Licences to weed out rogue landlords

If successful, a pilot scheme requiring all private rented homes to be registered could be coming to your town, reports Chiara Cavaglieri

Good tenants put up with rogue landlords and responsible landlords have their hands full with bad tenants, but whichever side you want to take, there are clearly huge problems with many private tenancies. One of the most shocking issues in recent years has been the development of illegal "sheds with beds" with whole families shoved into ramshackle buildings at the bottom of gardens.

The east London borough Newham had one of the largest numbers of these but the council is now hoping to improve the quality of rented accommodation in the area by testing a mandatory landlord licensing scheme. The scheme, which will come into force at the start of 2013 and will cover around 35,000 tenancies, has the backing of housing charity Shelter, and could be a blueprint for councils across the country.

"There are good landlords in Newham and we want to work with them. Unfortunately, there are also some unscrupulous ones – which these proposals would target," says Newham's mayor Sir Robin Wales. "Good landlords have nothing to fear from this scheme. For the bad ones, this a clear message they must clean up their act – or pay the price".

Licences will be required for each property rented out privately and landlords must start applying for these now, currently at a reduced rate of £150, but rising to £500 from 1 January. The licences last for five years, but Newham Council has the power to limit this for properties where they think work needs to be done. So, landlords who fail to meet certain standards may only be granted a short-term licence and will be monitored to ensure they make improvements before they can re-apply. Furthermore, if they fail to apply for a licence they could face fines of up to £20,000 and rent repayment orders of up to 12 months' rental income.

Newham landlords will need to demonstrate they are a "fit and proper" person when applying for a licence, which means having a UK address, having satisfactory financial arrangements in place for each property and undergoing a Criminal Record Bureau (CRB) check.

There will be a number of conditions to meet licensing standards including managing (or at least attempting to manage) tenants' anti-social behaviour, having a proper tenancy agreement in place, compiling an inventory for the property, giving copies of gas safety certificates and electrical installation reports to tenants, ensuring smoke alarms are fitted and protecting bonds and deposits in one of the government's nominated schemes.

Licensing is not a new idea; in 2009 there were proposals for full licensing and a national landlord register but these were abandoned when the coalition came to power. Whether Newham's scheme proves to be a success, or simply a bureaucratic mess, remains to be seen but with more people opting to rent rather than buy, time is of the essence for councils to sort out tenancy problems.

In five years the number of families renting a home from a private landlord has nearly doubled to 1.1 million, according to the English Housing Survey. The East Midlands saw the fastest growth with a 44 per cent rise between 2008 and 2011, while in London one in four households now rent from a landlord. On average, private renters pay 43 per cent of their gross weekly income on rent, compared with the 19 per cent that owners pay for their mortgage.

A £500 bill over five years does seem to be a small price to pay if it does combat dodgy landlords. However, there is concern that this scheme could simply mean more red tape and will not equate to better standards. Tenants could even find that any extra costs are actually passed on to them. Unsurprisingly, this scheme hasn't got the support of the National Landlords Association (NLA) who say that this will only increase the burden on law-abiding landlords and will have no impact on those who already flout it.

Decent landlords will already have all of the licensing conditions in order, but tenants still need to be clear about what their landlord should be doing.

"There are two things that tenants really, really need to know. The first is that their property is safe and the second is that their money is safe," says Nigel Bosworth, a director of specialist lettings company Dwell Residential. "If a tenant has any concerns on these two fronts, and has been unable to get a satisfactory answer from their landlord, then they should contact either their local housing officer or Citizens Advice Bureau, or the deposit protection scheme that has been used."

In terms of maintenance, landlords are responsible for external and structural repairs (which includes the roof, guttering, walls, windows and doors), as well as the plumbing, wiring and central heating. Furniture must be fire-proof, boilers must have an annual check and any wiring and electrical appliances must be safe.

Landords must also present tenants with a certificate showing their deposits are protected in one of the government-approved schemes, Deposit Protection Service (DPS), MyDeposits and Tenancy Deposit Scheme (TDS).

"Paying into one of these protection schemes ensures that deposits are kept safe and returned to tenants at the end of the tenancy as long as there hasn't been a breach of the tenancy agreement," says Ashley Alexander of estate agent review website MeetMyAgent.co.uk. "A court may order landlords to pay compensation to their tenants if deposits are not protected or protected too late. This compensation can be as much as three times the deposit even if the tenancy has ended."

Lettings agents can be another minefield but if they are members of the kitemark scheme SAFEagent, tenants and landlords know that all deposits and rents are covered by Client Money Protection insurance.

Most tenants have an assured shorthold tenancy (AST) which favours landlords by making it fairly easy to evict tenants but there is still protection in place. First of all, landlords must give notice before turning up at the property and are strictly forbidden from switching off utilities, or threatening tenants.

Tenants on a fixed-term contract cannot be evicted before it ends unless they break a term of the agreement (which is why tenants must not withhold rent without taking advice). Tenants on a periodic AST can be evicted at any time and with no reason but must be given two month's written notice.