Selective Licensing, Nottingham- The Story so far and the possible issues arising from the scheme
Since 2010, councils in England and Wales have been able to introduce landlord licensing schemes.
The 2004 Housing Act introduced mandatory licensing across England and Wales for Houses in Multiple Occupation (HMOs), where properties with five or more tenants occupying three or more stories would need a license. However the type of licensing that has caused controversy and courted headlines since 2010 is Selective licensing.
Selective licensing was also introduced by the Housing Act 2004, as an enforcement tool for councils to tackle poor management standards in non HMO privately rented properties. Councils could designate and target licensing in areas they deemed to be suffering from low housing demand, significant and persistent anti-social behaviour, high crime and migration and property disrepair.
Since 2010 we have seen a steady increase in the number of councils across the Country rolling out Selective licensing schemes; citing the need to stamp out rogue landlords and improve the quality and management standards in private rented homes. However, with so much regulation already available to councils to enforce against rogue landlords these type of schemes are often labelled as money making initiatives for local councils.
All proposed schemes have to go through a consultation period, during which councils are required to consult with those likely to be affected - tenants, landlords, landlord organisations and others in the local community. If a proposed scheme impacts more than 20% of the council’s geographical area or their private rented housing, permission to proceed with the scheme must be given by Secretary of State for the Department of Communities and Local Government. (DCLG)
In November 2016 Nottingham City Council (NCC) voted to commence a citywide Selective licensing consultation. The eleven week consultation to license over 35,000 properties representing all non HMO rental properties across Nottingham commenced in January 2017 and ended 31st March 2017. It produced just 1466 responses and according to the council a significant number of these responses were in favour of a citywide scheme.
At a full council meeting on the 18th July 2017 it was agreed by Nottingham City Councillors, a submission be made to the Secretary of State for DCLG requesting permission for a designation.
However the designation would no longer recommend a citywide scheme, instead the focus for their submission to DCLG will be targeting those areas which contain a high proportion of private rented homes. Therefore the council has agreed to reduce the scheme by 8% (3K properties) by removing the North West of the City from the designation where a high concentration of housing estates, parkland and industrial areas are situated. Apparently this part of the City contributed very little to the 1443 complaints the council received from private rented housing last year.
Councillor Jane Urquhart, the City Council’s Portfolio Holder for Planning, Housing & Heritage, said: “The introduction of a licensing scheme for private landlords was a key commitment made in our council Plan. The majority of private tenants who responded to the consultation were in favour of a scheme.
“We have listened carefully to the issues raised in the consultation and made changes to the proposed scheme without losing focus on the improvements it sets to achieve in the overall standard of private rented housing in the city.
“Reducing the cost to licence to £400.00 for landlords who have accreditation creates even more of an incentive for landlords to obtain it to demonstrate that they meet the required standards so we would encourage them to make an application now via DASH or Unipol, Nottingham’s approved landlord accreditation schemes.”
The designation submission by the council to DCLG will be in September 2017. The council hopes to have permission to proceed with their more or less citywide scheme by April 2018. Once a decision is granted to proceed the council must wait three months before commencing the scheme which will last for up to five years. The cost to license a property in Nottingham will cost £400 or £655 depending on the accreditation status of the applicant and will be payable in two parts. Once the scheme has started, landlords who continue to rent out property while failing to apply for a license or breach any of the license conditions can be fined as much as £30,000 per offence. Alternatively, they can be prosecuted and served with a minimum twelve month banning order. Tenants can now apply for a 12 month rent repayment order if their landlord fails to license or breaches license conditions or other 2004 Housing Act offences.
The licensing scheme if given the green light will be self-funding with the cost of £20.96 million over a five year period being met by income from the licence fees. (32,000 properties at £655.00) The license fee will be paid in two parts, where a licence application is refused, no refund shall be given. The first payment will be due on license application and the second payment shall be due following the applicant being served with statutory notification of the intention to grant a licence. Payment of the second fee will be a condition of the licence. No grace period will be given. Assuming that the designation is confirmed the licensing scheme will come into force on a date set by the Secretary of State and from that day applicants will be expected to comply. All applicants will be required to apply through a council online portal and submit all their required documents and fee via this portal. It is anticipated that licence documents and correspondence from the council shall also be issued through their portal.
EMPO have identified a number of issues which may arise if permission is granted to proceed with such a large scheme.
1. Recent changes in legislation around rent repayment orders and civil penalties will encourage license applications to flood into the council on day one. The impact of this may lead to a meltdown situation where a backlog of licence applications and large numbers of inexperienced staff result in applications not being dealt with in a timely manner. In turn this may lead to poor decision making in regards to issuing licenses and conducting property inspections.
However despite EMPO’s concern, the council is confident there will be adequate resources in place as 71 new people will be employed to process applications etc. The council have indicated in the event the workload becomes too much in the early months of the scheme they can activate a plan with local employment agencies to bring in temporary staff.
2. An accredited EMPO landlord who has been providing decent and safe homes to families since 1996 has reported he will sell three houses in Nottingham if the scheme is approved. He has cited other pressures too, however he believes the continuing hostile environment in Nottingham is not good for his business and is now looking at neighbouring boroughs for future portfolio growth.
Hopefully this scheme will not mean other good landlords decide to exit out of the Nottingham rental market because they perceive the regulatory environment as damaging to their business growth.
3. Landlords who appoint regulated agents to manage their properties will have to apply for a licence even though they have no day to day dealings with the management of their rental property. This is because no process or joint working relationship has been put in place to release regulated agents from this scheme, who in many cases conduct comprehensive HHSRS checks on properties before listing them for rental. The unintended consequence of this oversight will be more landlords forced into self-management as a way to save cost.
4. NCC promotes a key driver for their more or less citywide licensing scheme is ensuring the protection and safeguarding of tenants. It would seem however there is a lack of robustness in achieving this outcome as only 50% of non-accredited and 10% of the accredited properties will be inspected under their scheme.
Ashfield District Council who has been operating a Selective licensing scheme since early 2016 will only issue licenses once a property inspection has been carried out. The reason for this is to ensure the property is decent and safe and the landlord has the necessary skill set for their role.
5. People who wish to rent their properties for a short period of time will be at risk of receiving a Civil Penalty fine up to £30,000 as they would not consider the requirement to pay £655.00 for a license to rent their home.
It is clear at some point in 2018 Nottingham will be rolling out a Selective licensing scheme. The decision on the size of this scheme rests with the Secretary of State. It is hoped a scheme licensing of a further 32,000 properties will be seen as unnecessary; as recent new powers under the Housing and Planning Act now provide NCC with sufficient tools to address the issues it hopes Selective licensing will solve.
For more information click HERE (see Point 7)
On Tuesday 22nd November 2016, Nottingham City Council (NCC) announced a 10 week Selective Licensing consultation. The consultation will run from January to March 2017, with the scheme being implemented in February 2018.
In summary, NCC believes the private rented sector (PRS) suffers from numerous deep rooted problems, including high levels of anti-social behaviour and property disrepair and that a citywide selective licensing scheme will assist the authority in dealing with these problems.
The scheme will mean the licensing of 26,250 rental properties across Nottingham City. (In other words every rental property which is not regarded as a House in Multiple Occupation) The cost to the sector will be £600.00 per property, plus additional costs to comply with over 30 conditions. Essentially, the proposed scheme will remove £16m from the local sector and enable the council to employ 74 additional staff to deal with the administration, enforcement and property inspections under the scheme.
East Midlands Property Owners (EMPO) believes the proposed scale of this scheme is unnecessary and will have wide ranging consequences for your business and the wider PRS in Nottingham. EMPO will be attending an urgent meeting with the council to discuss the impact this scheme will have on buy-to-let investment, rent levels and housing supply in Nottingham.
Like us, if you believe this proposed scheme will adversely impact your business activities in Nottingham, please help us in “beating the drum” by mobilizing your landlord and tenant relationships into responding to the upcoming consultation.
EMPO will be hosting a Selective Licensing forum at Unity House, 35 Church Street, Lenton on Thursday 23rd March 2017 between 6.30pm-8pm. If you would like to attend please email me on firstname.lastname@example.org . In the meantime please feel free to contact me on tell 0755 264 2030 to discuss any aspect of this proposed scheme.
Read the full report HERE (Page 25-Agenda Report Packs)
Contact information for the Environmental Health team in Nottingham:
Tel: 0115 8761555
As part of the licensing scheme your property will need to meet both statutory and locally enforced conditions. The conditions cover areas around amenity provision, fire & electrical safety and HHSRS.