There’s no place like HMO

Large properties that have been converted into a number of individual dwellings such as bed sits or a number of bedrooms with shared kitchens and bathrooms, can be quite an attractive investment for landlords. This has lead to significant interest with converting these premises to House of Multiple Occupancy (HMO).

• Firstly, you are likely to get more money for renting out individual rooms than you will get for renting out the whole house.
• Secondly, finding people who want to rent a room is easier than finding someone who wants to rent a whole house.
• Finally, it is unlikely that all the individual rooms will be empty all at once, because people will come and go, so you’ll always have some rent coming in. If you are renting out the whole house, and your tenant gives notice, all the rent comes to an end, and won’t start up again until a new tenant or family move in.

However, having a House of Multiple Occupation (an HMO), as such properties are known, is not all plain sailing. You must have a license to run an HMO and you must comply with the regulations in order to get a license.

What is an HMO?

An HMO is, by definition, a property occupied by 5 or more people forming two or more separate households. So if you have three or four people in a shared property, then they are not an HMO.

Similarly, five or more people from the same family would not be an HMO. Under the old law, HMO regulations only applied if the property comprised more than two storeys, such as a townhouse.

There is now no requirement regarding the number of floors the property must comprise of, so even a bungalow could be an HMO if all of the other requirements were met.

Exception

The only property that would fit within the definition of an HMO but which doesn’t not require an HMO license is a purpose built block of flats consisting of 3 or more units.

New Regulations

Since 1st October 2018, tighter restrictions have been put in place that cannot be ignored. The aim of the new legislation is to have more control over what landlords of HMO’s can do, the standards they must adhere to as well as the condition and size of the property.

The starting point is to consider whether your property falls within HMO legislation. If it doesn’t, then you don’t have to comply with the rules, but standard housing law still applies if you are renting your property out, so don’t be too complacent. If your property does fall within HMO legislation, then read on!

Old Licences

So what happens if you have an HMO license that complied with the old law? Does the change in the law mean that your old license is now invalid, and you have to reapply?

No!

If you already have an existing HMO license this will continue to be valid until the license expiration date, which is usually around 5 years following the date of issue.

When the existing license expires you will have to apply for a new license, and at that point, you must be compliant with the new legislation. So you’ve got from now until the license expires to make any changes to the property or the way in which you let it, to be compliant. You must then apply for a new license under the new legislation.

No Licence

What happens if you are letting out a property that is an HMO, which under the old legislation didn’t need a license, but now does need one? You will now need to make sure that your property is compliant, and then apply for a license as soon as possible from your local council.

Size matters

One of the other requirements of an HMO license relates to the size of each room. The new legislation prevents landlords from letting out rooms to an individual adult where the useable floor space is less than 6.51sqm and 10.22sqm to couples. This could be made up of more than one room, provided that they have exclusive use of those rooms, so common parts such as kitchens and bathrooms don’t count.

In addition, rooms which are under 4.64 sqm cannot be used for sleeping! So you could let several rooms to someone, where they use the smaller one perhaps for storage or as a living room, but you can’t put a bed in it.

Health and Safety

The new legislation isn’t just about the number of people and the size of rooms. There are also regulations about health and safety issues. For example, a landlord must provide a minimum number of bins and storage facilities for waste.

There are also requirements such as the minimum number of kitchen and bathroom facilities depending on the size of the property and the number of people living in it.

Breaching the regulations

There is always going to be the risk that a landlord will flout the new regulations because they hope they will get away with it. However, local authorities are good at tracking down errant landlords and have a number of courses of action available to them.

Firstly, they can subject a landlord to both local authority and civil penalties, so it can get quite expensive. Not to mention the legal fees that you’ll have to pay.

Secondly, they can serve the landlord with a notice requiring them to carry out remedies, and if the landlord fails or refuses to do so within a reasonable period of time, the local authority can take the necessary steps themselves, and then pursue the landlord for the costs. This will be much more expensive for the landlord than doing the works themselves.

Sometimes landlords will fall foul of the regulations because they are unaware that they are in breach. This could be because they don’t know about the regulations, but that will not be a valid defence. However, sometimes a landlord does not know that their property has become an HMO, because their tenant may be illegally subletting the property to more people than is allowed by the regulations. This, again, will not be a valid defence, but is something that a landlord can guard against, but doing regular checks on the property (or having their agent undertake such checks) to make sure that the tenant is not doing anything that puts the landlord in breach of the regulations. If the landlord does discover that the tenant is in breach, he should immediately take action to protect his position.

If you are thinking about buying a property that either is an HMO or you think you can turn into an HMO, make sure that you check whether the property would be eligible for a licence and if not, what steps you’d need to take to become compliant. You may find that the cost of the works is disproportionate to the amount of rent you will get when the property is let, making the project uneconomic, but it’s better to find that out at the beginning than at the end!

Disclaimer – our articles are designed to give you guidance and information. There is no substitute for proper direct advice, particularly as everyone’s circumstances are different. If anything in this article may affect you, please contact us for advice that is specific to your circumstances.