Landlord licensing is now a cost to underwrite, not a footnote, for anyone buying tenanted stock in a licensing area. In July 2026 the High Court again dismissed a judicial review of Thurrock Council’s selective licensing scheme and ordered the claimant to pay £7,500 in costs, and two more councils are consulting on fees at or near £1,000 per property.
In short
- The High Court dismissed a legal challenge to Thurrock’s selective licensing scheme and ordered the claimant to pay £7,500 in costs.
- Since 23 December 2024, councils in England no longer need central sign-off before implementing a selective licensing scheme of any size.
- Licensing fees are reaching £1,000 per property: Thurrock charges £1,034.90, Preston is consulting at £1,050 and Liverpool has proposed fees of up to £995, up from £704.
- Operating without a required licence risks a civil penalty of up to £40,000 per offence, raised from £30,000 for offences from 1 May 2026.
- Councils are also reaching for Article 4 directions to remove permitted development rights for small HMO conversions.
At about £1,000 for a licence of up to five years, the fee works out at roughly £200 a unit a year. It is charged per property, so on a block or a portfolio the total adds up quickly.
Why licensing schemes are spreading
Selective licensing sits in Part 3 of the Housing Act 2004. It lets a council require a licence for privately rented homes in a designated area where it can evidence problems such as low housing demand, anti-social behaviour, poor housing conditions, high levels of migration, deprivation or crime.
The change that matters is procedural. Since 23 December 2024, councils in England no longer need confirmation from the Secretary of State before implementing a selective licensing scheme of any size, per the government’s guidance for local authorities.
Before that, larger designations needed central sign-off, which acted as a brake. Councils still have to meet the statutory tests in Part 3, and are expected under government guidance to consult for at least ten weeks, but the decision now sits locally.
That is the structural reason the volume of schemes and consultations has picked up through 2026.
The High Court dismissed a challenge to Thurrock’s scheme
Thurrock Council designated 16 of its 20 wards for selective licensing, with the scheme becoming enforceable from January 2026. A group of landlords and letting agents brought a judicial review.
A written High Court decision on 13 March 2026 dismissed the claim. The claimant sought an oral hearing to challenge that decision, and in July 2026 the court dismissed the claim again. The council confirms the court ordered the claimant to pay it £7,500 in costs and that it is now implementing the scheme.
Thurrock publishes the standard licence at £1,034.90 for up to five years, with a higher rate of £1,767.40 for landlords who do not apply in time.
The point for investors is not the specific borough. It is that a judicial review did not stop a designation that was already in place. Assuming a legal challenge will unwind a scheme is not a plan. A narrower kind of challenge has worked in at least one case: LandlordZONE reported on 25 September 2026 that Great Yarmouth Council had cut its selective licensing conditions back, according to the landlords’ association that challenged them, to almost entirely the mandatory conditions plus a limited duty to notify changes and a case-by-case anti-social behaviour condition, after that association cited the Upper Tribunal’s ruling on Portsmouth Council’s HMO licence conditions; the council says its move is in common with all local authorities following that case. Great Yarmouth Council says the ruling does not affect its powers to inspect licensed properties and that its inspection programme will continue as planned.
Selective licensing fees are reaching £1,000
Two councils opened fee consultations on 27 July 2026, and both run into October.
Preston City Council is consulting until 11 October 2026 on selective licensing across three wards at a proposed £1,050 per property for up to five years, split into £470 on application and £580 once the council is minded to grant the licence. The council is not proposing instalments, though it has asked landlords for views on whether a discount should be offered for good practice.
Liverpool City Council is running a ten week consultation, closing on 5 October 2026, on what replaces its current scheme when that ends in March 2027. Three options are on the table:
- A citywide scheme covering all 64 wards.
- A scheme covering the 29 most deprived wards.
- One covering 26 wards with concentrations of private renting and evidence of disrepair.
The proposed standard fee is up to £995, against £704 today, across 12 different fee levels.
| Council | Proposed fee | Current fee |
|---|---|---|
| Preston City Council, 3 wards | £1,050 | N/A |
| Liverpool City Council, up to 64 wards | £995 | £704 |
Both of those are consultations rather than settled schemes, and the ward coverage could still change. Medway Council has already gone further: it approved new selective and additional licensing schemes on 22 September 2026, due to go live on 4 January 2027, with headline fees, before discounts, of £840 per property for a five year selective licence and £1,600 for a five year additional HMO licence, and with the selective scheme covering seven wards, an estimated 52% of its private rented sector. The direction of travel on price is not in doubt though, and a licence is charged per property, not per portfolio.
Article 4 spreads to HMOs
Separately, councils are reaching for planning powers to control HMO growth. Converting a family house into a small HMO for three to six sharers is normally permitted development. An Article 4 direction removes that right and forces a full planning application. Larger HMOs already need planning consent in their own right.
St Helens Borough Council’s cabinet authorised a borough-wide Article 4 direction on small HMO conversions on 15 July 2026. The council’s background paper sets out a six week consultation, and because the direction is made without immediate effect it needs at least twelve months’ notice before it takes effect.
Reigate and Banstead Borough Council has set a consultation period of 30 July to 24 September 2026, and if the council confirms the direction it comes into force on 30 July 2027.
Neither direction is in force, and neither can take effect before the second half of 2027.
Our guide to Article 4 directions and HMO investing sets out how to check whether a direction is in force, proposed, or absent before you commit to a conversion play.
What this means for property investors
Underwrite the licence as a real cost, and assume it is still rising. Keep the licence file alongside the paperwork the new PRS Database will ask for, since the register asks whether a property needs an HMO, additional or selective licence and for the licence number where there is one. Preston is consulting at £1,050. At roughly £1,000 per property for a licence of up to five years, a ten unit block carries a licensing bill of around £10,000 per term, or about £2,000 a year, before a single repair is done. That belongs in the net yield calculation, not in the notes at the back.
Check designation status at offer stage, not at legals. Three questions to the council settle it: is there a live scheme covering this address, is one out for consultation, and is there an Article 4 direction on HMO conversions. Consultation stage and in force are very different things, and the gap between them is worth real money on price.
Price the enforcement risk properly. Operating without a required licence exposes an owner to a civil penalty of up to £40,000 per offence committed on or after 1 May 2026, raised from £30,000 by the Financial Penalties (Housing Offences and Breach of Banning Orders) Regulations 2026, an unlimited fine on prosecution, and rent repayment orders to tenants.
Be aware that some council websites still quote the old £30,000 ceiling. On acquisition, confirm every unit that needs a licence holds one, and that licences are reapplied for on completion rather than assumed to transfer.
Watch the exit as well as the entry. A borough that adds licensing and an Article 4 direction narrows the future buyer pool, because the conversion play disappears. That cuts both ways. Inside an Article 4 area new small HMO supply is capped, which supports the value of lawful existing HMOs.
This is general information, not advice on your position, so take independent advice before acting.
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