BTL2022: HMO licensing and planning disconnect can ‘cause a lot of stress’

Speaking at The Buy to Let Forum at the AJ Bell Stadium in Salford yesterday, Jason Wilde (pictured), national sales manager at Paragon, said customers wanting to convert to an HMO would need to talk to the licensing department to get planning permission, but this is rarely a simple process.

The type of planning permission needed would depend on the size of the HMO. Smaller HMOs are easier to secure planning permission for as they are covered under permitted development rights, whilst properties with seven bedrooms or more would need sui generis planning permission, which is a separate category of its own.

Wilde explained that HMO licensing is dealt with by the private housing department, whilst planning permission is dealt with by the planning department.

“You’d be forgiven for assuming that as most of them are in the same building that they talk to each other. They don’t,” he said.

Wilde said that as a lender, Paragon had seen multiple examples of properties that had the HMO licence in place but did not have the planning permission, and vice versa.

“Our understanding is that they are now starting to communicate [more] hopefully going forward, so you won’t get to get one without the other, but it is fairly common,” Wilde added.

“We and many other lenders have got to the completion stage and the borrower has said they have the HMO licence and they assume they have the planning permission but they don’t.”

Wilde added that licensing looked at room sizes, height of the roof, safety and condition of the property, whereas planning will look at parking, bike storage and bin storage.

He said it was very “simple” for this disconnect to cause issues at the completion stage, citing an example where a property was let out on a five tenant basis and was licensed as a small HMO.

The owners then decided to let it out as a single dwelling but didn’t realise that they had lost their HMO planning permission during that period of time.

He said that issues like this could crop up from solicitors three or four days before completion and can “cause a lot of stress”.

Article 4 presents challenge for landlords refinancing

Wilde said that landlords looking to refinance would also have to be aware of Article 4 of the General Permitted Development Order, which gives local authorities who use them the right to withdraw specified permitted development rights in certain areas. It was updated in 2011.

Under normal circumstances, a C3 residential property can be converted to a C4, or small HMO, within permitted development rights, so planning permission is not needed.

However, Article 4 changes mean that planning permission needs to be obtained for these conversions, and this is used by local authorities to curb the number of HMOs in a certain area.

Solicitors now will usually require a certificate of lawfulness of evidence of use prior to Article 4 being implemented to secure an HMO licence in certain areas, such as Manchester.

Wilde said there could be challenges around this as most people did not have records going back that far while GDPR changes means that landlords have not held on to assured shorthold tenancy (AST) agreement documents such as old council tax bills, which could evidence that a property is an HMO.

He said brokers should help landlords “futureproof” their HMOs, either by seeing if the local authority could provide evidence in the form of an AST agreement, and if that could not be done then proceed down certificate of lawfulness path.

“Once you’ve got that information it futureproofs that property from a HMO point of view.”

He continued: “What we are finding now with rates going up is that landlords, certainly ones who have been around for 20 years, haven’t necessarily been refinancing stuff because they’ve been on a nice low reversion rate, but now they are starting to remortgage.

“Some of these properties would have been let as HMOs before Article 4 would have come in, and they’ve got nothing in place to try and futureproof that.”

He added that there was not a centralised database detailing which local authorities used Article 4, but said the information could be found on each local authority website.