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Changes to Mandatory HMO Licensing Expected October 2018

In December 2017 the government announced that it would proceed with extending mandatory property licensing of houses in multiple occupations (HMOs). On 23 January 2018, Housing Minister, Dominic Raab, responded to a written question from Wera Hobhouse MP stating that, subject to Parliamentary approval, the necessary regulations would be brought into force in October 2018.

What is mandatory licensing?

Since the Housing Act 2004 came into force it has been a requirement that large HMOs are licensed under mandatory licensing. Currently mandatory licensing applies nationwide to HMOs that:

  1. Comprise 3 or more storeys;
  2. Are occupied by 5 or more people living in two or more single households; and
  3. The occupiers share basic amenities such as washing and cooking facilities.

As these large HMOs are deemed high risk they are all required to be licensed regardless of where the HMO is located. Recent years have seen local authorities implement additional licensing schemes to cover smaller HMOs in an attempt to tackle poor housing conditions in the private rented sector. For example, in some areas, HMOs comprising one or two storeys need to be licensed.

What are the proposed changes?

The Housing Act 2004 allows the Secretary of State to prescribe the type of HMO that falls within the definition of mandatory licensing. The prescribed description has not been updated since 2006 when licensing under the Housing Act 2004 came into force.

The government has now decided to extend the scope of mandatory licensing to bring smaller HMOs within the scheme. Mandatory licensing will include:

  • All HMOs with 5 or more occupiers living in 2 or more households regardless of the number of storeys. Effectively this means the storey requirement will be removed from the current definition.
  • Purpose built flats where there are up to two flats in the block and one or both of the flats are occupied by 5 or more persons in 2 or more separate households. This will apply regardless of whether the block is above or below commercial premises. This will bring certain flats above shops on high streets within mandatory licensing as well as small blocks of flats which are not connected to commercial premises.

As is the case now, it is the individual HMO that is required to be licensed and not the building within which the HMO is situated. This means that where a building has two flats and each is occupied by 5 persons living in 2 or more households, each flat will require a separate HMO licence.

What are the proposals for implementing the changes?

The government proposes to implement the extension of mandatory licensing in two phases.

Phase one will last for 6 months. During this time local authorities will publicise the new licensing regime, process applications and issue licences. Landlords that did not require a HMO licence before the change in the rules will not be prosecuted during phase one for failure to license a licensable HMO and will not be exposed to rent repayment orders (RROs).

However, landlords will be expected to apply for a licence during the 6 month grace period and they are encouraged to do so because they will not be able to serve valid section 21 notices seeking possession until an application for a licence has been duly made (unless the landlord has instead applied for a temporary exemption in order to remove their property from licensing).

The government’s response is clear that the 6 month grace period does not mean that applying for a licence is optional. It just means that the criminal sanctions for not having a licence will be put on hold. Once the 6 month period is over and phase two begins any landlord without a licence will be subject to the full range of penalties for failing to comply.

It is also important to point out that landlords who currently require a licence under a local authority additional or selective licensing scheme and who are not licensed will not be able to benefit from the 6 month grace period just because their property has fallen within the new mandatory licensing category. These landlords could face enforcement action at any time.

What happens if I already have a licence under the local authority’s additional or selective licensing schemes?

The response paper confirms that properties already licensed under local authority additional licensing schemes will be passported into the mandatory licensing scheme without any cost to the landlord or alterations to the licence conditions for the remaining period of the licence. The distinction between mandatory HMO licences and additional HMO licences is largely artificial as both licences are granted pursuant to Part 2 of the Housing Act 2004. Passporting these existing licences into mandatory licensing should not be too problematic because they both fall within the HMO licensing scheme.

Some local authorities also have selective licensing schemes requiring all privately rented properties to be licensed whether they are HMOs or not. Selective licensing is governed by Part 3 of the Housing Act 2004. Some HMOs are only caught by selective licensing schemes, for example, where they do not fall within the current definition of mandatory licensing or the local authority has no additional licensing designation. In these circumstances, the government proposes to issue converted licences at no additional charge to the landlord. Converting Part 3 licences to Part 2 licences will require more consideration as there are differences between the two licensing schemes. Part 2 of the Housing Act, for example, requires the local authority to be satisfied that the property is suitable for multiple occupation and this includes assessing whether the property meets prescribed HMO standards.

What happens if I don’t get a licence?

There are serious consequences for landlords and letting agents who do not obtain licences for licensable properties. The local authority can bring a prosecution against the landlord in the magistrates’ court and fines for Housing Act 2004 offences have been unlimited since March 2015. Local authorities are also able to issue landlords with civil penalty notices of up to £30,000 per offence as an alternative to prosecution. Tenants and local authorities have additional remedies in the form of RROs where rent or housing benefit can be claimed back from the landlord by order of the First-Tier Tribunal.

Repeat offenders may also be subject to a banning order prohibiting them from letting property once these are brought into force. This is expected to happen in April 2018.

The new rules extending mandatory licensing are expected to come into force in October 2018. Landlords should start reviewing their properties now in preparation for the changes.

Source: Lexology

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Renting by the room brings biggest yields

Houses of multiple occupation (HMOs) – properties which are rented by the room – produced the highest buy-to-let yields in 2017, according to the latest figures.

Data compiled by Mortgages for Business showed average yields of 8.9 per cent for houses were many people rent rooms individually.

However, this represents a fall, and the first time that yields for this type of property have dipped below nine per cent since the  Mortgages for Business index was launched in 2011.

Experts at the firm said that the fall was due to the increasing popularity of this type of property with landlords, which is pushing up prices.

“The attractiveness of HMOs as a buy-to-let investment has increased in recent years not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios,” said Jeni Browne, sales director at Mortgages for Business.

“With more landlords vying for these properties, prices have been pushed up more quickly than the rents which, I would suggest, is one of the main reasons we are seeing their yields drop, although, I suspect that the granting of fewer new HMO licences is also having an impact.”

She added the figures showed landlords opting for cheaper ‘vanilla’ properties.

Defined as normal 2 to 3 bed houses and flats, usually fitting the general lending criteria of mainstream buy-to-let lenders, these properties produced average yields of 5.6 per cent in 2017.

The average value of a vanilla buy to let property in 2017 was £305,283, a 19 oper cent decrease on the average in 2016 (£375,409).

Ms Browne added there was anecdotal evidence landlords are looking further afield, where prices are cheaper.

Whilst there was no change in the number of lenders operating in the sector in Q4 2017, the number of mortgages available continued to rise, the figures showed.

There has been a 444 per cent increase in buy-to-let mortgage products since the index was launched in 2011.

Ms Browne said this rise resulted from lenders responding to the growing popularity of buy to let by offering a seemingly ever-expanding range of products to suit a variety of properties and borrowing requirements.

However, she said that this was likely to have reached its peak.

“Looking forward, it is widely anticipated that buy to let lending will contract this year in response to the tax and regulatory measures being imposed on the sector.

“As such, I would expect product numbers to peak in Q1 2018 and we have already seen some lenders trimming their ranges, leaving a core of great products which have been designed to reflect the changing needs of landlords,” she said.

Source: FT Adviser

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Rogue landlords making millions out of housing benefits

Highly organised gangs of rogue landlords are making millions every year out of the housing benefit system by enticing desperate local authorities to place single homeless people in micro-flats in shoddily converted and dangerous former family homes.

Three-bed houses, where the maximum weekly housing benefit for flat-sharers is under £100 a person, are being converted into as many as six tiny self-contained studios – as little as 10 sq m in size. Each then qualifies for housing benefit of £181 a week, enabling a landlord to squeeze £56,000 a year in rent from a property on London’s fringes, all paid from public funds. The £56,000 compares with the typical £6,200 annual rent on a three-bed council house.

A previously unpublished government report into a £700,000 project to tackle the scam, released this week under freedom of information laws, shows that councils are struggling to contain the spread of the “lockdown” model, which has taken hold in at least 12 London boroughs since 2015.

It warns of “well organised but unscrupulous landlords” profiting despite some councils – including Hackney, Bexley and Greenwich – launching prosecutions, raids and prohibition orders.

“Given available resources and the potential number of ‘rogue landlord’ properties, regulatory activity on its own would not solve the problem as long as the market was so heavily weighted to favour the supplier and the housing benefit rules allowed for high payments on such small conversions,” says the report. “Investors typically buy a three-bedroom house and convert it into six rooms, each with basic cooking facilities, in order to claim the maximum housing benefit rate.

“The lettings model was also being actively promoted as an investment opportunity amongst both existing landlords and, possibly, more widely. This has contributed to the strong growth of conversions using the model,” it says.

The report – obtained by local housing campaigner, Jon Knowles, after he appealed to the Information Commissioner – reveals “lockdown landlords” are exploiting planning loopholes created by the Conservative-led government in 2010.

“The basic premise […] was to convert houses into a large number of very small ‘self-contained’ units, each containing basic cooking facilities, but to also have a shared kitchen so as to be able to claim, for planning permission purposes, that the house was a house in multiple occupation and fell within permitted development rules,” it says.

Councils can apply to place restrictions on these rights but the report says only one councils in the project has managed to do so.

The converted flats, frequently approved by the landlord’s own private building control firms and electricians, are offered to homelessness services across the capital in need of rentals.

“The landlords often target local authority services which are looking for units when they accept either a full, or interim, homelessness duty for an individual. The landlords are aware that such individuals will be entitled to housing benefit, and are also aware how difficult it is for such services to locate suitable units,” it states.

Services from different areas regularly compete for the same properties, which can lead to “uncoordinated placements and clashes between the residents”. One incident resulted in a stabbing, and a woman living in one of these flats has been assaulted by other tenants. Checks by planning and environmental health officers are rarely carried out because homeless services are under such pressure to find rooms immediately.

“It was recognised that, with the shortage of units and the frequent emergency need for placements, the priority would often be to just get a person into some accommodation for the night.”

Housing inspectors found the micro-flats were often in very poor condition with inadequate fire safety provision and dangerously overloaded electrics and plumbing systems.

Neighbours complained of anti-social behaviour and feeling unsafe when there were influxes of often single men, with substance abuse and mental health problems .

Councils are reluctant to take a hard line because they fear it could make people homeless: “There were clear concerns about the model becoming too widespread and it was felt that changes did need to be made in order to contain its growth. However, it was accepted that these could not be wholly retrospective otherwise it would create a spike in homelessness.”

Lambeth council, whose officers coordinated the research project, says landlords using the model were still operating in the capital and that family houses were being divided up into micro-flats all the time.

“They are always being created to meet the demand for the lack of social and affordable housing,” it says.

Knowles fought to get the report released after he discovered a string of “lockdown properties” in his neighbourhood of Hanworth, west London. “I simply could not believe that you would be allowed to cram six bedsits into a former two-bed home,” he says.

Retired builder Gary Warren found himself sofa-surfing because he could not afford a deposit on a flat in west London. He thought his luck had changed when he found a letting company that accepted people over 35 and claiming benefits.

“I stayed with a few friends and then I found out about this company that rents flats out without a deposit if you are on benefits,” he says.

A letting agent showed him what they called a flat in Hanworth but it was actually a tiny room measuring just 10 sq m, including the toilet. He took it because he “had no deposit to put down on a private flat”.

Gary, who is 63, pays £980 for his room, which is mostly covered by his housing benefit.

The people in the four other flats are charged the same, which potentially earns the company £3,920 a month in rent.

“The length of my bed is the width of the room. I’ve got a wardrobe and fridge. So I have about 10ft by 3ft of space – it’s a corridor,” he says. “There’s no room for a chair, so I lay down all day. I don’t see anyone, so I don’t get any stimulation – I’m just stuck in this room.”

Water pours down the walls when it rains because the flat roof above him leaks. It got so bad over Christmas that the council moved him to a B&B as the room was uninhabitable. But Gary – who has had a stroke and is in the early stages of dementia – has carried on paying the rent because he needs somewhere to live. “It is robbery,” he says. “They are ripping off the council. Why are they letting it go on?”

Source: The Guardian

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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

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Buy To Let Investor Fined For Incorrect Licensing In Nottingham

A private buy to let investor has been told he must pay almost £6,500 for renting four properties in Nottingham without a license.

Rogue landlord Dilip Gohil was prosecuted after his failure to acquire the correct licensing for his houses in multiple occupation (HMOs). This was in spite of the fact that each property boasted a sizeable seven bedrooms, clearly rendering them most suitable for multiple occupancy and suggesting instead a blatant disregard for licensing regulation.

Furthermore, several health and safety issues were uncovered at the properties, rendering them potentially unsafe for tenant habitation. One house did not have a single fire door within the property, whilst the kitchen door did not have a handle and therefore could not be closed. Issues such as fire safety hazards often lead to councils taking a particularly hard line with negligent landlords.

Gohil admitted to seven breaches of the Housing Act in front of the court. He was subsequently subjected to fines amounting to £4,750. He was also told that he needed to pay council costs of £1,519 and a government tax of £170. The rogue buy to let investor was then given seven months to pay this.

Under the terms of the conviction, Gohil may in future be denied licences for the four properties. It was deemed that this would ‘affect his income.’ However, the landlord’s early guilty plea was acknowledged, along with the fact that the punishment would have been ‘a lot more than that’ according to presiding magistrate Joan Charlett.

Portfolio holder for community and customer services at the council, Toby Neal, spoke out about the case: ‘We take licensing issues really seriously, since landlords who ignore them are putting the safety, well-being and lives of their tenants at risk. We will always prosecute where breaches are found as they were in this case.’

Source: Residential Landlord

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Big crackdown on landlords by Thurrock Council

LANDLORDS of houses of multiple occupation [HMOs} and commercial dwellings with flats above shops faced a surprise earlier this month (Tuesday 3 October) during a council crackdown.

Officers from the Council’s housing, food safety and waste enforcement teams along with officers from Essex Police visited 80 homes suspected to be operating as unlicensed HMOs.

After the day of action, three licensable HMOs operating without a license, 18 non licensable HMOs, four landlords for planning and building enforcement prosecution and three empty homes were found and seven Environmental Protection Notices were served on local businesses.

Portfolio Holder for Housing, Cllr Rob Gledhill said: “Houses of Multiple Occupation Landlords are currently subject to mandatory licensing for three storey buildings occupied by five persons in two or more households.

“This currently limits the number of properties under this scheme but I am anticipating that the requirement is going to be extended by the government to include all properties with five or more people in two or more households meaning the 18 non licensable HMOs identified during the day of action will fall under this category next year.”

Letting a licensable HMO without a licence is a criminal offence and can result in an unlimited fine upon conviction. Persons managing or having control of a licensable HMO without a licence may also, in certain cases, have to repay rent. This applies to rent paid by tenants or by local authorities in housing benefit.

Cllr Gledhill added: “I would like to thank all those taking part in this operation to show we take this issue seriously. This was a coordinated effort to tackle poor performing landlords of HMOs and flats above shops where tenants are complaining to us about living in poorly maintained homes.

“`While we recognise that most private landlords comply with regulations and offer a good service to their tenants, it is important that we deal robustly with those in the sector who fall short of these standards.

“We are looking at extending licensing to include small HMOs in certain parts of the borough associated with anti-social behaviour and poor health and safety conditions to ensure that minimum standards are being met.”

If you have information about an unlicensed HMO, you can give us details by e-mailing [email protected] or visit: thurrock.gov.uk/houses-in-multiple-occupation for more information.

Source: Your Thurrock

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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

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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

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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

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How to deal with the proposed amendments to HMO licensing in England

The Government recently published the outcome of their consultation regarding changes to HMO licencing and it is anticipated that amendments will be made in line with their findings. The big question facing landlords is what will these changes to mean for them? Many landlords that are not currently affected by licensing will suddenly require one and I doubt very much that Landlords are even aware!

The current situation

At the moment, properties classified as large HMOs already have to comply with licensing. Your property falls into this category if it is rented to five or more people who are not from one household, it is three storeys high or more and the tenants share bathroom/toilet and or kitchen facilities.

The proposed changes

The Government is proposing the following changes which will increase the number of properties that are subject to licensing:

• Removal of the three-storey rule

• Incorporate flats that are situated above or below commercial premises

• Put in place a minimum size requirement of 6.52sq.m which is in line with the current standard for overcrowding (Housing Act 1985). This size is likely to be 10 Sqm for HMO’s in which all tenants have their own bathroom but share other facilities such as a kitchen.

The driver behind this is to provide tenants with a better standard of accommodation and prevent the sort of problems that exist at the moment with sub-standard quality of accommodation and overcrowding. In order to support this further they are looking at putting in place additional proposals which include the following:

• In order for landlords to obtain a license, they will now have to undergo a Fit & Proper Person Test

• Landlords must provide sufficient storage facilities to deal with the holding and disposal of all household waste

How could it affect you?

Whilst it is worth noting that these are proposals only at this stage, they are likely to take from April 2018. At this point, it is expected that landlords will have a grace period of six months, providing them with time to make changes to their properties so that they comply with the rulings.  After this, those that do not comply will be subject to a fine of up to £30k as well as possible criminal prosecution.

Whether you already own an HMO or are thinking about purchasing one, you need to be prepared to deal with the new rulings.  Under-resourced Local Authorities are also going to find themselves struggling to manage the increased workload as it is estimated that the number of properties requiring a license will double.  It is also likely that additional licensing schemes will still go ahead capturing the multi-lets with only four occupiers, not five.  If you already hold a selective license, switching it to a mandatory one should not be a problem.

The good news

On a more positive note, if you are looking to get into the HMO rental market by purchasing a new property, the banks and mortgage companies seem to be looking upon these types of licensed properties more favourably.

By providing all landlords in the UK with plenty of advance warning, the Government are hoping that the changes will not be too difficult to comply with and will increase the quality of HMO accommodation generally.

Source: Simple Landlords