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When may a council introduce an SLS?

An SLS can only be introduced if a council (ie a local authority) is satisfied that a high proportion (ie more than 19%) of properties in the relevant area are let out within the private rental sector under either assured tenancies or under licences. Any decision to implement an SLS should be consistent with the council's housing strategy and part of a coordinated approach for dealing with homelessness, empty homes, and anti-social behaviour. The council must also be satisfied that there are no alternative courses of action that might provide an effective remedy to these issues and that the introduction of an SLS will assist in dealing with the problems.

Additionally, councils can only implement an SLS if the relevant area meets at least one of the following requirements:

  • the area has low housing demand

  • the area is experiencing a significant and persistent problem of anti-social behaviour 

  • the area is experiencing a high level of migration (ie movement of people within the UK or from overseas)

  • the area has a significant number of privately-rented properties that are in a poor condition 

  • the area has high level of crime

  • the area has high levels of deprivation

Local authorities often need the Secretary of State’s approval to create an SLS, but they can designate an area for selective licensing without the Secretary of State's approval in certain circumstances. Specifically, when:

  • the local authority has consulted everyone affected for a minimum of 10 weeks

  • the SLS cover less than 20 of the authority's area or affects less than 20% of private rented homes in the area

Low housing demand

When deciding if an area is suffering from low housing demand, a local authority must take into account factors including:

  • the value of the properties in the area in comparison with similar properties in comparable areas

  • the turnover of occupiers (eg tenants) in the area

  • the number of properties available and the length of time they are unoccupied for 

Fit and proper persons

When operating an SLS and granting licences, local authorities must also assess landlords and those involved in managing their properties for:

  • sufficient level of management competence

  • being 'fit and proper' for their responsibilities, and

  • the suitability of their management structures and funding arrangements

When determining whether a landlord is ‘fit and proper’, local authorities can consider factors such as whether the landlord has been involved in any fraud, practised unlawful discrimination, broken any housing laws or breached any relevant codes of practice.

What are the exceptions?

Selective licensing only applies in designated areas. Where it applies, all privately rented accommodation in that area has to be licensed by the local authority. Exceptions exist if the:

  • property is an HMO that already requires a licence under a mandatory HMO or additional licensing scheme 

  • tenancy or licence has been granted by a registered social landlord

  • property is subject to an Interim Management Order (IMO) or a Financial Management Order (ie the council have taken over the management of the property) 

  • property is covered by a temporary exemption notice

  • property is occupied under an exempt tenancy or licence (eg holiday homes)

Can a licence be revoked?

Licences may be revoked if:

  • there has been a serious breach or repeated breaches of a condition of the licence

  • the licence holder is no longer a fit and proper person

  • the property becomes structurally defective

What are the consequences of non-compliance?

Where a property should be licensed but isn’t, or where a licence has been obtained but its conditions have been breached, a range of sanctions may be applied. While these may vary between local authorities, they generally include:

  • a fine on conviction

  • a civil penalty of up to £30,000 imposed by the local authority instead of prosecution

  • a Rent Repayment Order (RRO) being obtained in respect of the period the property was rented out whilst unlicensed

  • the landlord being subject to a banning order

  • the landlord being prevented from serving a Section 21 notice during the unlicensed period

Note that tenancies granted by landlords who have committed offences regarding the licensing of a property are lawful tenancies. This means that the tenant will be required to pay the rent as agreed in any Tenancy agreement and the landlord must follow correct eviction procedures to bring the tenancy to an end. For more information, read the Governments’ guidance on selective licensing.

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