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London licensing scheme regime failing consumers

11th October 2019

With over 130,000 unlicensed rental properties in London, safeagent calls for a rethink of licensing in the private rented sector to better protect tenants

New research for safeagent conducted by London Property Licensing has found over 130,000 unlicensed properties in London which should be licensed under either selective, additional or mandatory HMO licensing schemes.

The research, carried out through Freedom of Information (FOI) requests, found there are over 310,000 private rented properties in London that require licensing under mandatory HMO, additional and selective licensing schemes implemented under the Housing Act 2004. Whilst the mandatory HMO licensing applies across England, additional and selective licensing schemes are introduced on a Borough by Borough basis, with the aim of improving standards in the Private Rented Sector (PRS).

However, non-compliance in the capital is rife. Licence applications have been submitted for only 25% of the 138,500 private rented properties that require licensing under mandatory HMO or additional licensing schemes – a non-compliance rate of 75%. Without a licence application submitted, these properties are being operated illegally, potentially putting consumers at risk.

If they are caught operating an unlicensed property, landlords and their letting or managing agent, can face prosecution and a hefty fine, or a civil penalty of up to £30,000. The landlord can also be ordered to repay up to 12 months rent. However, many could be falling foul of the law through ignorance of the complex regulatory framework.

Since October 2018, the mandatory HMO licensing scheme has applied to most HMOs shared by five or more people whereas it was previously restricted to properties three or more storeys in height. In some boroughs, additional licensing schemes have extended licensing to properties rented to just three or four unrelated people. This complicated picture also makes it hard for council enforcement teams to assess which properties should have a licence.

The picture for selective licensing is markedly different. These schemes extend licensing to all private rented properties including single family lets within a certain geographical area. Licence applications have been submitted for 85% of the 173,000 private rented properties that require licensing under selective licensing schemes in London- a non-compliance rate of 15%.

Added to the confusion over licensable properties, many London Boroughs are struggling to process over 24,000 licence applications – a huge administrative burden that can lead to long delays in issuing licence approvals. Currently, about 40% of boroughs still rely on paper applications.

Read the full research

safeagent is calling for a simple, streamlined licensing process which would make it more cost effective for the public purse, easier for councils to enforce, and clearer for landlords and agents to understand whether a property should be licensed.

Isobel Thomson, safeagent CEO, said:

“The results of the survey are concerning. Consumers are not being well served and indeed many are being placed at risk through this mish mash of licensing schemes. Right now, the system isn’t fit for purpose and Councils are drowning in paperwork. Landlords needing property licences are either deliberately evading the schemes or are in the dark concerning their legal responsibilities and tenants are being placed at risk.

“If the compliance rate for HMO licensing schemes is only 25%, how can these schemes be effective? Ultimately this is about proper use of public money and consumer protection. Where are the assessment procedures for Councils who have schemes in place? Isn’t it time we went back to the drawing board to come up with a simple, streamlined system that works for all?

Types of licensing

HMO Licensing Mandatory HMO licensing applies throughout England under Part II of the Housing Act 2004. The licensing scheme applies to most Houses in Multiple Occupation (HMOs) occupied by five or more people – an estimated 220,000+ properties across England.

Additional Licensing Each council has the power to introduce additional licensing under Part II of the Housing Act 2004. Additional licensing schemes apply to certain Houses in Multiple Occupation (HMOs) that fall outside the scope of the mandatory HMO licensing scheme. For example, HMOs with only three or four occupants. Each scheme has different terms and conditions.

Selective Licensing Councils have the power to implement a selective licensing scheme under Part III of the Housing Act 2004. These schemes apply to all private rented properties within a defined geographical area. Larger schemes required approval from the Secretary of State.

Failure to comply with any of these property licensing schemes is a criminal offence that can result in prosecution and a hefty fine or a civil penalty of up to £30,000. Other sanctions also apply.

Research methodology

safeagent commissioned London Property Licensing to carry out research on mandatory HMO, additional and selective licensing schemes implemented by the 32 London Boroughs plus the City of London.

Freedom of Information requests were submitted to all 33 London local authorities seeking information about their property licensing activity as of 1 May 2019. Responses have been received from every council.

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