A study by insurer Direct Line for Business has shown the significant variance in licensing charges between local authorities, with the most expensive licence costing 21 times more than the cheapest.

The research found that the average landlord licence across the UK costs £591. However, there is a wide divergence in costs. For example, the cost of a licence for a first property in Liverpool totals £412, whereas in Salford just 30 miles away, it is 51% higher at £625.

In Scotland and Wales, landlord licence schemes are mandatory. However, in England only 16% of local authorities have a scheme in place; it is estimated that 460,000 rental properties in England are now covered by a landlord licensing scheme.

Licencing schemes allow councils to establish if a landlord is ‘fit and proper’ and may include regulations concerning the management, upkeep and safety measures.

Landlords who rent out a house for multiple occupation (known as HMO), shared by at least three people who are not from the same family, require a mandatory licence.

In addition, a growing number of councils are introducing their own ‘additional’ and ‘selective’ schemes to raise revenue.

Increase in costs

Direct Line for Business identified a dramatic increase in the costs charged by local authorities for landlord licences over the last few years. For its additional licensing scheme, the cost of a licence in the London Borough of Newham increased by 150% over a three-year period, from £500 in 2014-15 to £1,250 in 2017-18.

Since 2015 there has been a 61% increase in landlord licensing offences. For example, where no licence is in place or the terms have been breached by allowing more people to occupy a property than is permitted.

Failure to comply with a scheme is a criminal offence and can result in prosecution and a civil penalty of up to £30,000. However, the average fine for a licensing offence in 2017 totalled £926.

Matt Boatwright, head of Direct Line for Business, said: “Our analysis shows landlord licensing is truly a postcode lottery, with a phenomenal range of costs for those that do have to sign up for a scheme. Anyone planning on becoming a landlord, or who already has a property portfolio, should contact their local authority to see if they have a scheme in place.”

Quality not assured

David Smith, policy director for trade body Residential Landlords Association (RLA), noted that landlord licences fail to provide any assurance about the quality of accommodation – regardless of how much they cost.

“The RLA’s own analysis shows that there is no clear link between a council having a licensing scheme in place and levels of enforcement against criminal landlords,” Smith explained.

“The fundamental problem with all schemes is that it is only the good landlords who come forward to be licensed. They completely fail to identify the crooks,” he added.

Smith believes that councils need to be more creative in how they identify landlords by utilising their data to better effect, including council tax returns and information from deposit schemes.

How licenses work

Here are the three types of licensing for private rented properties:

• Mandatory licensing – this applies to HMOs with five occupants, comprising of two or more family units. Legally, all properties that meet these criteria must be licensed.
• Additional licensing – where a local council decides to expand the regulation of HMOs to include smaller HMOs, where some properties are converted into flats. Most seek to license all HMOs in their area.
• Selective licensing – this covers all private rented properties in a set area. It is designed to tackle particular issues in a small area, the decision by some councils to use selective licensing to cover whole boroughs has seen the government limit its powers.