Why introduction of Selective Licensing creates potential banana skin for landlords: Emma Reilly
The recent introduction of Selective Licensing in areas of Leeds creates a potential banana skin for thousands of ordinary landlords.
For those unfamiliar with the term, selective licensing is a scheme that requires private landlords in designated areas to obtain a licence from their local authority before renting out a property.
It was introduced in a bid to improve living conditions and raise management standards in deprived areas, as well as to address persistent local issues such as anti-social behaviour, high tenant turnover and poorly managed properties.
Landlords who fail to comply face prosecution and hefty fines, and yet it is an issue which flies largely under the radar.
Whilst professional investors should be aware of the requirement, many ‘accidental’ landlords – people renting out their homes due to a change in circumstance, relocation or inheritance - may not realise they need to comply.
As a result, solicitors are seeing a growing number of cases landing on their desks, often involving landlords who never expected or intended to fall foul of the rules.
And relative invisibility is one of the biggest challenges with selective licensing.
Because it does not apply everywhere, many landlords simply do not realise a licence is required, while those using letting agents often assume compliance is being handled on their behalf.
In reality, responsibility usually remains firmly with the landlord.
With schemes expanding and changing rapidly, existing landlords can easily be caught out and simply “not knowing” is not a defence. The financial penalties are significant: an unlimited fine on prosecution or a civil penalty of up to £30,000 per offence. In addition, tenants – or the local authority – can apply for a Rent Repayment Order, requiring landlords to repay up to 12 months of rent received while the property was unlicensed.
Each local authority has different rules in place and requirements such as standards, management expectations and fees vary widely. According to the National Residential Landlords Association (NRLA) 47 local authorities currently operate selective licensing schemes in England.
Leeds City Council recently introduced six designated areas of Leeds for selective licensing including the wards of Armley, Beeston and Holbeck, Burmantofts and Richmond Hill, Farnley and Wortley, Gipton and Harehills and Hunslet and Riverside. Sheffield, North Yorkshire, and Doncaster also have schemes in place, with Rotherham also introducing it in six designated areas this month.
The fees for obtaining a licence vary, although the national average is around £700 per property. In Leeds the fees are paid in two parts, £675 on application and £475 if the application is successful - a small price to pay compared with the potential consequences of not having one.
There is no doubt that selective licensing is a valuable, and welcome, tool for improving housing standards but landlords must ensure that they are well informed of their duties.
If you are renting out a property, even temporarily, check whether your area is subject to selective licensing and make sure you apply in good time.A simple oversight can become a very expensive mistake.
Emma Reilly, is a solicitor at Schofield Sweeney