Councils cash in on selective licensing schemes – special report

Despite councils charging landlords hundreds of pounds for selective licensing schemes, the government claims councils should not profit from licensing.

In an investigative report by Property118, we contacted numerous councils and the government to ask why selective licensing schemes are so expensive compared to places like Jersey, where they cost £60 and are valid for two years.

We also investigated why the government is introducing a Private Rented Sector Database under the Renters’ Rights Act when selective licensing is already in place.

Licensing schemes are designed and determined locally

When contacted by Property118, a spokesperson for the Ministry of Housing, Communities and Local Government told us it is up to councils to decide the fees.

A spokesperson said: “Licensing schemes are designed and determined locally, and local authorities have the discretion to charge fees which cover the cost of running these schemes. They are not expected to profit from licensing.

“The rate at which fees are set will be based on a number of factors such as the set-up costs of the scheme, the cost of assessing applications and issuing licences, and the cost of inspecting properties where necessary.

“We would expect local authorities to make details of these fees, along with the rationale behind their determination, transparent and readily accessible.”

Phil Turtle, licensing expert, at Landlord Licensing & Defence, says the selective licensing system is a mess and even points out that Chancellor Rachel Reeves broke the rules by renting out her family home without a selective licence.

He said: “There’s the rub, from the government, “We leave it to individual councils” that’s why there are hundreds of different licensing schemes, the thousands told council officers thinking up hundreds of different sets of rules that nobody understands (especially our glorious Chancellor it seems.”

One of the most expensive licensing schemes in the country includes Leicester, costing £1,290 per property.

As previously reported on Property118, Leicester council faced a legal challenge from leading letting agents Martin & Co Leicester and supported by JMP Solicitors.

The letting agents say the extortionate fee was causing “significant financial hardship for responsible landlords.

“In many cases, landlords simply cannot absorb these costs, meaning they are being forced to pass them onto tenants through higher rents.”

When contacted by Property118 about the selective licensing scheme, the council declined to comment.

Hefty fines for landlords

Many councils across England charge hundreds of pounds for a licence, with hefty fines for those who fail to obtain one.

Lambeth Council, for example, has warned landlords that they must pay £923 for a selective licence or face a fine of up to £30,000 if they fail to licence their property.

According to Lambeth council, the licence fee of £923 will be used to cover the cost of administering the licence over a five-year period, and managing and enforcing the licensing regime.

However, in places like Jersey, licensing fees only cost £60 for two years and have seen positive results with the scheme’s first year, an impressive 18,044 properties, over 87%, were licensed, adding more than 18,000 homes to the system in record time.

Deputy Steve Luce, minister for the environment for Jersey’s state assembly,  hailed the uptake as having “set a strong foundation for the future” and credited the scheme’s simplicity and affordability for its success.

Mr Turtle points to Jersey as proof that comprehensive regulation doesn’t require exorbitant fees or bureaucratic overload.

He explains: “If Jersey can license all rental properties for just £60 every two years and ensure they’re safe and compliant, why does England need a landlord database with its own fee, an ombudsman service with another fee and hundreds of council selective licensing schemes on top?”

Selective licensing and the Private Rented Sector Database have different purposes

Under the Renters’ Rights Act, all landlords will need to sign up for the database, which will include information about their properties that tenants can access

If a landlord lets or advertises a property without it first being registered on the database, they can be issued with a civil penalty of up to £7,000 or a £40,000 fine if they provide fraudulent information to the database.

However, this begs the question, why is the government introducing a private rented sector database when selective licensing is already in place?

The government told Property118, selective licensing and the Private Rented Sector Database have different purposes and the database is not designed to replace selective licensing.

The spokesperson said: “Unlike the Private Rented Sector Database, selective licensing schemes aim to target specific local issues by enabling more intensive proactive enforcement strategies.

“We will continue to review the use of selective licensing as we develop the Private Rented Sector Database, refining the way the two systems work together.”

Mr Turtle says the government response about the database and selective licensing schemes having a separate purpose only creates more confusion.

He said: “Jersey did one scheme and applied it to all with brilliant results.

“Instead of trying to defend the indefensible and leaving landlords at the mercy of the untrustworthy, incompetent revenue-grabbing councils, the government should just go ask Jersey for lessons in how to do it properly,  then we would only need one combined database/licensing scheme and landlords  wouldn’t need to pay for out-of-control councils and their nonsense.”

Property118 commercial reality check

Selective licensing fees keep rising, yet local authorities face no commercial pressure to price fairly. Regulation has become a municipal revenue stream disguised as “cost recovery.” Professional landlords cannot rely on consistency or common sense from council bureaucracies. The only rational stance is to treat licensing as a compliance cost of doing business and plan accordingly.

What serious landlords should do next

Map exposure across your portfolio. List every property, council area, and renewal date. Anticipate upcoming licensing applications to avoid penalties and preserve cash flow.

Build compliance into your operating model. Standardise your documentation, fire safety checks and EPC records so that licence applications can be completed in hours, not weeks.

Factor licensing into yield analysis. A property that loses 0.5% of gross yield to fees may still perform if financing, tax and maintenance are optimised. Margin discipline matters more than local fairness.

Use corporate structure for efficiency. Group properties into SPVs or LLPs to ringfence liability, manage accounting transparency and simplify evidence for council audits.

Advantage through professionalism

Regulation will always lag behind professional landlords. Those who systemise their processes, document every decision and treat compliance as a cost-controlled routine gain an edge. Tenants trust them, lenders respect them, and councils prefer to work with them. That combination drives sustainable profit long after the latest licensing scheme fades.