Mandatory licensing of all letting agents and private landlords in Wales will go ahead after the Housing (Wales) Act 2014 has become law.

It is the first piece of major housing legislation that the Labour-led Welsh Assembly has enacted, through devolved powers.

The legislation gives powers to implement compulsory licensing throughout the private rented sector – and could be a template for any Labour government elected at Westminster.

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.

Lesley Griffiths, communities and tackling poverty minister, with responsibility for housing, said: ‘This is without doubt one of the most important developments for people and housing in Wales for a generation.

‘The mandatory registration and licensing requirements will help to address the issue of bad landlords and generally improve standards in the private rented sector.”

The new Act also allows councils to charge double council tax on long-term empty homes, implements a homeless strategy, and imposes a duty on councils to provide gipsy sites.

The Act will come into force through a series of commencement orders.