For some, the fears were realised as recent court cases have seen HMO tenants win back their rent as the landlord failed to register for a license.
So this week, Mortgage Solutions asked: Are you warning landlord clients with HMOs to register with local authorities, following the claims tenants have made already?
When the definition of an HMO changed, I was looking at it and thinking “it’s interesting, what are lenders going to do about it?”, because local government was now empowered to classify these properties.
Some of the properties the council say are now HMO, but lenders have not considered that. I asked a few lenders what their plans were, and they said: “Nothing, either we consider it an HMO, or we don’t”.
That was the long and short of it and possibly why we haven’t heard much about it as brokers. As far as we’re concerned, it either fits their definition or it doesn’t.
For the client we just ask them to check if they need one, and that’s as far as our involvement goes.
If a property is already owned by somebody and the council does deem it to be an HMO we won’t know that unless a client has told us.
If they need to get a license that’s handled by the council. If someone applies for a license, they deal with the department directly. There’s no need for a third party.
I can see how there is a market for solicitors to target HMO landlords, but if someone is a professional landlord, it is their job to deal with the council anyway. They should know all about it.
Accidental landlords will be notified and they’ve got to comply. They’re always going to find out and there’s no need for third parties to get involved unless they want them to.
In the same way that many other councils operate, our local council, Colchester, publishes an online register of all HMO landlords providing a transparent directory of HMO owners.
This register can be, and is, used for a myriad of purposes, including tenant claims, the need to register, HM Revenue and Customs (HMRC) ‘spies’ and the like.
But, compliant, innocent and diligent HMO owners should not have anything to fear anyway but as in any industry, there are a few bad apples.
As a broker specialising in the property investor sector, I have spoken with all manner of HMO owners, and brought the need to comply to their attention.
However, as a father of a university student, my son is sharing an HMO house with four other fellow students, I have also seen it from a tenant’s perspective.
That particular HMO landlord was shocking, the property was disgusting, and it wasn’t registered. We didn’t need to employ an ambulance chaser to help us, but that landlord was grossly non-compliant, and it cost her hugely by the time we finished.
So, yes, we do bring the need for registration, compliance and the necessity to declare accordingly to the HMRC to our clients, but where they deliberately fall short, the transparent register is a very useful resource for the innocent victims of their actions.
For the compliant HMO landlords, the process is slow and onerous, however our business-minded clients are fully aware of their obligations and it’s just another red-tape task to be carried out and done so accordingly.
Virtually all lenders want to see that a property is fully compliant with HMO regulations, or at least that an application for registration has been made to the relevant local authorities.
To this end, we do briefly advise our clients on registering their HMOs as part of the application process to gain finance.
Issues however are more likely to emerge for ‘accidental HMOs’ where properties were converted before the changes in regulations. These properties tend to not have the relevant emergency lighting, emergency exits, smoke alarms and suitable energy performance certificate readings, etc. to meet current standards.
The largest barrier to having these items addressed is in raising the funds to spend on property improvements.
We have certainly assisted clients with refinancing their current HMO properties to help them with this in order that they can carry out the necessary work to meet current regulations.
In short, the investors currently going through the purchase process for an HMO are aware that they need to register. However, not all existing landlords may be aware that their property needs to meet current requirements.
The registration process is down to the client, solicitor and local authority to obtain and it is not something we are involved in securing.
Also, the registration process will vary between local authorities, particularly in the significant variations in processing times, and this can cause confusion which makes it difficult to gauge.