Tuesday, 28 February 2012

Landlord Licensing. Coming to your local authority?

Are we witnessing the birth of landlord licensing in England and Wales and at the same time looking at significant extra costs for landlords?

The London Borough of Newham has moved to its second consultation stage of their plans to licence all landlords who rent properties in the borough. Their statement says “We have listened to your views on our plans to license all private rented properties in Newham. As a result of your feedback, we have now adapted our formal proposals to introduce rented property licensing across Newham.”
Although selective licensing has been available to local authorities for some time no other council has decided to license every landlord, but councils throughout the country are watching the Newham experiment with great interest. Not least because it could be a nice ‘earner’ for the council.

Newham estimate that there are between 4000 and 5000 landlords who operate within Newham and propose that “All private landlords that let properties within the borough which will be designated as an Additional or Selective licensing designation will require a licence from Newham for each of their rented properties.”
Newham clearly believe that private renting is a major cause of anti-social behaviour. Their proposals state “Newham considers the use of borough wide licensing due to the high proportion and increasing level of privately rented accommodation in the borough and more significantly, the degree of anti social behaviour recorded and the link between anti social behaviour and poor property management and rented accommodation.”

According to the Newham proposals there are 25,339 privately rented properties in their Borough. They propose to charge landlords a sliding scale of charges starting at £150 per property for a 5 year licence. If every landlord complied immediately this would generate over £3.8 million in fees.
But if landlords fail to comply the charges get worse. Landlords who apply after the commencement date of the licensing designations will be charged £500 for a 5 year licence. At the top end Landlords who apply after the commencement date and receive two warning letters or landlords with previous management contraventions and are of concern will be charged £500 per property per year.

So the minimum Newham is looking to raise is £3.8 million, the reality could be significantly more than this. We believe this is why councils across the country are watching Newham’s proposals so closely and why if Newham moves to landlord licencing many other councils will follow their lead.
Landlords will no doubt be pleased to hear that Newham believe that “Whilst this is an additional business expense for landlords it is not seen as excessive in relation to the rental market in Newham at the present time. It is anticipated that any overall effect would possibly be offset by a higher rental premiums and cost margins through improvements in management standards and lower tenant turnover rates in the medium term when the benefits of the licensing schemes are recognised.”

Scotland has had landlord licencing since 2006 and the Welsh Government is currently engaged in its own consultation. But we believe the opportunity to raise significant sums of money will prove too tempting for local authorities, especially if, like Newham, they believe that landlords can simply pass the cost on to tenants irrespective of the backlash that will certainly come if landlords start increasing their rents.
For more information about Newham’s proposals please click here.