Shock warning that agents could be sued under selective licensing laws

A long-term legal critic of selective licensing is warning that letting agents could be held jointly accountable with the landlords, - and could be sued if there is a failure to secure a licence.

David Kirwan, from Kirwans law firm, says agents could be prosecuted either alongside or instead of landlords for failing to license properties on their books, and warns that a conviction could result in crippling fines and a criminal record.

“Councils such as Liverpool have made it clear that they will go after managing agents that they deem to be flouting the rules and will not hesitate to prosecute where they feel it is appropriate” says Kirwan.

In September 2018, a managing agent was fined almost £4,000 and handed a criminal record under selective licensing laws after pleading guilty to renting out 12 properties without a licence from Liverpool city council.

At that point, the council was reported to have served 1,700 legal notices since its licensing scheme started in April 2015 and was at the time considering almost 1,300 cases for prosecution.

In addition, a Freedom of Information request by the National Landlords Association made earlier this year revealed that Liverpool council was the frontrunner when it came to prosecuting letting agents, with a total of 13 prosecuted in the four-year period between 2014/15 and 2017/18.

By comparison, 53 per cent of the 20 councils questioned had not prosecuted any letting agents, while a further 32 per cent had prosecuted three or fewer.

However Kirwan says Liverpool is not the only council to have pursued letting agents under selective licensing rules; in May this year, a landlord and their managing agent were ordered by Canterbury magistrates to pay a fine of £1,000, in addition to costs of £120 and a victim surcharge of £100 for renting out flats without a selective licence from Thanet district council.

“Section 88 of the Housing Act 2004 states that the proposed licence holder is ‘out of all the persons reasonably available to be licence holder in respect of the house, the most appropriate person to be licence holder’. It also states that the proposed manager of the house is either ‘(i) the person having control of the house, or (ii) a person who is an agent or employee of the person having control of the house’” says Kirwan.

“Clearly the legislation anticipates that someone who is managing property, the subject of licensing, can also apply for and be granted a licence instead of the owner. In my opinion, many of the managing agency agreements which are operated by estate agents etc all over the country come within this bracket.

“It is, of course, a matter for the owner of the property who can - and often does – obtain the registration in his own name, particularly in cases where there is only a small portfolio of properties.

“Alternatively, if the property is being managed in every sense of the word by a letting agent, there is nothing to prevent thse owner delegating this function to the managing agent who then applies for the licence. This surely is what an owner/landlord is looking for when he pays his commission to the managing agent?”

Kirwan adds that according to Section 95 of the Housing Act, a person commits an offence “if he is a person having control of or managing a house which is required to be licensed under this part but is so not licensed.”

However, despite the potential for prosecution, Kirwan believes that the defence of ‘reasonable excuse’ can be extended to a managing agent as well as an owner landlord if the former is registered under the Act.

He adds: “Managing agents need to be on their guard and ensure that all properties on their books are covered by the relevant licences to safeguard themselves against legal action, while landlords should check the agreements and terms of business set out in the contracts with their agents.

“However, if the agent has agreed to apply on behalf of the owner of registration then it does not matter if that is not specifically referred to in the agreement.

“It would be better, though, to have such a provision that in the terms of the ‘management’ of the property, the application for and compliance of all the terms and conditions of any subsequent registration licence is included as an agent’s responsibility.”