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New Guidance to UK Landlord Licensing Scheme

A significant change to the landlord licensing scheme is the exemption of licensing for smaller HMOs.  If you are a landlord renting out your premises in the UK to multiple occupants and have been exempt from licensing all this while, you may want to pay attention to the latest changes in legislation.

Since its implementation in the UK some 8 years ago, the landlord licensing scheme has brought changes to the UK housing market, affecting landlords across the country. 

Landlord licensing, also known as selective licensing, sets out to ensure that landlords are “fit or proper persons” and that buildings for rent are fit for occupation — all with the intention of raising standards and improve the rental market.

Recently, the UK government released new guidance affecting landlords of houses in multiple occupations (HMOs). The overhaul will take effect on 1 October.

Due to their shared facilities, HMOs often offer cheaper accommodations to students, migrant workers, and young professionals looking for cheaper rental housing.

The new guidance in the landlord licensing scheme is aimed at tackling overcrowding and ensuring all landlords’ properties reach minimum standards.

One of the most significant additions in the landlord licensing scheme is that the previous rules exempting smaller HMOs from licensing, will be removed. Other mandatory changes in selective licensing for HMOs below:

Part 1 of changes – minimum room size

The Mandatory Conditions of Licences 2018 according to Schedule 4 of the Housing Act 2004, introduces new conditions of minimum sleeping room sizes as follows:

  • Not less than 6.51 square meters for one person over 10 years old;
  • Not less than 10.22 square meters for two persons over 10 years old;
  • Not less than 4.64 square meters for children under 10 years old.

Rooms that do not fulfill the minimum requirement are not allowed to be used as sleeping accommodation. Those who abuse the regulations will be charged a penalty of up to £30,000.

Part 2 of changes – waste disposal

The government also set out new guidances related to waste disposal,  given that waste generation by HMOs is higher than standard households due to the high number of occupants.

All the above new amendments will take effect in cities in which  the landlord licensing scheme applies, for instance, London, Liverpool, Nottingham City, Leicester City, and few regions in Manchester.

We published an article on the landlord licensing scheme on our blog last November. Landlords should keep abreast of regulations affecting them or risk being penalised by the UK government. To find out about the scheme in general, take a look at first blog here: CSI Prop looks forward to continously keeping our readers and investors updated on the latest happenings in the Australian and UK housing markets. For a detailed list of the changes to HMOs, scroll down to the sources below. 

By Noorasikin Ali


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UK Landlord Licensing

The Landlord Licensing scheme has recently taken effect in several cities and boroughs in the United Kingdom.

The scheme, which is also known as selective licensing, sets out to ensure that landlords are “fit or proper persons”, and that the buildings being let out are fit for occupation. If someone cannot meet the ‘fit and proper’ landlord criteria the scheme sets out, they will be refused a licence.

Despite having been introduced in certain areas recently, it is not new, and was provided for by the UK Housing Act 2004. Nonetheless, enforcement of Landlord Licensing is still in its infancy. Several city councils, for example, Bradford, Luton, Stoke & York have yet to implement the scheme (as at time of publication), whilst Liverpool and Manchester enforced the scheme in 2016 and 2017, respectively.

Selective licensing really is an attempt to improve the rental market by raising standards and helping to identify non-compliant landlords and management agents who do not invest in their properties or manage them properly.

Areas are designated for selective licensing upon the discretion of the local council. Often a scheme will only cover certain wards or areas of a city, and under new rules only 20% of a council’s area can be selectively licensed without a special application being made.

A scheme lasts for five years and can be renewed if the local council deems it necessary.

Right now Liverpool is running the scheme citywide, while Manchester has introduced licensing in only some parts of the Crumpsall, Moss Side and Rusholme areas.

Landlords in London can use the London Property Licensing website to find out whether they are in an area covered by a scheme, but there is no countrywide list of schemes. Checking with the local council is the safest strategy.

Where selective licensing applies, then normally all houses within the private rented sector for that area must be licensed, except where they require to be licensed as HMOs (houses in multiple occupation). Licensable HMO properties are properties with three or more storeys, and are occupied by five or more tenants not from a single household. Non-licensable HMOs must be licensed under selective licensing.

Some properties are exempt from selective licensing. These include:

  • Holiday lets
  • Business premises
  • Student premises where the university is the landlord/manager
  • Premises where the tenant is a family member

Each local council sets their own licence fees and discounts, and the licences last until the end of the 5-year period. In Manchester the licence costs £650, with each additional licence costing £550. Liverpool charges a fee of £400 for the first, with each subsequent licence costing £350.

In Liverpool, properties managed by professional managers who are members of one of the council’s approved co-regulation organisations (e.g. the Association of Residential Lettings) are entitled to a 50% discounted fee. This means that investors of property developments like Queensland Place and Parliament Place need only pay £200 for the licence.

If the property consists of en-suite units in a cluster sharing a common living area, only a single licence is required for the whole cluster. Student accommodation is a good example of this. This means that cost of one licence can be divided amongst the individual units, greatly reducing the price of licensing.

This is good news for investors in student accommodation. The more units one cluster has, the greater the division, and the lower the cost of licensing. However, studio apartments with no common living area will require a single licence for each individual apartment.

The local councils are taking this very seriously. In October last year, a landlord in Liverpool was fined £1,500 due to his failure to obtain a licence.

“The punishments can be very high,” says Richard Tacagni, founder and managing director of property consultancy London Property Licensing. “Landlords can be forced to pay 12 months’ rent back to a tenant, or could be told that they are unable to rent out a property in future.”

Article by Ian Choong

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts. 

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