Nearly a third of councils in England have said they would consider introducing compulsory licensing schemes for landlords.
A study by the Local Government Information Unit (LGiU) and the Electrical Safety Council revealed six out of every 10 councils are already considering investing in training and support for local private landlords.
Eight out of 10 councils in England said they want to play a larger role in the private rented sector and nearly 95% think they have and ‘important role to play’ when it comes to renting.
The main reasons councils gave for wanting to engage more actively in the private rented sector were to reduce health and safety risks in properties and protect tenants from unscrupulous landlords.
LGiU chief executive Jonathan Carr-West said: “The number of people living in the private rented sector is increasing dramatically. The 2011 census shows the number of private renters in England and Wales has jumped from 1.9 million in 2001 to 3.6 million in 2011 – an increase of 88%.
Richard Patterson, a landlord and founder of My Online Estate Agent, thinks a compulsory register is a good idea if it is used to stop those with serious criminal records becoming landlords as this should help crack down on the small minority criminal landlords engaging in illegal and fraudulent activities.
However, he worries the regulation would not just stop at a simple register and fears some sort of accreditation requiring landlords to take a paid course would be enforced.
“My concern about a more complicated accreditation is that it would be an extra hurdle and expense for accidental landlords. I’d be very happy to see accreditation for landlords outside of the accidental landlord group – maybe by introducing this for those who let more than one property,” Mr Patterson explained.
The main issue being raised by landlords and property professionals is how well the licensing would be enforced.
Good landlords already behave themselves, so they do not need to be licensed, but will happily sign up and comply anyway. However, unscrupulous landlords will ignore the licencing for as long as they can get away with doing so.
Marc von Grundherr, director at Benham & Reeves Residential Lettings, believes professionalising is a good idea, especially in an area where large sums of money and people are involved, however, he said “the devil is always in the detail”.
“Given the vast cuts in resources for both government and councils, I don’t know how it will be controlled and policed. It is all about knowledge and information and I wonder how deep the council pockets will be to ensure all landlords know about the proposals,” he said.
Mr von Grundherr believes as long as the process is simple, fair and not overly expensive then it is a good idea and will be largely supported.
Jennifer Drinkwater, lettings and property management manager for Manchester based Sanderson James, was involved in a licensing pilot scheme and found it to have many loopholes.
She said the irresponsible landlords it was supposed to target found ways to avoid the scheme.
“We would not welcome such a move unless councils invested in the resources necessary to police it properly.”
“We would not welcome such a move unless councils invested in the resources necessary to police it properly and there were stronger penalties in place for those who avoided paying for the licence,” Ms Drinkwater added.
Results in Newham
Newham Council is the first local authority in England to introduce a form of compulsory landlord licensing.
Landlords have to apply for a separate licence for every buy-to-let property they own. Those who do not licence their rental properties can be prosecuted and charged up to £20,000 plus have control of their properties taken away from them.
A spokesperson for Newham Council said 1,200 warning letters have been sent to landlords in the area and 750 enforcement visits have taken place since the scheme was launched.
Following these visits, 50 cautions have been issued and 30 prosecutions have been made.
The impact in Scotland
Compulsory private landlord registration has existed in Scotland since April 2006, but its introduction went unnoticed by a huge number of landlords in the country due to a lack of publicity, according to John Gell, director at Simply Let in Inverness.
He said the more astute landlords were aware of the introduction and reluctantly accepted it as a possibly beneficial initiative with potential to improve the sector by removing poorly performing landlords from the market.
“That, for the most part, hasn’t happened and, seven years on, little has changed,” Mr Gell added.
He believes that, to this day, many landlords are still completely unaware of the need to register.
“The impact of landlord registration varies across Scotland according to the vigour and acumen of the local authority personnel responsible for its implementation and I think it’s the case that the smaller authorities are more effective at identifying unregistered landlords and obliging them to register,” Mr Gell said.
He feels there is little, if any, evidence to suggest landlord registration has improved the private rented sector as poor practice, by both landlords and agents, still abounds.
He suggests unlicensed landlords should first be offered opportunities to gain accreditation through Landlord Accreditation Scotland, with punishment following later if they decline all opportunities to gain accreditation or work to accreditation standards.
The Scottish Government recently launched its vision and strategy for the private rented sector called A Place to Stay, A Place to Call Home, which clarifies why landlord regulation exists in the country.
“This re-states the purpose of landlord registration and gives local authorities clear direction as to its aim and their responsibilities,” explained Rosemary Brotchie, policy manager at Shelter Scotland.
Eleanor White, co-owner of The Online Letting Agents, worries landlord licensing will deter people from investing in property and entering the buy-to-let market.
She emphasised that a five-year licence for one property in Newham costs £500.
“The drive to improve standards needs to be done in such a way that it doesn’t make buy-to-let an unattractive option for landlords.”
“Clearly it is important for landlords to provide good quality safe properties for their tenants, but the drive to improve standards needs to be done in such a way that it doesn’t make buy-to-let an unattractive option for landlords,” Ms White concluded.
As landlords are in the business of making money, it is likely any costs they incur when gaining a licence will be passed onto their tenants.
The main reason councils want to introduce licensing is to make the private rented sector more pleasant for tenants, but the last thing this group wants at a time when wages are static is even further increases in their rent.