Marijana No Comments

Agents told to read small print in local licensing schemes as more fall foul of new rules

Landlords and agents are being increasingly caught out by having to license small shared properties as Houses in Multiple Occupation – only for landlords to be told that they are in breach of their mortgage conditions and are not covered by insurance.

Properties that now rank as HMOs requiring licences could be as small as one-bedroom flats where the tenants use the sitting room as a second room for sleeping.

In one very recent case, the owner of a flat let to three sharers was told they needed an additional HMO licence. However, the mortgage lender would not give consent to this use, putting the landlord in breach of local licensing rules and making them liable to prosecution.

The landlord went to HMO consultant Richard Tacagni, of London Property Licensing, who managed to obtain a temporary exemption from licensing so that a Section 21 notice could be served on the tenants.

Once they have left, the property will then be re-let to a family – meaning that exactly the same property will be compliant without the need for a licence.

Separately, an agent told us that since August he has had 11 landlords who have been told in the last four months to apply for HMO licences for small shared properties and who now intend to sell up rather than obtain a licence. He said they do not want the expense of having to put in HMO standards, and a small property being sold with an HMO licence would be devalued.

He said that as local licensing schemes increasingly bite, the supply of rental property will diminish.

A major difficulty is that new licensing schemes, both additional and selective, vary widely across different authorities.

Since 2006, the law has defined an HMO as any property occupied by three or more people not all related who share facilities. However, until relatively recently, licensing has been restricted to HMOs of three storeys and over with five or more unrelated sharers in most areas.

An additional licensing scheme extends the definition of a licensable HMO and can include properties let to just three occupants in two or more households. Within designated licensing areas, many very small house and flat shares now require an HMO licence.

Furthermore, when an application is made by or on behalf of the landlord, the local authority is legally obliged to find out if the property is mortgaged, and if so, to write and inform the lender.

One agent, in the London borough of Southwark, told EYE: “One of our owners was written to last week. He has a buy-to-let mortgage on his property but has now been told that because he has what is now classified as an HMO, he is in breach of his mortgage conditions and is not covered by insurance.

“We have one outstanding property on our books where the landlord has spent about £160,000 on renovations.

“He will now have to replace all the beautiful new doors with fire doors and comply with all the other requirements for an HMO.

“I am sure we will see further landlords exit the market because of this. It is a nonsense.”

He said that mortgage lenders are unaware of differences between HMOs, and automatically think of HMOs as being large buildings crammed with bedsits – not a small two- or three-bedroomed house or flat – and so refuse permission for a change of use.

Even a one-bedroom flat with three unrelated occupants treating the sitting room as a second bedroom is a licensable HMO in a growing number of areas.

Among the affected properties are those previously let to families but now rented by small groups of sharers.

We spoke to Southwark Council about its licensing scheme, which has been in operation for just under two years, since the start of 2016.

Cllr Barrie Hargrove, cabinet member for communities, leisure and safety, told us: “The definition of an HMO comes under section 254 of the Housing Act. This is not determined by licensing legislation or by the introduction of a licensing scheme.

“Any properties in breach of their mortgage agreements are therefore in breach regardless of our licensing scheme.

“The council has been writing to landlords letting them know about the need to license since January 2016.

“The licence application form includes a section that asks for details of all interested parties, as legally we have to tell them about the application for a licence, and this includes mortgage lenders.

“This is part of the licensing process for all local authorities.”

Tacagni said there is widespread ignorance about the licensing schemes.

He said: “A lot of agents still don’t understand property licensing rules, which creates a huge compliance risk.

“Many agents also don’t realise that they share that compliance risk with the landlord. Both can face prosecution or a civil penalty if they fail to apply for a licence.”

He said agents should check what rules apply locally: “With the expansion of property licensing schemes across the country, this issue is affecting more and more agents and landlords.”

In advice on his website, Tacagni writes: “As part of the application process there is a requirement for the applicant to let certain people know in writing that an application is being submitted.

“There is a requirement for the applicant to notify the mortgage lender, freeholder, leaseholders, licence holder, managing agent and anyone else who has agreed to be bound by a condition in the licence.

“So the mortgage lender will find out about the licence application, and failure to disclose the lenders details would be a criminal offence.

“But there is more. It is a two-stage notification process. So in addition to the individual telling all relevant people about the application, the local authority will also do the same.

“By law, the local authority must send a copy of the proposed licence to all relevant people and allow them 14 days to make any representations before the licence is approved or refused.”

Tacagni said that this puts landords in a tricky position. If they apply for a licence, they risk action from their lenders; if they don’t apply, they risk prosecution by the local authority.

He said: “The only option may be to remortgage the property and potentially face a hefty redemption penalty.”

He warned that landlords who breach their mortgage terms might also undermine any future borrowing arrangements, and risk the lender calling in the loan at short notice.

He said another issue to consider is whether the property stacks up financially if let to a single household rather than to sharers.

Yet another possible complication is that in some areas there are HMO Article 4 Directions. This means that as well as having to get a licence for what could be a small shared property, owners may also need to apply for planning permission.

Tacagni’s consultancy service covers London, but contains useful information for agents and landlords anywhere where local authorities have introduced their own selective or additional licensing schemes.

Source: Property Industry Eye

Marijana No Comments

Bath Landlords Fined For Operating HMO Without Licence

Two Bath private landlords have been told that they must pay more than £16,000 due to their failure to obtain the correct House in Multiple Occupation (HMO) licensing.

Elizabeth Vowles, 48, and Hayley Book, 55, both from Weston pleaded guilty at Bath Magistrates’ Court to their licensing failure, deemed an offence under the Housing Act 2004.

The court was told that the two landlords had been caught operating a pair of HMOs in Bath’s designated Additional Licensing Area without the adequate licensing. Their flouting of the regulation was discovered in January 2017, despite the fact that it had been a legal requirement in certain locations in Bath since 2014. The licensing scheme was introduced to enable officers to know the location of HMOs and place conditions on the landlord to enforce minimum standards of safety, as well as making sure that the property’s management is maintained.

The pair of private landlords were also managing a third HMO in the Additional Licensing Area, so both landlords would have been well aware of the additional licences that were required for houses of multiple occupation licensing, the court was told.

Vowles and Book were each fined £4,000 for each property. They were also ordered pay prosecution costs of £550, as well as a victim surcharge of £170. In the Bath designated licensing area, operating a property without a licence is an offence punishable by a fine up to £20,000

Councillor Paul Myers commented on the case: ‘Our Housing Services will try to work in partnership with landlords to improve housing standards wherever possible. Additional licensing helps to ensure that occupants of HMOs are able to live in safe and well managed properties. Where landlords fail to licence their properties such as the case here, they are undermining the objectives of the additional licensing scheme.’

Source: Residential Landlord

Marijana No Comments

Fresh eviction fear for residents after council refuses Willenhall HMO plans

The saga over a former warehouse which has been used for housing without permission for more than two years has taken another twist after planning chiefs refused plans to make it legitimate.

Tenants have been living in the premises at 51 to 53 Wolverhampton Street, Willenhall, which is now a house of multiple occupation, since at least 2015.

Last year Walsall Council took enforcement action against the owner Jim Haliburton effectively evicting the residents, but the move was put on hold after he formally submitted an application to ‘change the use’ of the building retrospectively.

Now the authority’s planning committee has refused the proposal and is considering enforcement action once again, meaning residents face fresh eviction fears.

However it may not be the end of the lengthy dispute if Mr Haliburton contests the latest decision.

A council spokeswoman said: “This application was refused for lack of shared parking, limited bin storage and poor outlook for residents all impacting detrimentally on amenity.

“The planning file will now be passed to the Planning Enforcement team who will commence work on taking action to cease the use of the building as a HMO.

“This action though will need to be placed on hold if the applicants appeal to the Planning Inspectorate in Bristol in an effort to overturn the decision to refuse planning permission. If the appeal is dismissed, officers will press ahead with enforcement action.”

Earlier this month Mr Haliburton appealed the council’s decision to turn down planning permission for another of his properties in Butts Road, Walsall, in a very similar dispute.

Source: Express & Star

Marijana No Comments

Another dent to landlords’ profits

Renting out a house as a multiple-occupancy let can be very lucrative, allowing landlords to rent out rooms on an individual basis rather than via one tenancy. However, government plans to crack down on the sector are about to make this type of investment less attractive than it once was.

The Department for Communities and Local Government published a consultation paper on houses of multiple occupancy (HMOs) last October, setting out its plans to “raise the standards”. The rules are expected to come into effect next spring, later than expected (probably because of June’s surprise general election). But despite the fact that thousands of properties could be affected by the government’s proposals, as many as 85% of landlords are still unfamiliar with the proposed changes, according to a survey by Simple Landlords Insurance.

One of the main aims of the legislation is to widen the definition of properties that require a licence to be legally let. At the moment, a property is classed as being a HMO if three or more people from more than one household live there, and share toilet, bathroom or kitchen facilities. Currently, only houses that are classed as “large HMOs” – properties rented to five or more people (from more than one household) – and set over three or more storeys, need to have a licence. However, the new legislation would mean that all large HMOs – regardless of the number of storeys – would require a licence. The government also plans to extend mandatory licensing to flats above and below business premises. Currently around 60,000 HMOs across the UK require a licence, but the government reckons that a further 174,000 properties will need a licence if the rules come in.

Although the cost of a licence will vary between local authorities, a five-year licence typically costs about £500. Landlords may also be subject to new, enhanced “fit and proper” tests before they can be granted a licence, which, if introduced, would probably require them to submit a Disclosure and Barring Service (DBS) check, at a cost of £25. Note that if your HMO should be licensed, but isn’t, you can be fined and ordered to repay up to 12 months’ rent.

The government also plans to impose a new minimum room size of 6.52 square metres for a single person, in line with the current standard for overcrowding. For couples, the minimum is likely to be 10.23 square metres. Importantly, this new minimum may affect the number of rooms in a home that can be legally let. For example, if a “box room” in a four-bedroom student house falls below the minimum room size, the property would be considered a three-bedroom house. Landlords letting a room smaller than the prescribed dimensions would be liable for an unlimited fine or a civil penalty of up to £30,000. Finally, owners of licensed HMOs will need to provide “adequate” waste-disposal facilities.

Once the rules are confirmed, landlords should be careful to budget for any added expense they bring. The changes also come at a time when many landlords are already under increasing financial pressure, with lenders now required to take a more stringent approach to buy-to-let mortgage applications from those who own four or more mortgaged properties. That’s on top of the recently introduced 3% stamp-duty surcharge on second homes, and the scaling back of mortgage interest tax relief. If you didn’t already have the message, buy-to-let looks like an increasingly risky bet as an investment.


Yours for £25m: a 30ft hole

A Grade II-listed London townhouse with a 30-foot hole in its garden has been put on the market for £25m, says Sean Morrison in the Evening Standard. The Knightsbridge house was once owned by conman Achilleas Kallakis, who ordered the excavation of the home’s “mega-basement”, which was designed to hold a swimming pool, spa and car-lift. However, workers abandoned the job in 2008 when Kallakis was convicted of 21 charges related to his property business, including conspiracy, forgery and money laundering. In December, Kensington and Chelsea council approved plans to build an “astonishing” nine floors of living space, featuring a pool, underground parking and reception areas.

Source: Money Week