New powers for Local Authorities were introduced last week (Thursday 6 April 2017), which allow councils to now issue a fine up to £30,000 for landlords who:
- Do not have the appropriate licensing for their HMO property
- Fail to comply with a housing improvement or overcrowding notice
- Fail to comply with the HMO management regulations
If you don’t comply with the rules, you will also loose the right to serve a Section 21 Notice on the tenants. It’s now more important than ever therefore that you know what a House in Multiple Occupation (HMO) means and whether it applies to you.
Here’s our mini HMO guide, where we’ll explain what an HMO is and whether your rental property requires a HMO license.
What is an HMO?
Recent research from Tenant Referencing UK shows that many landlords are unaware of what a HMO encompasses, so let’s start with the definition according to Gov.uk:
‘A house in multiple occupation is a property rented out by at least 3 people who are not from 1 ‘household’ (e.g. a family) but share facilities like the bathroom and kitchen.’
Your property will not be considered an HMO if:
- If it is occupied by only two people
- If it is occupied by the owner (and their family if any) and one or two lodgers
- If it is occupied by a religious community
- If the occupiers have their main residence elsewhere. (Accommodation used by full-time students while they are studying is taken to be their main residence)
- If none of the occupiers are required to pay rent or give other consideration in respect of the living accommodation
- If the owner or manager is a public body / an educational institution
- A building of self-contained flats if two thirds or more of the flats are owner-occupied
- If the property is part of a guest house or hotel (unless an ‘HMO Declaration’ is made)
HMOs are quite appealing to professional landlords as they tend to generate fantastic income and are more profitable than other types of rental property. But at the same time, there will also be fees for bringing the property up to legal standards and acquiring any necessary license, plus the Council Tax in HMOs is required to be paid by the landlord rather than the tenants. In addition to this, an HMO is generally a bigger responsibility, which is why most HMO landlords opt to get the entire property managed by an experienced letting agent.
Do you need a mandatory HMO license?
Any HMO in the country that consists of 5 or more tenants, formed of more than one household who share basic facilities in a property spread over three floors will need a mandatory licence. To apply for the licence, contact your local council or if you use a Managing Agent they will do it on your behalf.
Remember that it is a criminal offence not to apply for an HMO licence when you need one, and a landlord who does not have an HMO licence cannot serve a valid Section 21 notice and can risks huge fines of up to £30,000.
Additional licensing of HMOs
As if the world of HMOs wasn’t confusing enough, many local councils are now introducing their own HMO licence schemes or selective schemes (which apply to all properties in the borough irrespective of whether it is an HMO or not).
In fact, there are already a large number of London boroughs running selective licensing schemes, including Barking & Dagenham, Newham, Southwark, Tower Hamlets, and Waltham Forest to name a few.
So for instance, Camden council now require all HMOs rented to three or more tenants forming two or more households to apply for a licence, and there is a cost of doing this plus a minimum standards guide.
To make things even more complicated, each local borough interprets the rules slightly differently and has their own minimum standards list. For instance the minimum size standard for a double bedroom in Camden in 9 metres squared, but in Southwark they would accept 8 metres squared.
Selective licensing in the borough of Redbridge
Redbridge is the latest borough to impose selective licensing. From 13th July 2017, all Redbridge borough rental properties within the Valentines and Clementswood wards are required to be licensed in the same way that larger properties currently need to be licensed as part of the new Selective licensing scheme.
You can search for the ward that your property is in by clicking here.
The licence will last for 5 years and will cost a fee of £500 but this is discounted to £250 if the application is made before 13th September 2017. The registration portal opens for applications on 13th April 2017.
“It is important that Landlords familiarise themselves with the conditions that apply to both HMO and Selective licenses when they are granted. Licenses will often require certain works to be completed within a given time, usually relating to fire safety and general safety points. In addition, some licenses will restrict how many tenants can live in a property and if bedrooms are below the minimum size guidelines for a local authority, the licence may restrict use of that room.
Many landlords will no doubt be frustrated that regulations aimed at improving rental conditions for tenants may in fact result in bedrooms being removed from the rental stock, leading to an upward push on prices as supply falls, which no tenant will welcome. Ironically it is often ex-local authority flats, originally built by councils which are frequently falling foul of these bedroom size rules. Ultimately, the penalties for landlords can be severe and it is essential that licenses are applied for, understood and complied with.” Michael Kennedy, Property Management Director, Portico.
Are you affected?
The publicity for these schemes is not often all that prominent so many landlords may not be aware that new schemes have been introduced.
Hammersmith and Fulham, for example, are introducing a scheme later this year, which will be similar to the scheme in Camden.
As there is no national standard applicable to all, it’s imperative that you keep up to date with the regulatory position of your local authority and seek advice and help from an agent if you’re unsure as to whether you’re affected by one of these schemes.
You can find out all you need to know about property licensing across every London borough here. Simply ‘select borough’ at the top of the page.
Feel free to contact us for further information and advice on 0207 099 4000. Click here for an instant property valuation.