The phrase ‘rogue landlord’ has plagued the buy-to-let sector for decades and successive Governments have sought to rid the industry of unscrupulous operators. We may see some progress this year, as a national landlord registration scheme in England does form part of proposals in the Renters’ Reform Bill – a white paper that, after being delayed due to Covid, looks set to be adopted in 2022.
If you are a landlord you should understand how a national registration scheme may affect your buy-to-let, especially as there are growing concerns that landlords may need to obtain a licence to operate.
Do English landlords currently need a licence?
Currently there are no mandatory licensing requirements for small privately rented properties in England, although some local councils are able to enforce a ‘selective licensing’ scheme if there are particular issues with unreliable landlords and poor living conditions. In fact, figures suggest less than 8% of privately rented properties in England are under a licensing or register scheme.
The one exception is Houses in Multiple Occupation (HMOs) - properties with some shared facilities and five or more people forming a household in England already require a licence.
What might licensing look like in England?
The precedent has already been set in Scotland and Wales, where all landlords have to register with a Government-backed licensing authority or the local council to obtain a landlord registration number. Landlords also have to abide by a code of conduct and re-register every three or five years.
It is thought a similar model would be followed in England, if introduced. Landlords should expect to pay to obtain licence, as well as prove their properties meet minimum legal requirements. As a guide, landlords who are currently part of a selective licensing scheme have to pay between an average of £500 and £700 every five years.
The most ardent of licensing advocates would like to see landlords and letting agents become accredited via training or formal qualifications in order to obtain a licence. This would come at a cost too – either born by the landlord or probably passed on to them by letting agents via higher management fees.
What would licensing mean for self-managing landlords?
It is thought agents who manage their own buy-to-let properties would need to apply and pay for their own licence. This may be mitigated if the landlord appoints and pays for the extra cost of a professional managing agent, who would need its own licence to comply.
If licensing is introduced in England, would my buy-to-let be in jeopardy?
Existing licensing and associated registration schemes are already proven to bring huge benefits in terms of raising the standard of let accommodation, improving the tenant-landlord relationship and reducing anti-social behaviour.
Licensing does, however, increase the risk of landlords being penalised as licensing takes into account the quality of the property and of the landlord. Analysis by Generation Rent found councils that licence landlords take double the amount of enforcement action compared with other regions. In addition, there’s the risk a landlord or their property is deemed unfit and a licence denied or revoked, leaving them with no choice but to sell a property asset.
What about a national landlord register?
A database of ‘rogue’ landlords does already exist, listing landlords who have received banning orders or multiple civil penalties against them. The current national landlord register is only available to local authority enforcement professionals and features very few landlord names. The Renters’ Reform Bills, however, seeks to make the national landlord register an open document that the general public could search. As a result, renters may be able to identify and bypass landlords with poor track records.
The next 12 months look set to be defining for landlords, especially those deciding whether to exit the market or invest more money in bringing their property up to meet new standards. If you find yourself in the position of needing to sell property fast, contact LandlordBuyer.
Our cash buying service will become more valuable if licensing and landlord registration is made law. We allow property investors to dispose of their assets now to beat any changes or we will buy your investment portfolio for cash if becomes hard to comply later in 2022.