Landlords Beware – Changes to the HMO Regulations
Over the past few years, as I’m sure many of you will be well aware, landlords of residential investment properties and buy to let’s have had a hard time of it.
New regulations, changes to tax relief, increase in stamp duty. All these changes have made it increasingly more challenging to be a landlord.
And now there’s more! From 1st October 2018 there is new and tougher legislation coming into effect in England and Wales for HMO’s – Houses in Multiple Occupation.
As straightforward buy to let’s have become less profitable, I’ve been arranging finance for a lot more HMO deals. This is because more and more landlords are entering the HMO market where they view the returns as potentially better, and therefore a more attractive investment.
However, landlords already in the HMO sector or thinking of getting into the sector need to be aware of the new legislation that has recently come in and what the implications will be.
So here are changes that take effect from 1st October 2018:
Firstly, the new legislation has changed the definition of an HMO for licensing purposes and means many more landlords will need HMO licences.
Previously, a licence was only mandatory if your HMO was occupied by five or more people, from two or more separate households, and was spread over three or more storeys.
The new legislation means that a property is classified as HMO if it is below three storeys and occupied by five or more people, from two or more separate households.
It is estimated that within England alone, this one change will mean an additional 177,000 properties (on top of the existing 60,000) will now come under mandatory HMO licensing.
So, purpose-built flats, conversions, bungalows and large two-storey homes all meet the new definition, and it’s estimated that the number of properties requiring a licence will almost quadruple as a result of the new legislation.
The other main change in the legislation relates to the new minimum standards that will now apply in relation to the size of bedrooms in HMOs. The new minimum standards are as follows:
- Double bedrooms must be at least 10.22 square metres in area.
- Single bedrooms must be at least 6.51 square metres in area.
- For children under the age of 10, a single bedroom must be at least 4.64 square metres in area.
- Rooms smaller than 4.64 square metres must not be used as sleeping accommodation.
It will also be mandatory for an HMO licence to include a condition that states the maximum number of persons who may occupy each specific room in a property as sleeping accommodation.
In the event of a breach of the minimum room size, new licenses granted after 1st October 2018 will contain a condition giving landlords 18 months to act.
Landlords will need to bear in mind that in complying with the local council’s HMO licensing standards, changes may have to be made to the property to comply with minimum room sizes, including amenity standards such as kitchen facilities and number of bathrooms.
Importantly, as a landlord, if you think you’re going to be affected by the changes in legislation, you need to contact your local authority and apply for a licence.
Licences are not free, and your local authority will tell you what the costs will be. Costs will vary from council to council and every HMO will need its own licence.
HMO licences will need to be renewed every five years. However, if you already have an HMO licence in place on an existing property, that will remain valid until the renewal date.
It is important to be aware that landlords will have to stop letting rooms that fall below the nationally prescribed standard.
If they do not, then they will be in breach of licence conditions and could be prosecuted by the local authority or alternatively receive a civil penalty under the new Housing and Planning Act 2016.
The suggestion is that landlords could be subjected to an unlimited fine for renting out an unlicensed HMO. So, it is very much a case of landlord beware.
My advice is: plan ahead, get good advice and don’t delay in making any changes to your property so you fully comply with the new requirements.
In the meantime, if you’d like to find out more about how we can help you get the right funding for your next HMO project, give us a call on 020 8949 2122 or email us at keith.park@fundingtrack.com
