Compulsory licensing of all letting agents and landlords in Wales has become closer after a National Assembly Committee agreed with the principles of new legislation this week.

The flagship Housing (Wales) Bill will introduce a compulsory registration and licensing scheme throughout the private rented sector.

The scheme is regarded as a possible template for England should a Labour government get in.

Under the Welsh Agents and Landlords Licensing Scheme (WALLS), “fit and proper” person checks will be carried out on all agents and landlords. Any landlord who fails the check or who does not wish to be registered must use an agent.

Agents will have to register, pass a suitability test and become licensed, and must also belong to an approved body – for example, ARLA or NALS. Both agents and landlords would have to commit to training and continuous professional development, with agents having to ensure that two-thirds of staff received accredited training.

Licences would last three years.

Penalties for agents would be fines of up to £50,000 (£20,000 for landlords), and failure to register would be a criminal offence. Failure to register would also give tenants rent-free periods and make it impossible to evict them.

On Tuesday, the Communities, Equality and Local Government Committee said that private tenants “should be able to expect a decent standard of accommodation”.

It went on: “Under the licensing scheme, tenants shouldn’t have to pay rent if their agent or landlord hasn’t got a licence. In such cases, the committee wants to ensure that tenants are still protected, particularly from the threat of eviction.

“The committee also wants to know how the cost of enforcement actions against landlords and agents who breach the licensing scheme will be met.”

It has requested that full funding details are made available before the next round in the Bill’s progress.

One agent, Clive Spence, of The Home Rental Company in Carmarthen and Caerfyddin, said he felt many smaller agents would fall by the wayside once regulation is brought in.

He said: “I feel that many of the small letting agents operating out of one office will not survive the red tape.

“Also, some estate agents are unlikely to spend time and money having the staff trained and will leave the rental market altogether.

“We are expecting an increase of landlords who do not have the time, to hand their portfolio over to property management companies.

“I don’t think the Welsh Government has considered there may not be enough professional licensed letting agents in Wales to cope with the demand.”