Licensing and accreditation for landlords is now widespread. It has been brought in for the threefold purpose of establishing a register of rented properties, educating landlords as to their responsibilities and ensuring rented properties meet a certain standard. One of the key arguments for having a mandatory property licensing or registration scheme is that, without it, there is no way for the authorities to know which properties are rented out and therefore no means by which they can monitor them. Currently, because some of the schemes are mandatory and some are merely recommended, there is a big discrepancy between what is being achieved in different areas of the UK.
In Scotland, since April 2006, the owner of a property that is let must register with the authority where the property is located (https://www.landlordregistrationscotland.gov.uk). Both the owner and the agent or person who is letting the property must be declared a ‘fit and proper person’ by the local authority. All HMOs must be licensed and these properties and landlords are automatically entered onto the register.
Wales has had a voluntary accreditation scheme since 2008, but that is being replaced this autumn by the Landlord Accreditation Wales scheme, which will require all landlords to register with Rent Smart Wales ( https://www.rentsmart.gov.wales/en/ ). The agent or any landlords wishing to self-manage who will carry out the day-to-day tasks must also obtain a license through undertaking appropriate training.
Since 25th February 2015, all private landlords in Northern Ireland have been legally required to register information about themselves and their property with the Landlord Registration Scheme (http://www.nidirect.gov.uk/landlord-registration-scheme ), which gives them ongoing information and support in relation to their responsibilities.
In England, while there is not yet any ‘blanket’ requirement for landlords to be licensed nor for their properties to be registered, there are specific licensing rules for Houses in Multiple Occupation (HMOs) and some local authorities have introduced their own standards. For example, in the London Borough of Newham, every rented home must be licensed; in Oxford and Nottingham, mandatory licensing of HMOs is in force; other towns and cities simply run voluntary accreditation schemes.
Probably the biggest push for a standard to be established has been in the capital, where the Mayor’s London Rental Standard (LRS) was launched in May 2014 to educate landlords and allow tenants to see which properties are being let by such accredited landlords and agents – although it is currently only a voluntary scheme.
Naturally, this lack of consistent regulation throughout the UK makes it difficult for landlords who have properties in different locations to keep abreast of their legal responsibilities and creates a lot of extra administration for all landlords and agents.
So what has been the impact of the various schemes - has it all been worthwhile?
Well, there doesn’t seem to be a clear verdict one way or the other, except perhaps in London. Good landlords have greeted the LRS with enthusiasm, delighted that they are able to receive training, clearly distinguish themselves from the rogues and reassure tenants that they are reputable and their properties are safe and offer good quality accommodation. Meanwhile, Newham Council reported 359 landlord prosecutions in the 3 years to March 20141 - more than six times the number reported by the next highest borough, Haringey – and that has been largely attributed to the mandatory licensing implemented in January 2013.
The benefits of licensing are that the schemes usually provide very good information and training for landlords and in areas like Newham it is clear that the money landlords pay for the licence actually goes towards prosecuting those who fail to comply. And tenants can rent with confidence, knowing that their landlord has been approved by the council and is motivated to maintain the property to a certain standard.
However, in other areas, the cost of landlord registration appears to be disproportionate to the benefit it has brought to the industry. Over the first 6 years of the scheme in Scotland, 200,000 landlords registered, with fees and grants amounting to nearly £18m2. But in that time, just 40 landlords were refused registration and a mere 11 were reported for prosecution. While it might be argued that this is simply a reflection of an excellent standard of rental accommodation across Scotland, a survey of tenants’ experiences found otherwise.
Moving forward, more issues are likely to arise around the sale/purchase of Buy-to-Let properties affected by the Article 4 Direction4, which allows councils to refuse planning permission for the conversion of a property from a single-household rental to an HMO. If a property was already being operated as an HMO when the legislation came into force in November 2012, retrospective planning permission does not need to be obtained, but for new HMOs it does. So a property in a prime student area that is not currently an HMO could be harder to sell to an investor if the council has decided to enforce Article 4; conversely, investors could find themselves having to pay more than the standard market value for an HMO that is currently licensed, as it may attract a premium. This could lead to similar properties in the same area having very different market values, making it difficult for families to sell and putting off investors from buying.
Perhaps we can conclude that registration and licensing is a good thing, as long as the costs remain reasonable and local councils use the monies raised to implement effective monitoring and regulation. If private landlords find their costs escalating with no perceived benefit, some may exit the industry and other people may simply decide not to invest in Buy to Let, which could be highly detrimental in certain areas where the demand for rented accommodation is high.
If you are considering buying to let, you need to be fully aware of the regulations for your area and the type of property you are planning to own before you make any moves to invest. Check the schemes in force and make sure you know what licences or accreditation you need to obtain. For more information on what those are, call into any Reeds Rains branch and we will be happy to advise you.