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New Government powers to ban landlords and additional HMO regulations

From April 2018 any landlord convicted for the criminal offences of blackmail, theft,  handling stolen goods, harassment and stalking will automatically be banned from letting out property and added to the new rogue landlords database.

In addition Housing Minister, Alok Sharma, has introduced new HMO regulations set to be passed by Parliament confirming all properties occupied by 5 or more people from 2 or more separate households will face mandatory licensing.

The new HMO regulations will include:

  • Minimum bedroom size requirements (to prevent overcrowding). Rooms used for sleeping by a single adult will have to be no smaller than 6.51sqm, and those occupied by two adults will have to measure at least 10.22sqm. Rooms slept in by children of 10 years and younger will have to be at least 4.64sqm in size.
  • Responsibility falling on landlords to ensure the council’s rules on refuse and recycling are adhered to.
  • Additional powers to be given to local authorities for cracking down on over-crowded and sub-standard homes.

The government has estimated this will bring 160,000 into the licensing regime.

Alok Sharma said: “Every tenant has a right to a safe, secure and decent home, but far too many are being exploited by unscrupulous landlords who profit from providing overcrowded, squalid and sometimes dangerous homes.

“Enough is enough, and so I’m putting these rogue landlords on notice. Shape up or ship out of the rental business. Through a raft of new powers we are giving councils the further tools they need to crack down these rogue landlords and kick them out of the business for good.”

The RLA policy on this was previously spelt out by David Smith saying: “Councils are already struggling to enforce licensing schemes and the extension will potentially triple the number of homes under mandatory licensing.

“What is the point in introducing extra regulations if there are no resources to enforce them?

“Tenants should not be forced into excessively small rooms, but there are cases where tenants have other space available within their properties, which should be taken into account. By concentrating so narrowly on bedroom size the Government could knock thousands of rooms out of the sector, potentially forcing tenants out of their homes.”

Source: Property 118

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HMRC “Tackling the Hidden Economy”

The HMRC consultation titled “Tackling the Hidden Economy” has identified HMOs and selective licensing in the private rental sector as an option for developing tax-registration checks.

The consultation proposes to tackle different areas of the hidden (non tax paying) economy by making access to licences needed to trade conditional on tax compliance, known as ‘conditionality’.

Click Here to see the full  HMRC paper.

HMRC wish to target Licences issued under the Housing Act 2004 as the government believes they
may be suitable for conditionality.

Selective licensing for private rented properties:

Part 3 of the Housing Act 2004 (the Act) sets out a scheme for licensing private rented properties in a local authority area in England and Wales. Under section 80 of the Act, a local authority can introduce selective licensing of privately rented homes in order to tackle problems in their areas (or any part or parts of them) caused by low housing demand or significant anti-social behaviour. In 2015, DCLG introduced further grounds for implementing selective licensing schemes: poor property conditions, high levels of migration, high levels of deprivation and high crime.

Where a selective licensing designation is made it applies to privately rented property in the are a, and all properties in the private rented sector are required to be licensed by the local housing authority (subject to certain exemptions). Local authorities in England are required to obtain confirmation from the Secretary of State for any selective licensing scheme which would cover more than 20% of their geographical area or would affect more than 20% of privately rented homes in the local authority area.

Houses in multiple occupation (HMO) licences:

A house in multiple occupancy (HMO) is a property rented out by at least three people who are not from one ‘household’ e.g. a family, but share facilities like the bathroom and kitchen. Licences are required for those who rent large HMOs. There are approximately 510,000 HMOs in England and approximately 64,000 of these are currently required to be licensed. The Department for Communities and Local Government (DCLG) recently consulted on changing the definition of mandatory licensing which would bring a further 160,000 HMOs in scope.

Local authorities have the power to introduce additional licensing schemes, which would capture further
HMOs. These licences must be renewed every 5 years.

The Paper goes on to say:

“The government values the private rented sector and wants to see a strong, healthy and vibrant market, which meets housing needs in a professional way.

This includes ensuring that landlords are reporting and paying the tax they owe.

To support this aim, HMRC is increasing its targeted compliance activity across the private rental sector through taskforce activity. It is also encouraging those who have been non-compliant to come forward through activities such as the Let Property Campaign

Applying conditionality to HMO licences could support existing HMRC compliance activity by helping and encouraging more landlords to ensure they are compliant with tax laws before renting out properties.

Similarly, there may be potential for tax-registration checks to be incorporated into selective licensing schemes where appropriate and proportionate.”

Source: Property 118

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Landlords fined for failing to look after property in Camborne

Two landlords who failed to ensure a house of multiple occupation in Camborne was maintained adequately have been fined £2,000 by the courts.

Anthony Pickering and Alan Short pleaded guilty at Truro Magistrates Court this week to breaching several requirements of the Management of Houses in Multiple Occupation Regulations 2006 (“HMO Management Regulations”).

The charges were brought by Cornwall Council in relation to a property at Pendarves Street, Tuckingmill, Camborne.

On the 19 January 2017, Cornwall Council Private Sector Housing Team visited the premises and found that the communal kitchen and bathroom, staircase, rear out building and garden were poorly maintained.

The pair were given an opportunity to put right the problems but failed to do so.

Pickering, aged 57 of St Francis Meadow, Mitchell and Short, 53 or Hunter’s Gate, Okehampton were facing several charges.

The admitted failing to ensure that the common parts of the premises were maintained in good and clean decorative repair, maintained in a safe and working condition free from obstruction in relation to the kitchen and bathroom amenities and that they failed to ensure all hand rails and bannisters were at all times kept in good repair.

They also admitted failing to ensure that outbuildings, yards and forecourts used by residents of several properties were maintained, clean and in good working order.

Two other offences – failing to ensure that the common parts of that premises were maintained in good and clean decorative repair, maintained in a safe and working condition and free from obstruction in relation to the kitchen amenities and that every window and means of ventilation were kept in good repair were withdrawn.

They were ordered to pay a total of £3,847 – £2,000 for the offences committed, £1,647 in prosecution costs and a victim surcharge of £200.

Cornwall Council cabinet member for homes Andrew Mitchell said: “Well managed multi-occupancy houses are an important part of the housing market in Cornwall. However where the standards of management are poor, it can place tenants at significant risk of serious harm.

“In situations such as this, the Council will take enforcement action to protect the health, safety and welfare of occupiers.”

In 2018 it is anticipated that the Government will widen the coverage of the existing mandatory licensing scheme to cover all rented housing shared by five or more people.

To find out more and keep abreast of changes to the private rented sector, landlords are encouraged to join the free Cornwall Responsible Landlords Scheme.

Source: Cornwall Live

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Council collects £30,000 in housing fines from landlords

£31,606 has been collected in fines by Oxford City Council for housing offences since new financial penalty powers came into force in April 2017 to help clampdown on rogue landlords and protect the safety of renters.

The new powers, granted under the Housing and Planning Act 2016, allow local authorities to impose penalties to a maximum of £30,000 as an alternative to prosecution for various housing transgressions. Councils can keep all the income and spend it on private sector housing enforcement.

In a press release, Oxford City Council outlined the fines they have imposed: “In the biggest of the three fines, a landlord who owns a rented property on Garsington Road received financial penalties totalling £25,298 for failing to licence it as a house in multiple occupation (HMO) and uphold HMO management standards.

“The landlord was issued a financial penalty of £7,149 for failing to licence the property as well as an additional £18,149 for four separate fire safety failures.

“The third landlord was given a financial penalty of £1,234 for renting out an HMO on Iffley Road whose licence had expired in 2014. All three landlords cannot be named for legal reasons.”

Councillor Alex Hollingsworth, Board Member for Planning and Regulatory Services, has spoken on the issue: “I’m pleased that the Council can now take swift action against landlords who break the rules, and do it without the costs of taking a case through the courts. We will continue to use these new powers to drive up standards in the private housing sector and protect tenants from unsafe homes and rogue landlords.”

Source: Oxford Student

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‘Alarm bells ring’ as councillors examine ‘understaffed’ privately rented HMO licensing

A councillor has described how ‘alarm bells are ringing’ after considering a report on the ‘pressures’ in respect of licensing the private rented HMO sector by Wrexham Council.

The Homes and Environment Scrutiny Committee were examining this report that details the reduction in staff available to regulate housing standards in privately rented houses of multiple occupancy – known as HMO’s.

The staffing reduction over the years is detailed, with 6.9 full time equivalent staff (FTE) dealing with the licensing workload, which is now at 3.15 FTE. The report notes that there is no additional administrative support or an extra Environmental Health Officer post as there was previously.

The recent ‘Difficult Decision’ savings programme is referenced in the report, saying it “…has identified that the Public Protection Service is lean and that any future savings is only likely to be achieved via a shared service with other Local Authorities in a regional or sub-regional model. This in reality will provide additional resilience, but is likely to lead to a reduction in officers.”

Despite the staff cuts, the report states: “The workload for licensing has increased from the last additional licensing scheme.”

Detail was given to the meeting over the five year inspection periods, with an officer explaining that although the five years is the maximum mandatory inspection period, HMOs that are of concern could be inspected much more regularly such as six monthly.

Lead Member for Housing, Cllr D J Griffiths, did point out that it was a chicken and egg situation at times as without investigating properties the council would not know of any issues to deal with, but without the staff to do so then investigations may not be as frequent.

Officers explained how data is being used, such the energy efficiency certificates that are now issued, cross referenced against registered HMO’s to then deduce which could be the coldest properties. Such data is then referenced with possible high risk occupants, and therefore a priority list is created. Council officers were very careful not to criticise the staffing levels, however were clearly uneasy at definitively saying they had enough resources to deal with the possible issues in HMOs.

Cllr Benbow-Jones raised the issue of properties being rented on domestic mortgages: “These would not appear on buy to let lists, do we have an audit of all the homes in the borough?”

The council officer replied: “If anyone is renting a property is needs to be registered. If there is a property being managed or sub managed, they need to have a licence.

“At the moment the last statistics shows 105% of properties registered, which is clearly wrong, but is based on the census of 2011.”

More detail was given on work done to locate unregistered HMOs, including: “There are probably more HMOs than are legally registered, but it is finding them is the challenge. We look at various sources, council tax bills, housing benefit information, or even looking on the internet to see what is to let locally.”

Cllr Griffiths said: “If you know of people abusing the system, then let us know.”

Cllr Alun Jenkins thanked officers for a ‘very honest report’, adding: “The picture presented has set alarm bells ringing. I knew there were problems but did not know the extent. The bottom end of the private rented sector is dire.”

Comparisons were made about the huge Housing Revenue Account budget inside Wrexham Council that is managed by a sizeable team, and looks after around 11,000 council houses. Cllr Jenkins pointed out that with data given ‘there is a small team that works their socks off on the private rented sector’ looking after 11,000 houses.

“It is a dire story in the decline of the staff numbers. We have to do it because of austerity, but we are asking too much of the officers there. They can’t cope with the size of the problem.

“There are so many properties that are privately rented operating below the radar. We are working on percentages, but we do not know the total numbers, and we can’t find out. The small team simply does not have the resources to locate all the private rented property in Wrexham.”

Cllr Jenkins gave anecdotal evidence on how private rental issues are brought forward to the council with a response of “it was not registered therefore we didn’t know about it” being given as a reply.

Cllr Griffiths said: “I won’t disagree with what Cllr Jenkins has said.”

Cllr Skelland briefly spoke to say he was unaware of any HMO’s in Bronington (his ward) ‘thank goodness’, adding such issues “must be demoralising.”

Cllr Graham Rogers enquired about enforcement methods, and what actions are taken against landlords. In a detailed answer a council officer explained the various levels of intervention, adding an overview of a recent case where a landlord who was in prison had a property with a broken boiler – padlocked away so unfixable. The meeting was told the landlord in question has got a Christmas present from the council, a large bill.

Chairman of the meeting Cllr Paul Pemberton voiced his concern at the ‘understaffing’, and said: “With the under the radar properties, do you feel if you had more staff you could investigate that further?

“My concern is if you have properties under the radar we could have major health and safety issues, problems with flues, carbon monoxide and the like and we would not know.”

“I applaud what you are doing, and do not envy the department. I feel a machete has been put on offices and the department to cut rather than a stanley knife. This could be a major health and safety issue.”

The officer replied: “If there was more staff we would have more resources to identify properties.”

Councillors then shared various snippets of information from either what they had encountered on planning committees or in their wards. Cllr Rodgers observed: “We get registered social landlords not bringing their properties up to standard, then they have the audacity to submit more planning applications.”

Cllr Jenkins told the meeting there were ‘a number of HMOs in the town centre with no licence for more than three months, they are amongst the worst we have’.

Councillors looked to form a recommendation, led by Cllr Jenkins, settling on thanking officers for the report, with additional recommendations to restore staffing to two years ago and oppose any moves to share the service with another authority to save money. These recommendations were unanimously approved.

Interestingly in the meeting the council officer pointed to the Rent Smart Wales website as it has a public register that you can pop an address in and see if it is registered, and who the agent is (if there is one) – you can find the form here.

Source: Wrexham.com

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£3,300 fine for owner failing to keep HMO safe for tenants

The landlord of an HMO has been fined £3,300 for failures to meet his obligations, particularly regarding fire safety.

At Northampton magistrates court Nazrul Islam pleaded guilty to five offences in relation to the property in the town, including failure to comply without reasonable excuse to two licence conditions, two management regulations breaches, and works detailed on an Improvement Notice.

Islam breached management regulations which left the occupants of the property at risk of not being able to safely escape from the property in the event of a fire.

He also failed to comply with an Improvement Notice served on September 8 2016 which required him to make alterations to the layout of the property to ensure that the four occupants were adequately protected in the event of a fire.

He pleaded guilty to not keeping the rear garden of his property in good order, leaving exposed brickwork in the kitchen, and failing to ensure that the electrical installation in the house was at all times kept safe and in proper working order.

“We will now monitor the situation closely with this particular property to ensure the work needed is carried out adequately and in a timely fashion” says a local council spokesman.

The court fined Islam £3,300 and ordered him to pay the council’s £1,890.26 legal costs along with a £170 victim surcharge.

Source: Letting Agent Today

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How buy-to-let landlords can stay profitable in 2018

A casual observer may be forgiven for regarding buy-to-let as a poor investment right now thanks to new taxes, increasing regulation and rising interest rates.

But think again – in reality, it still provides strong returns for those who research what to buy and where.

Undeniably, the sector is tougher than before but one truth should guide investors: demand for homes to rent is growing faster than the supply of homes to let.

Research based on the government’s English Housing Survey and other reports shows there are now 4.5 million privately rented homes making up 20% of UK households; the estate agency Knight Frank suggests this will hit 24% by 2021.

High house prices (first-time buyers now pay £409,975 in London or £207,693 across the rest of the UK, says the Halifax bank) mean growing numbers have no alternative but to rent privately.

With demand high and growing, how do landlords optimise profits in the current climate?

Consider incorporation

Changes to mortgage interest tax relief are underway and once completed in 2021 will prevent landlords with buy-to-let mortgages from deducting interest payments or other finance-related costs from their turnover before declaring their taxable income. The result could be significantly higher tax payments.

However, landlords who own properties as a limited company will instead pay corporation tax – currently 20% – on their profits alone.

Additionally there may be a capital gains tax benefit. Currently individual landlords with buy-to-let properties pay 40% capital gains tax on their total capital appreciation when they sell them.

Many companies, however, are not taxed on the share of the appreciation that is due to inflation, currently running at 2-3% annually – that could save thousands.

But there are pitfalls too; company set-up costs may be based on current market values of properties, so some experts suggest corporate structures work best for future investments, not existing ones.

Always seek out an independent financial adviser or accountant to help.

Switching properties to high-yield areas

Many surveys show the best yields are now in the north of England, with its low capital values and reliably strong rents.

TotallyMoney recently analysed over 500,000 homes across 2,700 postcodes, finding the bulk of the 25 highest yields (ranging up to 12.63%) in the north; none was in London or the south east.

If you do sell to buy elsewhere, remember some evergreen rules: locations with strong employment stats and transport links and substantial student populations, typically provide the best returns.

But always check local agents to assess on-the-spot market conditions.

Consider short-term lets

Letting out a property Airbnb-style for a few nights at a time can be an excellent income supplement if done between longer-term tenants.

On a rent-per-day basis returns are higher than for traditional buy-to-let but you must inform lenders and insurers and arrange someone to hand over keys, clean the property, provide fresh linen as appropriate and be on call in the event of emergencies.

Remember most local authorities have a maximum – usually 90 nights per year – that homes can be used for short lets before they require planning consent for this kind of use.

Remodel to become a home in multiple occupation

If your property permits and the local market shows demand from young renters in particular, seek planning consent to turn it into a home in multiple occupation (HMO) delivering larger monthly returns from a greater number of tenants.

An HMO is rented by at least three people who are not from one household and who share facilities like the bathroom and kitchen.

A large HMO is defined as one let to five or more people who form more than one household in a building with three or more storeys.

HMOs involve strict licensing and safety regulations and much greater maintenance in addition to the costs of conversion. Nonetheless, this is regarded as the most profitable buy-to-let investment; using a lettings agent means they (not you) have to know the regulations and manage tenants. And agents’ charges to landlords are tax-deductible too.

Optimise your borrowing

The total you can borrow is linked to a property’s value so if older buy-to-lets are revalued you may be entitled to a higher loan-to-value with a wider choice of products – and at better rates.

Monitor the mortgage rate for each buy-to-let loan you have and check how far through the initial deal you are.

If you have finished the initial deal you will be free to switch, probably at no cost – this is particularly sensible if you have fallen on to your lender’s standard variable rate, which often happens automatically.

With more interest rate rises likely, a move to a fixed rate may be best. Again, an independent financial adviser is a good idea.

Source: Mortgage Introducer

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Government inspector overturns decision to use new legislation to stop expansion of student house in Falmouth

Proposals to change a bungalow into a house of multiple occupation (HMO) in Falmouth that fell foul of new legislation have been allowed on appeal.

Dylan Stephens already houses five people at the house in Dracaena Avenue, but had to apply for planning permission to increase the number to nine.

He said he was only applying “under protest” as he has operated it as an HMO for 14 years, but Cornwall Council turned it down.

Although any HMO for more than five people has always had to seek planning consent, Article 4 legislation, which came into force in June, means schemes can be refused if it is felt the area is at saturation point.

Despite being recommended for approval by planning officer Laura Potts, Cornwall Council’s planning committee used the policy to refuse it saying the area “was identified as containing a large number of HMOs”.

But Mr Stephens appealed both the change of use and a second application to add a loft extension. The first was upheld, but the planning inspector refused the extension because of the impact on neighbours.

Mr Stephens said in his application: “The deeds for the property state it can be used as a residential house or high-quality boarding house. Falmouth has an enormous demand for shared accommodation without the need to take up any more of the much-needed family housing.

“It has housed many local working people who have been unable to afford to live in a self-contained unit.”

The application received objections from residents, who raised concerns about the provision of just four parking spaces and suggesting it would increase noise problems already experienced from the premises.

One objector said: “It has already been enlarged to six bedrooms, that’s a 200% increase. To enlarge it even further to nine bedrooms would be 350%. That is massive over-development and overcrowding of a small site.”

Falmouth Town Council also objected to the application, saying it was over-development and unneighbourly and went against the emerging neighbourhood plan and Article 4 directive.

Planning inspector Chris Cheswell said, however, that as it was already being used as an HMO there was no change and therefore the Article 4 direction did not apply.

He said: “I am aware of the neighbouring occupier’s concerns regarding potential noise and disturbance. Although I do sympathise with these concerns, the property is already in use as HMO and it is not clear that an increase of three additional persons would materially change the existing situation.

“While I am aware of some previous complaints, there is relatively little before me to demonstrate that noise is an ongoing problem. Indeed, I note that the council’s environmental protection officer has no objection to the proposal.”

The property has a two-storey extension at the back and a single-storey extension is currently under construction having previously gained permission, but the inspector dismissed the second appeal for a loft extension because he said it would be overbearing and affect the living conditions of neighbours.

“Although I recognise that the proposal would provide a modest amount of additional accommodation within the town, this is not sufficient to balance in favour of the development.”

Source: Cornwall Live

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When HMO’s go BAD!

Owning one or preferably several HMO (Houses of Multiple Occupancy) properties can prove to be an extremely lucrative investment strategy.

If managed correctly and fully occupied – then HMO properties are arguable one of the best property types to invest in.

Get it wrong, though, and you will find them unforgiving and potentially disastrous.

I have often said to the enthusiastic newbie HMO investor (often fresh from a training course) that HMOs on paper do look like great investments, but you really need to know your market before you invest and have expert management in place.

What the training provider often misses out of their well-formed courses is the social dynamics that exist within HMOs and the potential impact that can have on the bottom line!

HMOs are also subject to lots of regulation and changing legislation, if you don’t understand this and consequently fall foul, then the fines can be huge.

Here’s just a few examples of how and when a HMO can go BAD:

• Landlord prosecutions
Managing a HMO is far more complex than managing a simple buy-to -let. You must comply with HMO management standards and any applicable HMO Licence, and failure to do so can lead to colossal fines. Landlords need to be conscious of room sizing, amenity provisions and fire safety to name just a few. Not a week goes by in which I don’t read about another HMO Landlord being fined upwards of 20k!

• There’s a higher turnover of tenants in a HMO
By their very nature the tenants of a HMO are transient. Nobody grows up dreaming of settling down in a HMO – for most people this type of accommodation is temporary or a stepping stone, suiting a particular requirement at a specific time. Consequently, tenancies are shorter and void periods are more likely. If you get this wrong, you can find yourself with two or three empties and hovering around break-even point before you know it!

• Saturation
Understanding the local market is essential when buying an HMO, and it’s especially important to look out for any Article 4s that may have been imposed by the local authority restricting the development of further HMOs. This is a prime indicator that an area may be reaching saturation, and in such places you can quickly find yourself with declining rents and increasing voids.

• Parties often cause more damage than the deposits
HMO’s are synonymous with anti-social behaviour. The damage caused by just one wild party can be destructive – and any deposit barely covers the cost of the damage. And therein lies another problem when it comes to HMOs; rarely do young professionals – who tend not to throw wild parties and tend to pay their rent on time – opt for a room in an HMO. The result is, as the owner of an HMO, you can end up with potentially problematic tenants quite a lot of the time, with the typical tenant profile being students and low-income workers.

• One bad apple (or tenant) can upset the entire apple cart
I have seen on many occasions that a healthy 6 bed HMO can be reduced to a single tenant in a matter of days. Typically, one bad tenant can create so much disturbance in a building that the other tenants just leave without notice, leaving the Landlord with the challenge of removing the offending tenant and reoccupying the building simultaneously.

Source: Simple Landlords Insurance

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Council urged to “rethink” Fife town’s HMO policy

The findings of Dr Ross Brown’s study suggest that the growing levels of ‘studentification’ in private residential areas and HMO policy changes could be having a significant impact on residential areas of the town. It says that this could lead to lower levels of owner-occupied properties, restrictions in housing for local residents, house price inflation, and an increased tension between the university and local residents.

The study follows data released last month, which showed that since 2011 Fife Council had issued 753 HMO licences within St Andrews. Speaking about the findings, Dr Brown said: “Large concentration of HMO within the local housing markets can have highly complex and counterproductive effects for local communities.” He added that this could have: “Longer term implications for the long viability of public services, causing feels of anxiety and disempowerment with in the local community.” Dr Brown said the partial moratorium implemented by Fife Council could be having “unintended negative consequences” and called for an “urgent rethink”. He said: “It should impose a comprehensive moratorium across the whole of the town on new HMOs. With the exception of student housing and halls of residence, no further private sector HMOs should be licenced until the council has devised a proper, coherent and evidence-based planning and housing strategy for St Andrews.”

Helen Wilkie, housing manager for Fife Council, said: “A moratorium was introduced in St Andrews town centre in 2011 and in 2016 we commissioned an independent assessment of this approach. “In January we’ll be holding a workshop with councillors to look at the consultants’ findings and explore options for the future. We hope to report to committee with proposals as early as February.” The council added that while the moratorium means no new planning applications for HMOs are granted in the town centre, existing licences have to be renewed every three years or re-issued to new owners who buy a licenced property. Each licence that’s issued is classed as a new licence even if it is for an existing house of multiple occupation.

Source: Fife Today