A controversial licensing scheme is due to come into force tomorrow – just as the council administering it has declared itself effectively bankrupt.

Nottingham council yesterday evening declared itself effectively bankrupt after issuing a section 114 notice – a technical process which means it is not able to deliver a balanced budget for this year, which is a legal requirement.

As a result of the section 114 notice, all new spending – with the exception of protecting vulnerable people and statutory services – must stop immediately.

Therefore there is some doubt over what happens next with a selective licensing system due to begin tomorrow, December 1.

The licensing regime covers an estimated 30,000 privately rented homes across most areas of the city: because of its scale, it required explicit consent from Housing Secretary Michael Gove over the summer.

Nottingham’s Labour council – which has courted controversy on the scale of its landlord licensing in the past – said before yesterday’s news that the new scheme means that tenants will also know what is expected of their landlord in terms of the maintenance, safety and management of their home. 

“It will be introduced into areas of the city where the council has gathered evidence of poorer property conditions” said a statement from the authority. This continued: “Rented properties are more likely to have dangerous hazards which could include electrical, gas, fire safety, damp and mould issues. Selective Licensing will help ensure these issues are addressed, as landlords of private rented properties in certain parts of the city must now meet a set of conditions and ensure good management of their properties.”

The council has been taking landlord and agent applications for the licence since September 1.

Before the bankruptcy announce Jay Hayes, the authority’s housing spokesperson, said in a statement: “People in Nottingham have a right to expect a decent and safe standard of private rented accommodation, which is well managed and maintained. Having a licence will allow landlords to demonstrate that they provide decent quality accommodation for tenants, and we will work with landlords to support them to achieve the licence conditions. 

“We believe the scheme will improve the reputation of private landlords, as well as Nottingham’s reputation for providing quality housing. The scheme is a major step forward in improving living standards for many Nottingham residents.”