Licensing of residential property – increased use of additional licensing for houses in multiple occupation (“HMOs”) and selective licensing for non-HMOs 

England and Wales

Licensing is increasingly an issue for residential landlords as the rules have been tightened by a number of local housing authorities.  

There are three types of licensing: mandatory; additional and selective.

Mandatory

The most common form of licensing is mandatory which applies where there are 5 or more people comprising 2 or more households occupying an HMO. 

A building or part of a building will be an HMO if it meets certain criteria, for example that it is the occupiers’ main residence and there are shared amenities. 

The application of licensing requirements is not straightforward or generic and the set-up of each property needs to be looked at in detail to determine whether it is an HMO or not. 

Additional

The increase in shared accommodation, which is causing problems for the occupants or members of the public, has prompted some councils to invoke their powers under section 56 of the Housing Act 2004 (“HA 2004”) to designate their district as subject to additional licensing.

This is a licensing regime which is being applied by increasing numbers of local housing authorities and will apply to HMOs that are outside the scope of mandatory licensing. 

Different local authorities may apply different criteria for their “additional” schemes and the scheme may apply to the whole or part of a district.  For example, Westminster City Council has designated the whole area of the district of the City of Westminster as an area for additional licensing of HMOs, with effect from 30 August 2021.  This means that HMOs that are occupied by 3 or more people comprising 2 or more households will need to be licensed from 30 August 2021.  This is a significant change for landlords in Westminster who are under a tight deadline to make necessary applications for licencing.  There is no central directory of additional licensing schemes so to find out if a property falls within an additional scheme one would need to check with the local authority.  

Selective

A local authority may also require certain properties that are not HMOs to be licensed under the selective licensing regime (Part 3 of the HA 2004). This may be done for example where there are poor housing conditions and the designation will contribute to improved social or economic conditions.

Consequences

There are serious consequences for breaches of the legislation. 

It is a criminal offence to fail to license an HMO required to be licensed under Part 2 of the HA 2004 or a property required to be licensed under a selective licensing scheme under Part 3 of the HA 2004. 

The obligation falls on whoever manages or has control of the HMO or the property which is required to be licensed under Part 3 of the HA 2004, which could be a landlord or the person who receives rent from the occupiers. Local housing authorities may also impose financial penalties as an alternative to prosecution. Landlords are also prevented from serving section 21 notices to obtain possession from a tenant of a property that is required to be licensed but is not. Finally, tenants of an unlicensed HMO or an unlicensed property which is subject to selective licensing may apply for a rent repayment order against their landlord.

Points to note

A licence (whether mandatory, additional or selective) lasts for a maximum of 5 years from the date it was granted.  It cannot be transferred on the sale of the property so thought would need to be given as to who applies for a licence in such circumstances.  The cost of licences varies between local authorities but is commonly in the region of £700 - £1,200 per property.

If you would like to discuss your property licensing requirements please contact Eleanor Murray, Anna Ralston-Crane, Sarah Ellison or Sally Tang.