Landlord guide to Selective and HMO Licensing

It is important for landlords to keep tabs on whether they need a licence to let their property, even if it’s a single let or a small HMO with under 5 sharers.

In this post I explain why it’s important for landlords to understand whether their rental property needs a licence, the different types of licence, and whether the Renters’ Rights Act will change the licensing regime.

I also explain the new General Approval for local authorities to introduce new licensing schems.

What are rental property licences in England?

The Housing Act 2004 introduced the ability for local authority to require landlords to obtain different sorts of licences in their area.

There are two types of licence. The first category is for HMOs. Under Section 254 Housing Act 2004, HMOs with 5 or more sharers from more than one household must have a mandatory licence. A local authority can extend licensing to smaller HMOs with 3 or more sharers by introducing “additional licensing”. For more discussion of HMO licensing, including an explanation of  Section 257 HMOs, see Landlord guide to HMO properties.

Licences are usually for five years, and councils provide discounts if the landlord is accredited by the NRLA or other accreditation bodies.

Why is it important to know if your rental property needs a licence?

Why is this important? Not only is letting an unlicensed property is an offence, but prosecution may result in an unlimited fine and a banning order for the landlord. Also, tenants can claim up to one year’s rent by applying for a Rent Repayment Order for up to one year’s rent. This will be going up to two years’ rent when the Renters’ Rights Act comes into force.

Landlords also can’t serve a valid Section 21 eviction notice if their property should have a licence but does not have one.

Given the large penalties for letting a property without a licence, landlords must check whether they need a licence before letting a property, and also each year. Landlords should check this themselves, even if they use agents, as sometimes agents don’t inform landlords when they need a licence.

With the new “General Approval”, it is likely that even more licensing schemes will be set up in 2025.

How can I find out if my rental property needs a licence?

Unfortunately there’s not a single website to look up the licensing requirements for a property by the postcode as licensing is decentralised, and managed by local authorities. This means you’ll first need to find the council for your property. If you don’t already know it, you can check which council your property is in here.

Here is the webpage licensing in London boroughs, as an example.

What are the different landlord licences in England?

Selective licensing for single lets

Although as a general rule private landlords don’t need a licence to let a property on a single let basis in England, Part 3 of the Housing Act 2004 gives local authorities to require private landlords in certain areas to apply for a selective licence.

Consequently, it’s important to check with your local council whether your property is in a designated selective licensing area before you let the property.

A selective licence is not needed if the property is already a licensed HMO or a holiday let.

The Labour government have made it easier for local authorities to set up selective licensing as from 23 December 2024, a new General Approval comes into force whereby they don’t need to obtain confirmation from the Secretary of State before implementing a selective or additional licensing scheme of any size. They must, however, still satisfy all statutory requirements in Part 3 of the Housing Act 2004, and consult for a period of at least 10 weeks on the proposed designation.

MHCLG requests that they include the mayor (where applicable) in their consultations, provide MHCLG with data on their selective licensing scheme and publish the outcome of any selective licensing reviews undertaken under section 84 of the Act.

Mandatory licensing for large HMOs

All large HMOs must have a mandatory licence. These are properties with 5 or more renters from at least 2 households, sharing basic amenities.

If a property needs licensing, the landlord must submit a licence application to the local council using their prescribed application process. The process isn’t centralised and the requirements differ between councils. 

The requirement to have a mandatory licence is separate to whether planning permission is needed under Article 4.

>> Related Post: Landlord guide to HMOs

Additional licensing for small HMOs

Local authorities have the authority under the Housing Act 2004 to require small HMOs (under 5 sharers) not covered by mandatory licensing to be licensed. They can only do this if they believe that a significant proportion of the HMOs in an area or even the whole district are not being managed effectively, and that this causes/ is likely to cause problems for local residents or the general public.

HMO landlords of properties with under 5 sharers, ie “small HMOs”,  should check with their council to see if their property needs an additional licence.

The consultation process for new licensing schemes.

Before local authorities can introduce a new selective or additional licensing scheme, they must take ‘reasonable steps’ to consult with any residents, landlords, tenants, and any other person likely to be affected by the licensing designation for not less than 10 weeks, such as letting agents and local businesses.

The requirements for selective licensing schemes are set out in Part 3 of the Housing Act 2004 and include low housing demand (or is likely to become such an area), a significant and persistent problem caused by anti-social behaviour, poor housing conditions, high levels of migration, high level of deprivation, or high levels of crime.

For additional licensing (HMOs), Section 56 of the Housing Act 2004 requires the local authority to “consider a significant proportion of the HMOs of that description in the area are being managed sufficiently ineffectively as to give rise, or to be likely to give rise, to one or more particular problems either for those occupying the HMOs or for members of the public”.

Local housing authorities must ensure that the consultation is “widely publicised using various channels of communication”.

From 23 December 2024, local authorities have a “General Approval” from the Secretary of State to implement selective or additional licensing. This means they no longer need to apply to the Secretary of State for approval.

The consultation process is important and the local authority must “consider any representations made in accordance with the consultation and not withdrawn”.

Landlords should participate in consultations to make sure their views will be “considered”.

How much do licences cost?

It is up to the local authority to decide how much to charge, and they structure the payments into Part A (due when the application is made) and Part B (due before the licence is issued.

Taking the London Borough of Haringey as an example, the total cost of an HMO licence is £1,295 for up to 5 units: Part A is £588.50 and Part B is £706.50. An additional £50 is payable for each additional unit over 5 units.

For a selective licence in Haringey, the total cost is £642 for the 5-year duration of the scheme. Part A is £374.50 and Part B is £267.50.

Discounts are available. For instance, accredited members of the NRLA or the London Landlord Accreditation Scheme receive a discount of £50 from Part B. Properties with an EPC rating of C or higher have a discount of £50.

What documents and information do local authorities ask for?

Again, it varies from council to council.

Taking the London Borough of Tower Hamlets as an example, they require the following documentation for a selective licensing application:

• Gas safety certificate
• Fire safety alarm system inspection and servicing report
• Electrical Installation Conditions Report (EICR)
• Portable Appliance Testing (PAT) certificate
• Floor plans of the property showing the layout, rooms, measurements and fire safety precautions
• Tenancy Agreements

Landlords also need to provide the contact details, including full name, telephone number, postal and email address of the following people/organisations:

• Proposed licence holder
• Freeholder (if relevant)
• Leaseholder (if relevant)
• Managers
• Rent/collector receivers
• Mortgage companies
• Person responsible for repairs

Will selective licensing be abolished when the Renters’ Rights Act comes into force?

No. The government have made it clear that the new Landlord Database will be in addition to any licensing by local authorities.

Additionally, the General Approval granted from 23 December 2024 makes it easier for local authorities to introduce both selective and additional licensing.