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Plan to convert Worcester B&B into 13-bed HMO looks set to be approved

A PLAN to convert a city bed and breakfast into a 13-bed house of multiple occupation (HMO) looks set to be approved.

The application would see Wyatt Guest House in Barbourne Road transformed into the apartments with a number of shared facilities.

The guest house, which sits in the Shrubbery Avenue conservation area and is designated as being within an archaeologically sensitive area, is split over four floors all of which are proposed to be converted.

Permission to demolish a conservatory at the back of the eight bedroom B&B to make way for two studio apartments, three flats and a town house was approved in March 2018.

The demolition and extension would work still go ahead if Worcester City Council’s planning committee goes along with its planning department and approves the plan at a meeting on Thursday (May 23).

The building has been up for sale since April 2015. The B&B owners wanted to sell the building to a developer to carry out the work but it gathered little interest resulting in the request to convert the building into a HMO.

The new plan shows 13 bedrooms each with an en-suite with a shared kitchen and a shared communal area.

Three bedrooms spread across the extension would share another kitchen and communal area.

According to council planners, approving the application would push the percentage of homes within a 100 metre radius up to 9.5 per cent.

The council’s planning policy on HMOs allows for no more than ten per cent of homes within a 100 metre radius to be classed as HMOs.

Council planners were also satisfied the other HMO policies – which ensures no more than two adjacent properties are HMOs and supports applications for HMOs unless it has a negative effect on parking, results in insufficient space for waste and recycling or is out-of-keeping with the character of the area – were not broken.

Neighbours were incorrectly told by the council the new HMO would be breaking the ten per cent threshold because of a miscalculation.

Neighbours were told of the mistake through a letter.

Council planners said the building being used as a more permanent residence rather than a temporary B&B would increase activity in the area.

The size of the HMO would usually require at least four parking spaces but planners have accepted the lack of parking due to its close location to the city centre.

By Christian Barnett

Source: Hereford Times

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High yields still await savvy landlords

Landlords who let out property on a room-by-room basis last year enjoyed yields of 8.9 per cent on average, research from specialist buy-to-let mortgage broker Mortgages for Business shows .

This compares to a much lower, though still healthy, 5.6 per cent yield on ‘vanilla’ buy-to-lets where the whole property is let on one tenancy agreement.

Profit margins in the buy-to-let sector remain significant, and the firm attributes this  to landlords buying lower cost properties and renting them out for more.

The research found that the average value of a buy-to-let property in 2017 was £305,283 – a 19 per cent decrease on the average in 2016 when it was £375,409.

Jeni Browne, of Mortgages for Business, said: “These results suggest that landlords are seeking lower value properties and, anecdotally, we hear that they have been looking further north for their acquisitions where prices are cheaper.

“The benefits of this strategy include less stamp duty, future capital growth, and scope for rental increases which thus allow for slightly higher yields.”

The findings tally with separate research out last week revealing Nottingham and Liverpool as the best cities in the UK in which to be a landlord.

The Mortgages for Business research also showed the rising popularity of purchasing buy-to-lets through a limited company.

According to the firm, limited companies accounted for 49 per cent of all buy-to-let mortgage completions in the final three months of last year, compared to 31 per cent in Q4 2016.

Houses in multiple occupation – or HMOs – have become an increasingly popular option for landlords on the hunt for better returns after tax changes began to push up their costs.

Ms Browne said: “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.

“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.

“Savvy landlords like to have a good mix of properties. They like the consistency of vanilla buy-to-lets and the higher returns of more complex property types.

“Although lower than previously, 8.9 per cent is still an excellent return for HMOs, not only when compared to vanilla buy-to-lets but also other, non-property assets.”

Source: Simple Landlords Insurance

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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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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