L&G’s reported two-year landlord licensing gap: could tenants really reclaim £15m?

The growing regulatory burden on landlords means compliance is becoming increasingly difficult to keep on top of, particularly for smaller landlords managing properties themselves. But not knowing about a licensing requirement or assuming somebody else has dealt with it may not protect you when something goes wrong.
Tenants are entitled to the same protections regardless of whether their landlord owns one property or hundreds. This should be a reminder for landlords to regularly review the rules affecting every property they own and keep evidence that licences, applications and other compliance requirements have actually been dealt with. With regulation continuing to increase, relying on what you understood the rules to be a few years ago is becoming increasingly risky.

If these reports are correct, this is outrageous.

We spend years telling individual landlords that ignorance is no defence, that licensing rules matter and that getting compliance wrong can have serious financial consequences. So a major institutional landlord cannot be held to a softer standard simply because it is big enough to have layers of management companies and processes behind it.

In fact, I would argue the opposite. The bigger the landlord, the higher the expectation should be.

The £15m figure is still hypothetical and should not be presented as an established liability. But the principle here matters enormously. If hundreds of homes were being rented without the required licences, tenants deserve proper answers about how that was allowed to happen and for how long.

You cannot demand professionalism from small landlords while treating institutional failures as administrative oversights.

Same market. Same rules. Same accountability.

Mark Alexander has done the digging on the reported licensing gap, and my honest answer to his question is no. Civil penalties and rent repayment orders are two different pots of money: the penalty is paid to the council, and only a rent repayment can reach a tenant. So £15m isn't a sum tenants could reclaim, and the headline is oversold. My thoughts are on the part nobody has costed. A penalty for breaking the law is not a deductible business cost, so it is paid out of profit that has already been taxed. A landlord with a couple of flats must earn more pre-tax profit than the penalty itself just to pay it, so budget for the profit it takes, not just the cash. The rent side is less settled: rent is taxed as income once, and HMRC has published no clear answer on what happens when that rent is later ordered to be repaid. It's a gap worth closing before a smaller landlord finds it.

The issue here is surely consistency. If licensing requirements are mandatory, they need to be enforced consistently regardless of whether the landlord owns one property or thousands. The £15m figure also needs some care, as civil penalties and rent repayment orders are not the same thing. But if there really was a two-year licensing gap, there are legitimate questions about how it happened and why it wasn’t identified sooner. Regulation loses credibility when people feel the consequences depend on the size of the organisation involved. Same rules, same accountability.

L&G’s potential £15m licensing exposure sends a massive warning shot to institutional BTR investors and large-scale landlords.

The critical lesson here is that regulatory compliance cannot be passively outsourced. Too many institutional funds and large-scale landlords delegate local licensing applications to managing agents and assume the risk is covered. However, upper tribunal precedents like Aytan v Moore establish that appointing an agent does not automatically grant a 'reasonable excuse' defence for late submissions.

For the wider commercial property sector, this highlights a dangerous systemic oversight. Sophisticated corporate ownership does not lower compliance standards; if anything, tribunals expect tighter corporate systems. Ultimately, a landlord can delegate the task, but they can never fully delegate the liability. Directors must actively audit their licensing pipelines rather than simply taking an agent's word that compliance is 'in hand'.