Many landlords opt for Houses in Multiple Occupation (HMO’s) as they often have the potential to generate higher yields for landlords than standard single dwellings. Last year the government published key HMO licensing changes to further protect tenants which came into effect from 1 October 2018. If you are a landlord that owns an HMO you need to know what licensing regulations apply in your local authority and ensure that you are compliant.
Previously only large HMOs comprising three floors or more were licensable. Under the new legislation, any landlord who lets a property to 5 or more people – from 2 or more separate households – must be licensed by their local housing authority. The changes were expected to effect around 160,000 smaller HMO’s. The government has extending mandatory licensing to smaller HMOs and introduced minimum bedroom sizes as they continue to rebalance the relationship between tenants and landlords. Read more about the HMO licensing changes below and the different licenses.
There are three different types of property licencing schemes: Mandatory, Additional and Selective.
Mandatory licensing is a national scheme for large HMOs which are occupied by five or more people with at least two households. Once a Mandatory licence is approved for a large HMO, the property is deemed fit for rental based on the specified conditions of that licence, which is valid for a maximum of 5 years.
Additional licensing schemes are adopted by councils to extend the scope of licensing to more or all HMOs within a scheme, rather than only large HMOs. These schemes are generally more targeted than Mandatory, and can cover say certain wards, only HMOs above commercial premises, etc. etc.
Lastly there are selective licensing schemes which councils apply to all properties in a specific geographic designation, not just HMO’s. Selective licensing is designed to target less affluent areas where tenants are deemed to be particularly vulnerable to rogue landlords.
If you have a property that now meets the minimum criteria and you do not already hold a licence for that property, or are unsure whether you hold the correct licences, you will need to apply to your local Council. Don’t delay as the penalties are significant.
To finish off on a brighter note for investors. Property website Rightmove just published their latest benchmark index which shows that UK house prices increased by 1.1% in the four weeks to 6 April, the largest increase in over a year. And according to Yahoo Finance the delay in Brexit may prompt another property price rise. Slightly optimistic maybe!
If you’re a landlord and would like further help on the HMO licensing changes, please contact Andrew Coney on firstname.lastname@example.org or 020 8551 7200.
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