Selective licensing: why getting it wrong can have costly consequences

Selective licensing is not new, but it remains an area where landlords can be caught out. Unlike mandatory House in Multiple Occupation (“HMO”) licensing, which applies nationally to larger houses in multiple occupation, selective licensing is introduced by individual local authorities for designated areas. Where a scheme is in force, privately rented properties within that area may need a licence even if they are ordinary single-family lets. Additional HMO licensing can also apply locally, capturing smaller HMOs that fall outside the national mandatory scheme.

That patchwork approach is what makes compliance difficult. Two very similar properties, sometimes only streets apart, can be subject to different licensing requirements. Schemes also change over time. A landlord who checked the position when they first acquired a property may assume nothing further is needed, only to find that a new designation has since brought the property within scope.

The consequences of that mistake can be significant. Landlords should regularly review their property portfolios to ensure they remain compliant and are not caught out by new or expanding licensing schemes. Local authorities have no obligation to consult landlords directly; they need only comply with the prescribed consultation process. 

Operating an unlicensed HMO, or letting a property without a required selective licence, can expose a landlord to prosecution or a civil financial penalty. Local authorities must follow their own enforcement policies and relevant statutory guidance, but the sums involved can be substantial. The risk does not necessarily stop with the council either. Tenants, as well as local authorities, may pursue rent repayment orders where a property should have been licensed but was not.

A recent example: proposed penalties reduced by around 70%

We recently advised a landlord facing financial penalties totalling more than £100,000 following a failure to apply for a HMO licence, as well as failures in displaying landlord contact details, ensuring fire safety measures are complied with and ensuring that common parts of the HMO were maintained in good and clean decorative repair and in a safe and working condition, in accordance with legislation. The proposed penalties were commercially serious and, if imposed in full, would have had a very significant impact on the landlord’s ability to keep the rental property.

The starting point was not to ignore the notices or assume that the council would reduce them simply because the figure felt high. It was necessary to analyse the licensing position, review the council’s penalty calculations, identify where the decision-making could properly be challenged and present mitigation in a clear, evidence-led way. That included addressing the landlord’s conduct, the various breaches, any steps taken to regularise the position, any relevant mitigation, the level of harm or risk, proportionality, totality and the wider financial impact.

Following representations, the proposed penalties were reduced by around 70%. That outcome is a useful reminder that a notice of intent to impose a financial penalty is not necessarily the end of the story. However, it is also not something that landlords should treat casually. The response window is limited, and the quality of the mitigation evidence and submissions is pivotal and can make a real difference.

Why this matters

Selective and additional licensing schemes are increasing in practical importance. Local authorities are under pressure to improve standards in the private rental sector and licensing gives them a direct enforcement route. At the same time, the wider regulatory environment for landlords is becoming more demanding, with increased penalties, expanded rent repayment order risk and further data-led enforcement expected, as national private rental sector reforms develop.

For landlords and managing agents, the message is simple: licensing should not be treated as a one-off administrative check. It needs to form part of ongoing portfolio management. That means checking the position before acquisition, before letting, when occupancy changes and whenever a local authority consults on or introduces a new scheme.

Key takeaways

• Check the local licensing position regularly. A property may become licensable after a new selective or additional licensing scheme is introduced.
• Do not assume HMO licensing is only relevant to large shared houses. Smaller HMOs may be caught by local additional licensing schemes.
• If a notice of intent is received, act quickly. There is an opportunity to make representations, but deadlines matter.
• Evidence is critical. Mitigation should be supported by documents, chronology and a clear explanation of what happened and what has been done to remedy the position.
• Consider the wider risk. Civil penalties, rent repayment orders, reputational impact and future “fit and proper person” assessments can all be relevant.

Licensing breaches can be expensive, but early advice and a properly evidenced response can materially improve the outcome. The better approach, however, is to build licensing checks into day-to-day property management so that requirements are identified before the local authority identifies any potential breach and takes action. If you do find yourself in a position where property licensing has been overlooked, we encourage you to seek legal advice promptly.