HMO licensing – the potential pitfalls for landlords – Landbay

by: John Goodall, CEO and co-founder of Landbay
  • 22/05/2018
  • 0
HMO licensing – the potential pitfalls for landlords – Landbay
From 1 October, the government will be tightening regulations for house in multiple occupation (HMO) to improve the general standard of lettings in the UK.

 

The change to licensing closes off a major HMO classification loophole regarding the number of storeys a property has.

An HMO is a property rented out by at least three people who are not from one household (for example, a family) and who share facilities, including the bathroom and kitchen.

Current guidelines state that a license is only required when the property has three or more storeys and five or more tenants from more than one household, collectively sharing the kitchen, toilet or bathroom.

 

Updates in HMO licensing

Worryingly, however, these criteria have led to some landlords skirting HMO licensing status, particularly evident in student accommodation where landlords squeeze more than five tenants into less than three storeys.

Under the new rules, a property home to five or more people from more than one household, regardless of the number of storeys, will be classified as an HMO.

Landlords will also have an obligation to adhere to rules regarding minimum room sizes.

Single rooms will be required to be a minimum of 6.51sqm and double-rooms a minimum of 10.22 sqm. An extra requirement has also been added for children under 10 years of age, with these rooms required to be at least 4.64 sqm.

 

Burden for landlords

The new licensing is part of the government’s ambition to encourage more responsible lettings and reduce the possibility of potentially unsafe living conditions for tenants.

However, it will unavoidably place further pressure on Britain’s already stressed landlords.

According to the Residential Landlords Association, 16% of landlords rent to people in HMOs.

It is predicted that once the changes come into effect later this year, a further 177,000 HMOs will be subject to licensing.

Not only will the new rules require these landlords to apply for a license, they’ll also likely lead to some costly upgrades putting their profit margins under pressure.

This could be a result of a reduction in rooms available to let, increased costs to meet regulatory hurdles in terms of room size and subsequent safety measures, or general checks that a property is fit for purpose under the new criteria.

However, forgoing an updated HMO license would result in even greater financial damage, with severe penalties set to be imposed on landlords who fail to adhere.

 

No grace period

These criteria changes come amid a wave of new legislations, including the updated energy performance certificate (EPC) requirements in April and the various tax and regulatory changes introduced last year.

It seems landlords are being challenged to remain more industry-aware than ever before.

The value of external advice and support through these changes cannot be underestimated, as landlords will have no grace period after the regulation comes into effect on 1st October.

For brokers, this is a chance for them to brush up on the essentials of the new HMO licensing.

It’s the perfect opportunity to build a strong reputation of expertise in regulatory compliance, ultimately creating more business down the line as more landlords look to them for advice.

 

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