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What is selective licensing?

The Nottingham City Council are launching a new licensing scheme on 1st August 2018 labelled Selective Licensing.

It is estimated that over 90% of Tenants in Nottingham will be affected. This is a big blow for tenants whose house may already be kept to a high standard as they may now be hit with a rent increase. If tenants cannot afford the rent increase, it may also lead to a rise in homelessness. It’s estimated to cover over 30,000 privately rented homes.

This website breaks down the facts and truth regarding the scheme and informs you of how you may be affected.

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Council’s view – Why the scheme is needed

The Council believe the scheme is needed to ‘raise the standards in the privately rented sector, and to ensure that all tenants living in them are able to enjoy a safe, comfortable and well managed home.’ They state it is estimated that “21% of Nottingham’s private rented properties are likely to have ‘Category 1’ hazards including exposed wiring, dangerous boilers, cold bedrooms, leaking roofs, mould or vermin infestation.”

Source: Nottingham City Council

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Landlord’s view – Why the scheme is not needed

Landlord’s argue that by the Council’s own admission, it is estimated that 21% of properties are in a poor condition and therefore 79% do not have a problem. They argue that the scheme unfairly penalises the GOOD landlords and GOOD tenants for doing absolutely nothing wrong. An alternative scheme such as that proposed by Citizen’s advice could have been the better option. “Landlords who receive the most complaints should pay more towards the running of an ombudsman, keeping the costs low for the majority.”

Source: 24 Housing

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Landlord’s view – how much will a license cost?

 

Landlord’s argue that the figure of £1.85 a week is impossible as there are a series of associated costs to be made before getting the discounted rate. Landlords must also pay this cost UP-FRONT in two separate payments. If a landlord had for example 50 houses, they will have to pay up £39,000 (or £24000 with accreditation) in one go before adding on any associated costs.

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Landlord’s view – Associated Costs

Landlord’s disagree with some of the criteria required. The full requirements are listed below based on real quotes & prices. Note: Not all of the below are additional costs due to Selective Licensing but are included to illustrate the full costs involved for a typical Landlord per property.

  • Plans of each floor of the property (update – this has now been removed following negative feedback given to the Council)
  • Landlord insurance – up to £200 per year
  • A Criminal Record (CRB) Check – £26
  • An electrical safety certificate – £140 – £160
  • A valid gas safety certificate – £80 – £100
  • An EPC (Energy Performance Certificate) – £80 – £100
  • A PAT test for portable appliances left in the property – £1 – £2 per item with minimum invoice values e.g. £50
  • Evidence of relevant training (e.g. Landlord training)

In total, the associated costs per house cost between £500 – £600. In addition to this, Landlord’s argue further work may be required to bring the house up to ‘new build’ standards despite this not being a requirement in Council houses or being present in a large number of houses in the UK. This could include e.g.

  • Latest fuse boards at £350 – £400 (for the electrical safety certificate)
  • Fire escape windows (if needed) at £400 – £500
  • Wired smoke alarms £160 – £200
  • IPC lighting in bathroom £40 – £50

The result of additional works could cost up to a further £1000.

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Council’s view – Associated Costs

The Council states a series of documents (or improvements) are required in order to apply for a licence & accreditation. This includes:

  • Plans of each floor of the property (update – this has now been removed following negative feedback given to the Council)
  • Landlord insurance
  • A Criminal Record (CRB) Check
  • An electrical safety certificate
  • A valid gas safety certificate
  • An EPC (Energy Performance Certificate)
  • A PAT test for portable appliances left in the property
  • Evidence of relevant training (e.g. Landlord training)

Source: Nottingham City Council

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The total costs involved…

Taking into consideration the upfront & associated costs, an illustration for a Landlord due to Selective Licensing is below.

Application cost: £780 (or £460 with accreditation)
Associated costs: £500 – £600
Home Improvements: up to £1000

Total:
£2000+ per house.

For a landlord with for example 50 houses, this could approximately cost them a whopping £100,000 up front. Is this fair? Here is the Council’s view on it:

“The Council believes that the fee should not lead to landlords increasing rent and that the vast majority of landlords will absorb the licence fee and the cost of any necessary improvements to properties as part of the day-to-day costs of running of their business. Income from the licence fees goes towards the cost of setting up, operating and delivering the schemes. The Council is not permitted to make a profit from the scheme.” – Source: Nottingham City Council

Unsurprisingly, landlords disagree with this view. A landlord with a small number of properties may well absorb the cost, however those with large bills will be looking to recoup as much as possible, as any company or organisation would (e.g. Nottingham City Transport increasing ticket prices when service costs increased). A typical landlord may seek to increase your rent in order to recoup some of the costs, whilst still accepting a small loss.

We continue analyse the facts and implications of the scheme below…

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Council’s view – Inspections

The Council state it is anticipated that “10% of accredited properties will be inspected and 50% of non accredited properties will be inspected. This is likely to mean that not all landlords will receive an inspection.” Furthermore, they have imposed a series of Licence conditions that the Landlord must meet, including inspecting each property at least once every six months and maintain records of the inspection.

Source: Nottingham City Council

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Landlord’s view – Inspections

Landlord’s argue that It costs the Council only £77 to inspect a house as discovered by a Freedom of Information request, whilst documents show they intend to only inspect 10% of accredited and 50% of non accredited properties. This gives them a surplus £703 (or £403 with accreditation) to deliver the scheme. A typical landlord therefore may question why are the licenses so expensive, especially since not all properties are being inspected? Furthermore, they argue that whilst this isn’t a problem for some tenants, others may not want to be regularly inspected by their landlord.

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