Brokers can help landlords navigate the licencing labyrinth – Keystone Property Finance

Over the years, there has been a steady legislative creep in the private rented sector, to the point where it is nearly a full-time job keeping on top of the various new rules and regulations.

In recent times, we have seen the emergence of landlord licences, houses of multiple occupation (HMO) licences, C4 planning legislation and various tax reforms aimed at property investors.

While nobody doubts the intentions of government and local authorities in trying to make the sector more professional, they have certainly made being a landlord more complicated.

A trend Keystone Property Finance is starting to notice more over the past year or so is the introduction of ‘selective licensing’.

In areas where local authorities have introduced selective licencing, all landlords must apply and hold a licence for every property they own in that area.

This new licencing system has been introduced, primarily, to rid the market of rogue landlords or to reduce levels of anti-social behaviour in a given area.

This is not an issue per se, but from discussions with both landlords and brokers, the majority are unaware of the existence of selective licensing and the consequences of not having one.

The reason a lot of people may not have heard of selective licencing is because only 69 out of 333 local authorities in England have thus far introduced it.

However, more are being introduced all the time. Around 14 local authorities have introduced a selective licencing regime in the past 12 months while a further 15 are in consultation.

The three problems with selective licencing

If you’re a landlord operating in a selective licence area and you don’t have one, it can cause three problems for you.

First, it is a criminal offence and the fine can be unlimited. Second, it can cause major issues when trying to obtain mortgage finance. Third, the tenants can claim back the rent they have paid causing further financial pain.

A scenario we come across often is when a landlord has a specialist property (HMO) that not only requires a selective, additional, or mandatory licence but is also situated within an Article 4 area.

This means that the landlord needs to have the correct licencing, depending on the local authority’s regulations, but will also be required to have C4 planning in place to ensure they are meeting all the necessary requirements.

Unfortunate as it sounds, local authority planning, and licensing departments rarely talk to each other so your client will be responsible for making sure they get the correct sign-offs. Without the correct licensing and planning, the landlord may well struggle to refinance, with Keystone or indeed other lenders.

The issue is there is no guarantee an application will be approved or, even if it is, you cannot be sure it will be granted in the timeframe you need.

While it is not technically part of a broker’s job to make borrowers aware of the various licences needed to operate as a landlord, it’s worth having these conversations with your clients early on.

That is the sort of thing that fosters, develops, and maintains long-term relationships with clients which is never a bad thing and Keystone are here to help you and your clients.