Licensing of Private Rented Properties

The Housing Act 2004 introduced licensing of privately rented premises, and it is compulsory to license larger higher-risk dwellings. Still, local authorities can also license other types of rented premises, including other lower-risk HMOs and individual houses and flats, if they can establish that other avenues for tackling problems in these properties have been exhausted.

Purpose of Licensing

Licensing is intended to make sure that:

a landlord is a fit and proper person (or employs a manager who is)
each premise is suitable for occupation and
the standard of management is adequate.

This ensures occupiers are protected and that the risk of anti-social behaviour is reduced. High-risk premises can be identified through licensing and targeted for improvement by a local authority under the Housing Health and Safety Rating System (HHSRS).

The landlord of a licensable dwelling must apply to the local authority for a licence. The local authority can clarify whether a property is licensable. Suppose the landlord refuses to apply for a licence (or cannot satisfy the 'fit and proper' person criterion) and does not use a managing agent. In that case, the local authority must manage the property instead.

More information about mandatory HMO licensing can be found below and on the GOV.UK website at https://www.gov.uk/house-in-multiple-occupation-licence.

Mandatory Licensing of HMOs

Mandatory licensing applies if the HMO or any part of it:

comprises three storeys or more
is occupied by five or more persons and
is occupied by persons from two or more households.

'Storey' can include commercial premises (for example, below a flat / maisonette) and some attics and basements.

Mandatory licensing never applies to the Type 5 HMOs previously described, defined in section 257 of the Housing Act 2004, regardless of the number of storeys and people involved.

Additional Licensing of HMOs

The Housing Act 2004 gives local authorities the discretion to establish additional HMO licensing schemes, to cover smaller types of HMO where management problems have been identified.

Before setting up such a scheme, the local authority must follow the legal process, which includes:

identifying the problems arising from that type of HMO
considering whether any other course of action to deal with the problems is available
ensuring the scheme is consistent with their local housing strategy
consulting with those likely to be affected, including occupiers, landlords, letting agents, landlord organisations etc.

A scheme does not come into effect until three months after it is made, and a scheme may last for up to five years.

Additional licensing schemes can include Type 5 HMOs if the local authority chooses to do so. Schemes that cover "shared HMOs" will not generally include them, but if the scheme says "all HMOs", one would expect them to be included.

Selective Licensing of Other Residential Accommodation

Part 3 of the Housing Act 2004 gives local authorities the discretion to introduce selective licensing schemes to cover all privately rented property, but not HMOs which are covered by mandatory and additional licensing, in designated areas which suffer or are likely to suffer from low housing demand and also those which suffer from significant and persistent anti-social behaviour. The use of this discretionary power is subject to local consultation.

Before setting up such a scheme, the local authority must follow the legal process, which includes:

identifying the problems arising from that type of property
considering whether any other course of action to deal with the problems is available
ensuring the scheme is consistent with their local housing strategy
consulting with those likely to be affected, including occupants, landlords, landlord organisations, local agents etc.

A scheme does not come into effect until three months after it is made and may last five years.

Applying for a Licence

The person who requires a licence is not defined in the legislation – just that an appropriate property (as described above) must have one. Note the licence is both person and property specific. In other words, a landlord needs a different licence for each property, but if the landlord sells the properties, the new owner must apply for a new licence for each property. However, the local authority must be satisfied that there is a manager in place who will be either the person having control of the house or a person who is an agent or employee of the person having control of the house.

Where a landlord self-manages the property, it's the landlord who will be both the person in control and the person managing and, as such responsible for applying for the licence.

If a landlord employs an agent on a rent collection or full management basis, either landlord or agent would be responsible for applying for the licence (and agents need to check this to avoid potentially being prosecuted by the local authority for a failure to have applied for a licence if the landlord hasn't).

Where a landlord lets a house through an agent on a let-only basis, the position remains that an agent could be prosecuted if there is no licence (or applied for). You may think that an agent acting on a let-only basis cannot be a person managing or in control, but this has been held to be wrong. One of the definitions of a person managing is the receiving of rent. In a court case, it has been held that even just receiving the first payment of rent upon commencement of the agreement is sufficient for the definition of the person managing to be triggered. The let-only agent was held responsible for the failure to have a licence.

The local authority must give a licence if it is satisfied that the:

HMO is reasonably suitable for occupation by the number of people allowed under the licence
the proposed licence holder or the proposed manager (if there is one) is a fit and proper person
the proposed licence holder is the most appropriate person to hold the licence
the proposed management arrangements are satisfactory
the person involved in the management of an HMO is competent, and the financial structures for the management are suitable.

Fit and Proper Person Test

In determining whether the licence applicant is a 'fit and proper person', the local authority will take into account some factors, including:

any unspent convictions relating to violence, sexual offences, drugs and fraud
whether the person has breached any housing or landlord and tenant law
whether they have been found guilty of unlawful discrimination.

An associate of the landlord can have also committed the offences. This is to avoid a criminal landlord passing management to their partner or friend if the council do not think this is appropriate.

Licence Conditions

A licence will last for up to five years, and the local authority charges a fee typically to cover the cost of issuing the licence. Some local authorities give discounts if the landlord or property is accredited or if an application is made with a plan.

The licence will specify the maximum number of people who may live in the property. The following conditions must apply to every licence:

a valid, current gas safety record, which is renewed annually, must be provided (for properties that have gas)
proof that all electrical appliances and furniture are kept in a safe condition
proof that all smoke alarms and emergency lights are correctly positioned and installed
each occupier must have a written statement of the terms they occupy the property. This may be but does not have to be an occupation agreement. Properties outside the Renting Homes (Wales) Act 2016 can be HMOs and may need licensing.

There is a requirement to apply for references on prospective occupiers for a selective licence.

The local authority may also apply other conditions of their own, which may include any of the following:

restrictions or prohibitions on the use of parts of the property by occupants
action necessary to deal with the anti-social behaviour of occupants or visitors
ensuring the condition of the property and its contents, such as furniture and all facilities and amenities (e.g. bathroom and toilets), are in good working order and ensuring that specified works or repairs are carried out within certain time limits
for an HMO, a requirement that the responsible person attends an approved training course in relation to any approved code of practice
that the property only be occupied by a specified class of persons (e.g. occupied only by students).

Renewing a Licence

If there has been no significant change in the property, you will be asked to renew the licence. Contact the local authority or check their website, which is the easiest way of renewing the licence. A renewal must be requested before the initial licence runs out.

Properties Where a Licence May Be Refused

If the property is not suitable for the number of occupants, is not correctly managed, or the landlord or manager is not a fit and proper person, the local authority will not grant a licence. Suppose a property cannot be given a licence. In that case, the council must make an Interim Management Order (IMO), which will allow the local authority to manage the property (either directly or indirectly through a nominated partner).

The IMO can last for a year until the local authority can make suitable permanent management arrangements. If the IMO expires and there has been no improvement, the council can issue a Final Management Order (FMO). This can last up to five years and can be renewed.

Temporary Exemption From Licensing

Suppose the landlord, or person in control of the property that requires licensing, intends to stop operating as a licensable property or legally reduce the number of occupants below the level that requires a licence and can provide evidence of this. In that case, they can apply for a Temporary Exemption Notice (TEN).

A TEN lasts for three months and ensures that the property converted from a licensable property does not need to be licensed. If the situation is not resolved, the landlord can apply for a second Temporary Exemption Notice for three months.

When this expires, the property must be licensed, become subject to an IMO, or cease to be a licensable property. TENs also apply where the licence holder dies. The property will be treated as if it is subject to an exemption notice for three months, during which time the estate can either apply for a new licence or cease to run the property as a licensable property. If it takes longer than the initial three months, the estate can apply for one further exemption notice.

Right of Appeal Against a Local Authority's Decision

A landlord can appeal to the Residential Property Tribunal Wales (RPT), generally within 28 days, if the local authority refuses a licence, grants a licence with conditions or revokes or varies a licence.

Offences

It is a criminal offence if the landlord or the person in control of the property fails to apply for a licence or allows a property to be occupied by more people than permitted. An unlimited fine may be imposed. In addition, breaking any licence conditions can result in an unlimited fine. There may be a restriction on seeking possession, depending on the letting, if no licence has been at least applied for.

Rent Repayment Orders

The local authority may apply to the RPT for a 'rent repayment order', allowing it to reclaim any housing benefit that has been paid during the time the property was let without a licence, up to a maximum of 12 months.

An occupier may also make an application to claim back any rent they have paid during the unlicensed period, up to 12 months if the landlord has been convicted of operating a licensable HMO without a licence or has been required by a rent repayment order to make a payment to the local authority in respect of housing benefit.

Last Reviewed: