If you’re in the world of property, postcode differences won’t be a surprise for you, but you may be surprised to learn how many differences there are in terms of rules, regulations and costs. If you’re a newbie landlord, it can be quite a shock to find out about all the hoops you have to jump through, none more so than the Landlord Licence. Depending on where you’re buying, it can be an unexpected cost. So what’s the problem?
What is a landlord licence?
Many local authorities throughout the UK operate a landlord licencing scheme in order to keep tabs on how many landlords there are, and who they are. The aim behind these schemes is to help ensure that landlords are following the law, and that they are ‘fit and proper persons’ to be landlords in the first place who have not previously broken housing law and have no relevant convictions against them.
Where will I need one?
Landlord licences are mandatory in Scotland and Wales – and one in six local authorities in England now require them too, covering 460,000 properties. But there are big differences in how they are administered and how they operate between each area; covering everything from how long they last, and who has to apply for them, to what kinds of properties require them and which are exempt. As a result, understanding landlord licences can be a minefield for even an experienced landlord.
The postcode lottery
While the variable implementation of the landlord licence is confusing enough, the most controversial aspect of the scheme is the cost. The variance is immense, with the amount you’ll pay dictated by your postcode and the type of property you plan to let out. The cost can run from as little as £55 to as much as £1,500 – 21 times more expensive. Many local authorities have been accused of adding more categories of licence to the list in order to raise extra revenue, with evidence showing that the average local authority raises more than £144,000 from their licencing schemes. Liverpool City Council, for example, are known to raise as much as four million pounds from theirs. Not only does the flat cost of each licence differ greatly between authorities, but the amount you’ll pay also varies to the point where shopping around for a cheaper area to become a landlord is also very difficult. Some authorities may charge above-average rates for some types of property while completely exempting others, and some authorities may have relatively cheaper rates overall but may have punitively high fees for the specific licence type you need.
The punishment for failing to become licenced in England varies as much as the rules and the cost, but in Scotland and Wales it means being issued with a fixed penalty that can be as high as £50,000 (depending on the severity of the offence, such as breaching the terms of the existing licence). The number of successful prosecutions for landlords in breach of the rules has gone up as the range and complexity of the active schemes have increased. The majority of fines, however, are well short of the maximum, with an average of only £926. To avoid problems, it pays to do in-depth research into any area in which you’re planning to become a landlord to determine whether they have an existing scheme, and what the terms of the scheme are. Taking out landlord insurance is a good way to mitigate the danger, because it provides legal cover to help deal with any mistakes which may happen.