This article is for general information only and does not constitute legal advice.
Selective licensing is the broadest form of landlord licensing in England. If your property falls within a designated area, you need a licence to rent it out, regardless of whether it is an HMO or a standard single let. Over 60 local authorities operate selective licensing schemes across parts of their area, according to Property Passport. The number grows each year.
Fees range from £350 to £900 for a five-year licence. Not knowing about the scheme is not a defence.
How selective licensing works
Under Section 80 of the Housing Act 2004, local authorities can designate areas where all privately rented properties must be licensed. The designation must be based on at least one of the following conditions in the area: low housing demand, significant and persistent anti-social behaviour, poor housing conditions, high levels of migration, high levels of deprivation, or high levels of crime.
A designation covers a defined geographical area, usually specific wards or neighbourhoods within a borough. Some councils operate borough-wide selective licensing (Newham was the first). Others target pockets where the evidence justifies intervention.
Each scheme requires consultation and formal approval. Schemes covering more than 20% of the council's geographic area or 20% of privately rented properties require Secretary of State confirmation.
Which councils operate schemes?
There is no single national register of selective licensing areas. You have to check with your local authority directly.
As of 2026, notable active schemes include areas within Liverpool, Nottingham, Salford, Waltham Forest, Newham, Brent, Barking and Dagenham, Burnley, Hyndburn, Pendle, and Middlesbrough.
Croydon Council launches a new selective licensing scheme on 1 September 2026 covering selected wards. Hackney has expanded its additional HMO licensing to nine wards from October 2025, with selective licensing in place in parts of the borough.
Before buying an investment property, check the council's website for current and planned licensing designations. Some property data tools (August, Property Passport) provide searchable licensing maps, though coverage is not exhaustive.
What the licence requires
A selective licence imposes conditions on how you manage the property. Standard conditions typically include:
Providing a written tenancy agreement. Obtaining references for tenants. Ensuring the property is in good repair and free of category 1 hazards. Maintaining smoke alarms, carbon monoxide alarms, gas safety certificates, and electrical safety. Dealing with anti-social behaviour by tenants. Allowing the council to inspect the property.
The licence is issued to the person having control of or managing the property. You must pass the fit and proper person test (identical to the HMO licensing test).
Fees
Fees vary by council and are structured to cover the cost of administering and enforcing the scheme:
| Council | Licence fee (5 years) |
|---|---|
| Newham | £500 |
| Liverpool (selective areas) | £450 to £650 |
| Croydon (from September 2026) | To be confirmed |
| Hackney (selective areas) | £400 to £925 |
| Nottingham | £480 to £640 |
Some councils charge a higher fee for late applications. Applying early (before the scheme start date) often qualifies for a reduced fee.
If your property also qualifies as an HMO, you need both a selective licence and an HMO licence. Two fees, two applications, two sets of conditions.
Penalties
Operating a rented property in a selective licensing area without a licence carries the same penalties as unlicensed HMOs:
An unlimited fine on criminal prosecution. A civil penalty of up to £30,000 per offence (rising to £40,000 under the Renters' Rights Act 2025). A rent repayment order of up to 12 months' rent. Inability to use most Section 8 grounds for possession while unlicensed.
The council can also apply for an interim management order, taking control of the property and appointing a manager at your expense.
Checking before you buy
If you are purchasing a BTL property, check these before exchanging contracts:
The local authority's website for current and proposed selective licensing designations. Whether the property sits in an additional HMO licensing area. Whether Article 4 directions apply (relevant if you plan to convert to an HMO). Whether the existing licence (if one exists) can be transferred to you, or whether you need to apply for a new one.
Your conveyancer should raise these as standard enquiries, but many do not unless you ask. Add licensing checks to your due diligence list alongside EPC ratings, flood risk, and planning history.
Impact on yield
A selective licence adds £70 to £180 per year to your costs (£350-900 spread over five years). This is modest compared to the overall running costs of a rental property. The compliance conditions (gas safety, electrical safety, smoke alarms) are obligations you should be meeting anyway.
The bigger concern is the enforcement environment. Councils with active selective licensing schemes tend to be more aggressive in their housing enforcement. Inspections are more common, and penalty notices are issued more readily. If your property has any compliance gaps, a selective licensing area is the worst place to have them.
Sources
- GOV.UK, "Selective licensing in the private rented sector: a guide for local authorities". https://www.gov.uk/government/publications/selective-licensing-in-the-private-rented-sector-a-guide-for-local-authorities [Accessed 6 May 2026]
- Property Passport, "HMO licensing requirements in England 2026". https://www.propertypassport.uk/guides/hmo-licensing-requirements-england-2026 [Accessed 6 May 2026]
- Croydon Council, "Selective licensing scheme 2026". https://www.croydon.gov.uk/housing/landlords/selective-and-additional-hmo-licensing-schemes-2026/selective-licensing-scheme-2026 [Accessed 6 May 2026]