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.
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.
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.
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.
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.
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 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.
From April 2015, local authorities will 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:
A scheme does not come into effect until three months after it is made and may last up to five years.
Anyone who owns or manages a licensable premises, whether under the mandatory scheme or an additional or selective scheme, has to apply to the local authority for a licence. The local authority must give a licence if it is satisfied that the:
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.
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:
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.
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.
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.
If the landlord or person in control of the property intends to stop operating as a licensable property or legally reduce the numbers of occupants 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.
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.
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 section 5 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.
The local authority may apply to the First-tier Tribunal for a ‘rent repayment order’ allowing it to reclaim any housing benefit that has been paid during the time the property was without a licence up to a maximum of 12 months.
A tenant living in a property may also make an application to claim back any rent they have paid during the unlicensed period, up to a maximum of 12 months, if the landlord has been convicted of operating a licensable HMO without a licence, or has been required by a rent repayment order to make a payment to the local authority in respect of housing benefit on the property.