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Sections 79, 80 and 81 of the Housing Act 2004 provide for the introduction of a scheme of selective licensing of private landlords in a local housing authority’s area. The powers in the Act came into force in April 2006. This note explains the history and operation of the scheme.

Selective licensing is intended to address the impact of poor quality private landlords and anti-social tenants. It has primarily been developed with the need to tackle problems in areas of low housing demand in mind – although the Act also allows for selective licensing in some other circumstances. Many of the provisions relating to selective licensing are similar to those relating to the mandatory and discretionary licensing of Houses in Multiple Occupation (HMOs) – new regimes for which were also introduced by the 2004 Act.

In an area subject to selective licensing, all private landlords must obtain a licence and if they fail to do so, or fail to achieve acceptable management standards, the authority can take enforcement action - e.g., issuing a fine of up to £20,000 or in some cases, assuming management control of the property.

Background information on the origins of the scheme can be found in Part III of Library Research Paper 04/02, The Housing Bill.

The Department for Communities and Local Government has also produced two leaflets on the subject:

A general guide - Selective Licensing of other residential accommodation:

http://www.communities.gov.uk/documents/housing/rtf/158142.rtf

A procedural document, aimed mainly at local authorities considering a selective licensing scheme – Approval steps for Additional and Selective Licensing Designation in England:

http://www.communities.gov.uk/documents/housing/pdf/154091.pdf

Other relevant Library Standard Notes include: SN/SP/1012 Anti-social behaviour in private housing and SN/SP/708 Houses in Multiple Occupation (HMOs).

This note relates to England and Wales.

2.1 Which areas can be selectively licensed? 3

2.2 Consultation 4

2.3 Granting of designation and notification 5

3.1 Licence conditions – what is required of landlords? 6

3.2 Granting of licences 7

3.3 Sanctions 8

3.4 Exemptions 8

3.5 Fees 8

Section 80 of the Housing Act 2004 allows local authorities to apply for selective licensing of privately rented properties in areas which are experiencing low housing demand and/or suffering from anti-social behaviour. The main provisions in respect of selective licensing came into force in April 2006. The same Act also introduced a new licensing regime for Houses in Multiple Occupation (HMOs).

The explanatory notes to Part 3 of the Act make it clear that the selective licensing scheme is strongly linked into the Government's anti-social behaviour agenda and provides some further background to the scheme:

2

4 DCLG (January 2008) Approval steps for Additional and Selective Licensing Designation in England, p 8

As an article in the November/December 2005 edition of Adviser magazine noted, selective licensing extends anti-social behaviour policy initiatives beyond the usual domains:

Local housing authorities can designate their entire district or an area within a district. The proposed area must meet one or more of the following conditions:

1. The area is one which is experiencing (or is likely to experience) low housing demand and the local housing authority is satisfied that ‘designating’ an area will, when combined with other measures, lead to improved social and economic conditions in the area.

1. The area is experiencing a "significant and persistent" problem caused by anti-social behaviour and that some or all private landlords in that area are not taking appropriate action to tackle this. Moreover, the designation in combination with other measures would lead to a reduction in or elimination of the problem.3

Section 80(4) of the Act requires the authority to consider the following factors when judging if an area is ‘subject to low housing demand’:

1. the value of residential premises in the area, in comparison to the value of similar premises in other areas which the authority consider to be comparable (whether in terms of types of housing, local amenities, availability of transport or otherwise);

1. the turnover of occupiers of residential premises;

1. the number of residential premises which are available to buy or rent and the length of time for which they remain unoccupied.

Further Department for Communities and Local Government guidance suggests that an authority may also consider other factors, for example:

1. A lack of mixed communities in terms of tenure, for example, a high proportion of rented property, low proportion of owner occupied properties.
2. A lack of local facilities, for example, shops closing down.

1. The impact of the rented sector on the local community, for example, poor property condition, anti-social behaviour etc.
2. Criminal activity.4

3

6 The Selective Licensing of Houses (Additional Conditions) (Wales) Order 2006 SI 2006/2825 (W.248

The guidance acknowledges that it is more difficult to define an area likely to become one of low housing demand. In this case, the onus is on the authority to provide evidence of local trends which are contributing to the growth of low demand over a period of time.

When defining whether an area meets the second set of conditions relating to anti-social behaviour, the Act says the following criteria must be met:

1. that the area is experiencing a significant and persistent problem caused by anti-social behaviour;
2. that some or all of the private sector landlords who have let premises in the area (whether under leases or licences) are failing to take action to combat the problem that it would be appropriate for them to take; and
3. that making a designation will, when combined with other measures taken in the area by the local housing authority, or by other persons together with the local housing authority, lead to a reduction in, or the elimination of, the problem.

There is no definition of ‘anti-social’ behaviour in the Act (or related Regulations) but DCLG guidance suggests the following as examples of what may count:

1. Crime: tenants not respecting the property in which they live and engaging in vandalism, criminal damage, burglary, robbery/theft and car crime.

1. Nuisance Neighbours: intimidation and harassment; noise, rowdy and nuisance behaviour; animal related problems; vehicle related nuisance. Tenants engaged in begging; anti-social drinking; street prostitution and kerb-crawling; street drugs market within the curtilage of the property.

1. Environmental Crime: tenants engaged in graffiti and fly-posting; fly-tipping; litter and waste; nuisance vehicles; drugs paraphernalia; fireworks misuse in and around the curtilage for their property.5

In Wales, the National Assembly has exercised its powers under the Act to stipulate through Regulations, additional ‘conditions’ for designating an area. These have the effect of allowing local housing authorities in Wales to apply for selective licensing designation where: a district, or an area in that district, comprises a minimum of 25% of housing stock let by private sector landlords; or a local housing authority has provided assistance to any person in accordance with an adopted and published policy under articles 3 and 4 of the Regulatory Reform (Housing Assistance) (England and Wales) Order 2002 (power of local housing authorities to provide assistance); or a local housing authority has declared an area as a renewal area under section 89 of the Local Government and Housing Act 1989.6

Before making a decision to designate an area for selective licensing an authority must consider whether there are alternative means of addressing the issues – for example, through the introduction of a voluntary accreditation scheme for landlords. It must also ensure that any proposed licensing scheme fits with its overall housing strategy and policies on homelessness and empty dwellings.

The Act requires authorities considering designating an area as subject to selective licensing to:

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10 HC Deb 27 January 2010 c55WS

1. Take reasonable steps to consult persons who are likely to be affected by the designation, and,

1. Consider any representations made in accordance with the consultation.7

DCLG guidance8 suggests that this consultation should include: local residents – for example, tenants, landlords and managing agents where appropriate; other members of the community who live or operate businesses or services in the proposed designated area; and local residents and businesses in the surrounding area who will be affected.

Initially, local authority applications had to be approved by the ‘appropriate national authority’ – in England, this is the Secretary of State, and in Wales, the National Assembly for Wales. The National Assembly subsequently issued a "general consent" so that Welsh authorities may establish selective licensing schemes provided they meet the criteria set out by the Welsh Assembly Government.

The Act enables the Secretary of State to grant ‘general approvals’ to specific local housing authorities – these would allow them to designate particular areas within their districts without having to seek approval in each case. The Labour Government said that it did not intend to exercise this power immediately as it wished to "take a view on the purposes for which authorities are using licensing"9 however, on 27 January 2010 the then Government announced a consultation exercise on the issuing of a "general consent" to cover discretionary and selective licensing schemes:

A key driver behind this proposal was the "wider Government commitment to ensure decisions on local matters are made as close to the people affected by them as possible." Full information can be found in the consultation paper General consents for licensing schemes under Parts 2 and 3 of the Housing Act 2004. This consultation closed on 12 March 2010. CLG published a summary of responses on 1 April 2010, of the 87 responses received both landlord and tenant organisations were opposed to the introduction of a general consent and to linking it to the Comprehensive Performance Assessment (CPA) results; respondents also opposed use of its successor, Comprehensive Area Assessment (CAA) even though this had not yet been proposed, General consents for discretionary licensing schemes under Parts 2 and 3 of the Housing Act 2004: Consultation - Summary of responses.

5

12 The Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (England) Regulations 2006 SI 2006/373 and The Licensing and Management of Houses in Multiple Occupation and Other Houses (Miscellaneous Provisions) (Wales) Regulations 2006 SI 2006/1715 (W.177)

The Coalition Government subsequently published a general consent which is applicable to all local housing authorities in England – it is not linked to either CPA or CAA results. Before using the consent to impose additional licensing requirements authorities are required to take all reasonable steps to consult persons likely to be affected (2004 Act, ss.56(3)(a) and 80(9)(a); 2010 Order, para. 4). The consultation period must run for a minimum of 10 weeks (2010 Order, para. 4).11

The maximum period for which selective licensing can run is five years. During the designation period, the local authority must from time to time review the operation of the scheme.

Sections 59 and 83 of the Act stipulate that once a designation has been made, the authority must:

1. Publish a notice within the designated area within seven days of the designation being confirmed.

1. Notify all those consulted on the proposed designation within two weeks of the designation being confirmed.

Regulations further stipulate what steps an authority must take to notify local residents and other interested parties – for example, they are required to publish notices in local newspapers and send copies of the designation to organisations which provide advice on tenancy or landlord issues – e.g., Citizen’s Advice Bureaux.12

Authorities have discretion to set the precise conditions of the licence as regards anti-social behaviour and general management of the property. These can include conditions relating to the use and occupation of the house, and measures to deal with anti-social behaviour of the actual tenants or those visiting the property. However, the conditions imposed must be ones which relate to the residential use of the property – they cannot, for example, place responsibilities on landlords to act where, for example, tenants may be committing crimes unrelated to their occupation of the property.

There are also certain mandatory conditions which must be included in a licence. For example, licensees are required to:

1. Present a gas safety certificate annually to the LHA, if gas is supplied to the house;
2. Keep electrical appliances and furniture (supplied under the tenancy) in a safe condition;
3. Keep smoke alarms in proper working order;
4. Supply the occupier with a written statement of the terms of occupation;
5. Demand references from persons wishing to occupy the house.

6

13 See: http://webarchive.nationalarchives.gov.uk/20100418065544/http://asb.homeoffice.gov.uk/members/article.aspx?id=8008

In deciding whether or not to grant a licence, the authority will consider whether the landlord (or the managing agent) is a ‘fit and proper’ person. The rules that must be followed in order to determine this are outlined in section 89 of the Act. The authority must have regard to any previous convictions relating to violence, sexual offences, drugs or fraud; whether the proposed licence holder has contravened any laws relating to housing or landlord and tenant issues; and whether the person has been found guilty of unlawful discrimination practices.

The previous Government’s ‘Respect’ website suggested that authorities should not institute a ‘blanket’ policy of carrying out Criminal Record Bureau checks on all new licence applicants:

As is the case with the granting of licences for HMOs, if the authority determines that the landlord is not ‘fit and proper’, it can refuse to grant a licence. It must give 14 days’ notice of its intention, during which time the landlord can appeal. The local authority can also withdraw a licence after issue if the licensee is no longer considered a ‘fit and proper’ person.

Additionally, the authority must be assured that the person to whom the licence is granted is the most appropriate’ person – for example, taking into account whether they are locally resident and have management responsibility. This is designed to ensure that unfit landlords cannot ‘apply’ for licenses using a third party.

The authority must also confirm that there are satisfactory management arrangements in place regarding the property; in doing so, it must have regard to a range of factors including: the competence of the manager; management structures; and soundness of the financial arrangements.

7

http://www.communities.gov.uk/publications/housing/239-evaluating

If an authority believes that a landlord has breached licence conditions, they can issue a fine of up to £5,000 for each offence. Operating a property without a licence in a designated area can attract a fine of up to £20,000. For its part, the authority is obliged to take reasonable steps to ensure that applications are made for all licensable properties.

Part 4 of the 2004 Act contains additional provisions for enforcement action in respect of properties that are licensable under Parts 2 and 3 – including those licensable under selective schemes.14 The mechanisms that authorities have at their disposal include interim management orders and final management orders. More information on management orders can be found in section 4.5 of Library Standard Note SN/SP/708 Houses in Multiple Occupation (HMOs).

Some types of tenancies are exempt from selective licensing schemes:

1. Those operated or administered by Registered Social Landlords or local authorities

1. Houses in Multiple Occupation (HMOs) subject to mandatory or discretionary licensing under Part 2 of the Act.
2. Those where a Temporary Exemption Notice (TEN) is in force.15

1. Those where a management order is in force under Part 4 of the Act.

Other categories of tenancies or licenses that are exempt from the licensing requirements are specified in Regulations.16

As with the HMO licensing regime, landlords must pay a charge for a licence issued under a selective licensing scheme. Local authorities can set the level of the fee – the intention is that the rate should be ‘transparent’ and should cover the actual cost of the scheme’s administration.17

1. Uptake and impact

In August 2007 the DCLG published Evaluating the impact of HMO and Selective Licensing: the baseline before licensing in April 2006.18 Based on survey and other research carried out by the Building Research Establishment, this report offered some observations on the expectations of local authorities before the introduction of the new measures.

Key findings in respect of selective licensing included:

8

19 DCLG (August 2007) Housing Research Summary 239, Evaluating the Impact of Houses in Multiple Occupation and Selective Licensing: The baseline before licensing in April 2006, p 4

1. 12% of local authorities were considering or had decided to apply for selective licensing schemes. The main reasons stated for considering an application were "low demand; empty properties and poor housing conditions. Bad management and lack of interest by landlords were also mentioned, as were anti-social behaviour and issues with migrant workers. The most common tenant group in areas earmarked for selective licensing was unemployed people."

1. Case study authorities saw selective licensing as one of many tools for improving standards. Many officers were concerned that licensing was being seen by residents, council members or other departments as a ‘cure all’ solution.
2. Selective licensing was felt likely to be resource intensive, not self-financing. Authorities were concerned about their ability to deliver services to landlords of the level and quality needed to support the schemes. 19

Further research by the BRE into the impact of HMO and selective licensing was published on 27 January 2010. Eleven authorities in England currently operate 15 selective licensing designations. The main conclusions on the impact of selective licensing are reproduced below:

9

1. safeguarding the investment in regeneration by avoiding ‘cheap’ properties being purchased by investors from outside the area looking for quick returns rather than to provide and manage decent quality housing that will have a positive impact on the local community
2. helping to control ASB by involving the landlord and the security of the tenancy. Compelling landlords to provide written tenancy agreements together with tenant referencing/vetting has clarified the situation for all parties. If properly drawn up, the terms of the tenancy agreement can be used to deal with persistent ASB by threatening eviction with little prospect of finding decent alternative accommodation locally
3. ensuring that those landlords who were unwilling to join voluntary accreditation schemes take steps to improve the physical standards and management of their properties
4. giving local authority staff and others contact with good landlords that they might not have engaged with before. This has started to break down entrenched views

10

about private landlords and the current and potential role of private rented housing. There is, however, still some way to go on this

11

20 http://www.communities.gov.uk/documents/housing/pdf/1446438.pdf

1. poor standards of management
2. poor property condition (because this is almost always a symptom of poor management)
3. lack of engagement with voluntary accreditation schemes
4. high levels of private renting combined with social deprivation/lack of community cohesion

The Communities and Local Government Select Committee report, The Supply of Rented Housing, (May 2008) drew attention to the poor quality of accommodation provided by some private landlords and called on the Government to "address the bad practices of some

12 13

26 CLG Press Notice, 10 June 2010

landlords and letting agents by strengthening the regulatory approach to the private rented sector."21 The Committee also recommended the introduction of a system of accreditation for private landlords.22 In response the Government referred to the review of the private rented sector being carried out by Julie Rugg and David Rhodes at the University of York. The Rugg/Rhodes report, The Private Rented Sector: its contribution and potential, was published at the end of October 2008. A number of respondents to this review argued for a system of compulsory registration (licensing) for all private sector landlords:

Rugg and Rhodes concluded that a system of "light-touch" licensing for all private landlords with effective redress mechanisms should be introduced.24 This has not been welcomed by organisations representing private landlords.

The Government published its response to the Rugg review in May 2009 in which it set out an intention to introduce a national register of private sector landlords.25

On 10 June 2010 the new Housing Minister, Grant Shapps, announced that the Coalition Government would not be taking this proposal forward:

But for the bad landlords, I am putting councils on alert to use the range of powers already at their disposal to make sure tenants are properly protected.26