Selective Licensing: A reminder for family offices and overseas landlords owning properties private rented sector in England and Wales

By the end of 2025, 21 out of 33 local authorities in London will have selective licensing schemes in place. These were introduced under the Housing Act in 2006 to allow local authorities to require landlords of properties in the private rented sector to obtain a licence to let out their property in certain areas where Councils wanted to improve the condition of properties and have been gradually increasing in popularity across London and nationwide. These are not required where a property is a House in Multiple Occupation (“HMO”) as HMOs are subject to separate licensing requirements.

There is no official central database of selective licensing schemes so landlords and their agents must contact the relevant local authority or refer to their website to confirm whether a scheme is in existence in that area and the exact location the scheme covers.  In some cases, it is certain named wards within an area and in others it is certain streets, so there is not a one-size fits all approach to implementation of selective licensing schemes. This can pose a challenge to landlords who have a portfolio of properties across a number of areas or to overseas family and private offices who might own one or more rented properties in England and Wales to clarify whether they must hold a licence for one or more of their properties.  Applications for a selective licence are made to the relevant local authority in most cases via a portal on their website and a fee must be paid to obtain a selective licence, which varies from area to area, subject to exemptions or discounts in certain limited cases.

The consequences of failing to hold a selective licence are significant.  Firstly, a landlord cannot serve a valid Section 21 Notice giving at least two months’ notice to terminate an Assured Shorthold Tenancy until such time as a licence has been obtained (where required). The Renters’ Rights Bill, which is concluding its passage through Parliament and is likely to receive Royal Assent by the end of 2025, will abolish Section 21 Notices and Assured Shorthold Tenancies. However, it is anticipated that the requirement to hold a valid selective licence (where the property is located in an area where a scheme operates) will become connected to a landlord’s application for an active listing on the new Private Rented Sector Database. Further details are awaited from the Government on the precise requirements which may be contained in secondary legislation).  

Another sanction for failing to hold a selective licence is that a tenant or the local authority can apply to the First-Tier Tribunal (Property) Chamber for a rent repayment order under the Housing and Planning Act 2016. Where granted, this requires a landlord to repay rent to the tenant or housing benefit to the local authority up to a maximum of 12 months rent. This is due to be increased under the Renters’ Rights Bill to up to 24 months’ rent and the list of offences for which a rent repayment order may be sought is due to be extended.

Finally, an offence is committed for failing to hold a selective licence where one is required, or failing to comply with any condition of the licence and fines can be imposed by the enforcement authority upon a landlord who does not hold a selective licence.

Interestingly, when a property is sold, a selective licence cannot be transferred to the new owner and a fresh application for a licence must be made as soon as possible by the new owner.  It is important for all landlords whether based in England or Wales or overseas to familiarise themselves with the requirements of selective licensing schemes and to understand whether their properties are situated in areas where a selective licence is required.  If so, they must obtain a licence from the relevant local authority to avoid the sanctions for failing to hold a valid licence.

Please contact David Haines, Laura Bushaway or your usual Charles Russell Speechlys contact if you have any queries.