ person criterion) and does not use a managing agent, the local authority must manage the property instead.

More information about mandatory HMO licensing can be found below and on the GOV.UK website at https://www.gov.uk/house-in-multiple-occupation-licence.

2.11.2 Mandatory Licensing of HMOs

Mandatory licensing applies if the HMO or any part of it:

  • comprises three storeys or more
  • is occupied by five or more persons and
  • is occupied by persons from two or more households.

The definition of ‘storey’ can include commercial premises (for example below a flat / maisonette) and includes some attics and basements.

From 1 October 2018, an HMO property with five or more persons sharing (two or more households) will require a HMO licence irrespective of the number of storeys. The exception to this is if the building is a purpose built block of flats with more than two flats in it.

2.11.3 Additional Licensing of HMOs

The Housing Act 2004 gives local authorities the discretion to establish additional HMO licensing schemes, to cover smaller types of HMO where management problems have been identified.

Before setting up such a scheme, the local authority must follow the legal process which includes:

  • identifying the problems arising from that type of HMO
  • considering whether any other course of action to deal with the problems is available
  • ensuring the scheme is consistent with their local housing strategy
  • consulting with those likely to be affected including tenants, landlords, landlord organisations etc.

A scheme does not come into effect until three months after it is made and a scheme may last for up to five years.

2.11.4 Selective Licensing of Other Residential Accommodation

Part 3 of the Housing Act 2004 gives local authorities the discretion to introduce selective licensing schemes to cover all privately rented property, but not HMOs which are covered by Mandatory and Additional Licensing, in designated areas which suffer, or are likely to suffer from, low housing demand and also those which suffer from significant and persistent anti-social behaviour. The use of this discretionary power is subject to local consultation.

Before setting up such a scheme, the local authority must follow the legal process which includes:

  • identifying the problems arising from that type of property
  • considering whether any other course of action to deal with the problems is available
  • ensuring the scheme is consistent with their local housing strategy
  • consulting with those likely to be affected including tenants, landlords, landlord organisations etc.

Local authorities require confirmation from the Secretary of State for any selective licensing scheme which would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area. In addition, the following criteria must be met:

  • that the area contains a high proportion of properties in the private rented sector, in relation to the total number of properties in the area; and
  • that those properties are occupied either under assured tenancies or licences to occupy;

And that one or more of the following applies:

  • the local housing authority considers it would be appropriate for a significant number of the properties to be inspected, with a view to determining whether any category 1 or category 2 hazards exist on the premises;
  • that the area has recently experienced or is experiencing an influx of migration into it;
  • that the area is suffering from a high level of deprivation;
  • that the area suffers from high levels of crime;

A scheme does not come into effect until three months after it is made and may last up to five years.

2.11.5 Applying for a Licence

The person who requires a licence is not defined in the legislation – just that an appropriate property (as defined above) must have one. However, the local authority must be satisfied that there is a manager in place who will be either the person having control of the house or a person who is an agent or employee of the person having control of the house.

Where a landlord self manages the property, it’s the landlord who will be both the person in control and the person managing and as such responsible for applying for the licence.

If a landlord employs an agent on a rent collection or full management basis, either landlord or agent would be responsible for applying for the licence (and agents need to check this to avoid potentially being prosecuted by the local authority for a failure to have applied for a licence if the landlord hasn’t).

Where a landlord lets a house through an agent on a let-only basis, the position still remains that an agent could be prosecuted if no licence (or applied for) at the time of the letting. It may be thought that an agent acting on a let-only basis cannot be a person managing nor a person in control but this has been held to be wrong. One of the definitions of a person managing is the receiving of rent. It has been held that even just receiving the first payment of rent upon commencement of the tenancy is sufficient for the definition of the person managing to be triggered and as such the let-only agent was held responsible for the failure to have a licence.

The local authority must give a licence if it is satisfied that the:

  • HMO is reasonably suitable for occupation by the number of people allowed under the licence
  • the proposed licence holder or the proposed manager (if there is one) is a fit and proper person
  • the proposed licence holder is the most appropriate person to hold the licence
  • the proposed management arrangements are satisfactory
  • the person involved in the management of an HMO is competent and the financial structures for the management are suitable.

2.11.6 Fit and Proper Person Test

In determining whether the licence applicant is a ‘fit and proper person’ the local authority will take into account a number of factors, including:

  • any unspent convictions relating to violence, sexual offences, drugs and fraud
  • whether the person has breached any housing or landlord and tenant law
  • whether they have been found guilty of unlawful discrimination.

2.11.7 Licence Conditions

A licence will last for up to five years and the local authority normally charges a fee to cover the cost of issuing the licence. In some local authorities discounts are given if the landlord or property is accredited or if an application is made with a plan.

The licence will specify the maximum number of people who may live in the property. The following conditions must apply to every licence:

  • a valid current gas safety record, which is renewed annually, must be provided (for properties that have gas)
  • proof that all electrical appliances and furniture are kept in a safe condition
  • proof that all smoke alarms and emergency lights are correctly positioned and installed
  • each occupier must have a written statement of the terms on which they occupy the property. This may be, but does not have to be, a tenancy agreement.
  • requiring the licence holder to comply with any scheme which relates to the storage and disposal of household waste at the HMO pending collection (this condition applies from 1 October 2018).

For a selective licence there is a requirement for references from prospective occupiers.

The local authority may also apply other conditions of their own which may include any of the following:

  • restrictions or prohibitions on the use of parts of the property by occupants
  • action necessary to deal with the anti-social behaviour of occupants or visitors
  • ensuring the condition of the property and its contents, such as furniture and all facilities and amenities (e.g. bathroom and toilets) are in good working order and ensuring that specified works or repairs are carried out within certain time limits
  • for an HMO, a requirement that the responsible person attends an approved training course in relation to any approved code of practice
  • that the property only be occupied by a specified class of persons (e.g. occupied only by students).

2.11.8 Minimum Room Sizes

Minimum room sizes will be introduced by way of conditions in a mandatory HMO licence and as such only apply to licensable HMOs from 1 October 2018.

For all mandatory HMO licences granted on or after 1 October 2018, mandatory conditions must be attached to the licence by the local authority requiring the licence holder –

  • to notify the local housing authority of any room in the HMO with a floor area of less than 4.64 square metres.
  • to ensure that the floor area of any room in the HMO used as sleeping accommodation by one person aged over 10 years is not less than 6.51 square metres;
  • to ensure that the floor area of any room in the HMO used as sleeping accommodation by two persons aged over 10 years is not less than 10.22 square metres;
  • to ensure that the floor area of any room in the HMO used as sleeping accommodation by one person aged under 10 years is not less than 4.64 square metres;
  • to ensure that any room in the HMO with a floor area of less than 4.64 square metres is not used as sleeping accommodation.

In addition to those conditions, further conditions will be included in the licence whereby the licence holder must ensure that –

  • where any room in the HMO is used as sleeping accommodation by persons aged over 10 years only, it is not used as such by more than the maximum number of persons aged over 10 years specified in the licence;
  • where any room in the HMO is used as sleeping accommodation by persons aged under 10 years only, it is not used as such by more than the maximum number of persons aged under 10 years specified in the licence;
  • where any room in the HMO is used as sleeping accommodation by persons aged over 10 years and persons aged under 10 years, it is not used as such by more than the maximum number of persons aged over 10 years specified in the licence and the maximum number of persons aged under 10 years so specified.

When calculating the floor area, any part of the room which the height of the ceiling is less than 1.5 metres is not to be taken into account.

Where there is somebody already occupying a room in an HMO and a licence is granted on or after 1 October 2018 (regardless of whether a licence was in place prior to 1 October 2018 or not), the local authority must notify the licence holder of the breach and give a period of time to stop the breach. The time given must not exceed 18 months (but can be less).

2.11.9 Renewing a Licence

If there has been no significant change in the property, you will be asked to renew the licence. Contact the local authority or check on their website which is the easiest way of renewing the licence. It is important that a renewal is requested before the initial licence runs out.

2.11.10 Properties Where a Licence May Be Refused

If the property is not suitable for the number of occupants, is not properly managed or the landlord or manager is not a fit and proper person, a licence will not be granted. If a property cannot be granted a licence the council must make an Interim Management Order (IMO), which will allow the local authority to manage the property (either directly or indirectly through a nominated partner).

The IMO can last for a year until suitable permanent management arrangements can be made. If the IMO expires and there has been no improvement, then the council can issue a Final Management Order (FMO). This can last up to five years and can be renewed.

2.11.11 Temporary Exemption From Licensing

If the landlord or person in control of the property that requires licensing intends to stop operating as a licensable property or legally reduce the numbers of occupants below the level that requires a licence and can provide evidence of this, then they can apply for a Temporary Exemption Notice (TEN).

This lasts for a maximum of three months and ensures that a property in the process of being converted from a licensable property does not need to be licensed. If the situation is not resolved, then the landlord can apply for a second Temporary Exemption Notice for a further three months.

When this expires the property must be licensed, become subject to an IMO, or cease to be a licensable property. TENs also apply where the licence holder dies. The property will be treated as if it is subject to an exemption notice for three months, during which time the estate can either apply for a new licence or cease to run the property as a licensable property. If it takes longer than the initial three months the estate can apply for one further exemption notice.

2.11.12 Right of Appeal Against a Local Authority’s Decision

A landlord can appeal to the First-tier Tribunal, normally within 28 days, if the local authority refuses a licence, grants a licence with conditions or revokes or varies a licence.

2.11.13 Offences

It is a criminal offence if the landlord or the person in control of the property fails to apply for a licence for a licensable property or allows a property to be occupied by more people than are permitted under the licence. An unlimited fine may be imposed. In addition, breaking any of the licence conditions can result in an unlimited fine. Note also, that no section 21 notice (see later for more information about section 21 notices) may be given in relation to a shorthold tenancy of a part of a licensable HMO so long as it remains unlicensed. This means that where a licence is compulsory, unlicensed HMO landlords will be unable to evict their tenants by the notice-only section 21 procedure.

As an alternative to prosecution, from 6 April 2017, the local authority may offer the landlord the option of a financial penalty. The maximum offer is £30,000 which, given the fines for a prosecution are unlimited, may be an attractive alternative.

Furthermore, after a licensing offence, a local authority can apply for a banning order. A banning order will ban the person from letting housing or acting as an agent (or both) in England.

2.11.14 Rent Repayment Orders

If a landlord operates an unlicensed property on or after 6 April 2017, in addition to any penalties that may arise from a prosecution, a rent repayment order of up to 12 months rent is available upon application to the First-tier Tribunal by a local authority or tenant. The order is available whether or not the landlord has been convicted of the offence but the tribunal must be satisfied beyond reasonable doubt that there has been a failure. Rent repayment orders exist for offences committed before 6 April 2017 in a slightly different form.