Landlord Licensing – Everything BTL Investors Need to Know as New Rules Emerge

Landlord licensing likely effects more property investors than may be expected. Landlords have faced increased scrutiny in recent years, and have been targeted for reform and taxation[1].

This can be best demonstrated via the Renters’ Rights Act. When it launches on May 1, 2026[2], it will usher in tough new rules for landlords. It will also introduce a Private Landlord Ombudsman and a private rented sector database, which will enforce rules and hold landlords to account.

With what’s on the way, BTL investors will want to make sure they stay on the right side of the rules, and ensure their landlord licensing affairs are in order.

→ If you’re reviewing your landlord obligations, don’t miss our Complete Guide to Buy-to-Let mortgages to make sure your investment strategy stays on track.

What are the current landlord licensing rules?

Licensing rules can change based on where one is based, so it’s understandable that some landlords may be unsure of where they stand. Currently, there is one main circumstance in which landlord licensing rules will definitely apply without exception.

Large HMOs, defined as those with at least five tenants living in them, forming more than one household with communal shared spaces, must be licensed by the local council[3]. Although, local authorities have discretionary powers to impose landlord licensing rules on “regular” HMOs (with three or four tenants), and so owners will need to check in with their councils to see if they’re affected.

Indeed, there is a precedent for this spread across the entire BTL investment market.

Selective licensing

Within sections 79, 80, and 81 of the Housing Act 2004, it is stipulated that local housing authority areas can impose a scheme of selective licensing on private landlords[4]. Selective landlord licensing rules allow councils to make it compulsory for every private rented property in a specified area to have a licence.

The specifics may vary from place to place, but where these licenses are required, councils can check whether a landlord is a “fit and property person”, and lay down strict requirements on the management of the property.

Under what circumstances would a council introduce or utilise selective licensing?

According to government guidance[5], a selective licensing designation may be made if the area to which it relates satisfies one or more of the following conditions:

• low housing demand (or is likely to become such an area)
• a significant and persistent problem caused by anti-social behaviour
• poor housing conditions
• high levels of migration
• high level of deprivation
• high levels of crime

Where selective licensing is in place, the schemes run for five years. To illustrate, landlord licenses were mandatory in Hammersmith and Fulham between 2017 and 2022, effecting every rented property in 128 streets.

Another scheme is running now in the area and will last until 2027, but it only applies to 24 streets. This illustrates why landlords need to check in regularly with their local authorities – sometimes it’s unclear if they will, or will not be affected[6].

How many councils have selective licensing rules in place?

While there is no official list in place, it is possible to get a rough idea of how commonplace selective licensing is. A Freedom of Information request by Direct Line found that the number of selective licenses issued by councils increased by 9.3% between 2022 and 2024[7].

Although, it should be noted that out of 317 councils contacted, 245 responded to Direct Line’s FOI request, with only 47 confirming they selective licensing schemes in place.

Still, BTL investors should not chance it or test their luck when it comes to landlord licensing. If a property does not have the correct licence, the landlord could face unlimited fines, or even a prosecution[8]. Given that even the Chancellor of the Exchequer has been caught out by these rules, the average landlord could be at risk of underestimating the risks.

Latest developments

In fact, 2026 may be the year of “licensing creep[9]”. According to LandlordZone, councils are quietly expanding selective licensing schemes, aided by a recent regulatory tweak. In late 2024, the requirement for councils to obtain prior Secretary of State approval for selective licensing schemes of any size was removed. This change made it easier for councils to introduce or expand schemes quickly.

Under the relaxed rules, Manchester City Council. Westminster City Council, Reading Borough Council, and Barking & Dagenham and Bexley expanded or launched their landlord licensing schemes, effecting thousands of homes in the process.

Moreover, landlord licensing scheme introductions hit a record high in 2025, according to analysis from Kamma[10]. Nearly 50 new licensing areas were launched last year, with London alone reportedly being a “minefield” for landlords. In the capital, over £13m in licencing offence fines were issued last year.

Always keep the Renters’ Right Act in mind

Also, landlords need to be extra careful going forward, given how easy it’s becoming to identify and report poor management. As part of the Renters’ Rights Act, a database of PRS properties is expected to be set up that will collate key information for landlords, tenants, and councils[11].

This database will inform tenant choices when entering new tenancies; help landlords understand their obligations and demonstrate compliance; and will support councils in targeting enforcement.

What’s more, new investigatory powers were given to local councils in 2025 that provides them with a stronger ability to inspect properties, demand documents, and access third-party data to crack down on rogue landlords and enforce housing standards more effectively.

Evidently, BTL investors must keep on top of their landlord licensing obligations now more than ever. Should they need help tidying up their portfolios to figure out exactly where they stand, Market Financial Solutions is there to offer tailored support.