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New HMO rules expected in October amid warning that complexity of licensing is driving landlords out

The Government is planning to introduce an extension to rules on Houses in Multiple Occupation (HMOs) in October, according to Housing Minister Dominic Raab.

The Government set out its proposals last year, which involve mandatory licensing for properties — regardless of height — that are occupied by five or more people from two or more households.

Currently, HMOs that must be mandatorily licensed are of three or more storeys.

The new rules still have to be approved by Parliament, but in response to a question in Parliament by Liberal Democrat MP Wera Hobhouse, Raab set out a timetable for their introduction.

He said: “The Government proposes to extend the scope of mandatory houses in multiple occupation (HMO) licensing, so that a licence is required for HMOs with five or more occupiers.

“We published our response to our HMO reforms consultation in December 2017, and we plan to lay the necessary regulations before Parliament shortly with a view to bringing them into force (subject to approval) in October 2018.”

New rules will also come into force setting minimum size requirements for bedrooms in HMOs. As part of the licensing requirements, local councils will be able to make sure that only rooms meeting the standard are used for sleeping.

Rooms used for sleeping by one adult will have to be no smaller than 6.51 sqm and those slept in by two adults will have to be no smaller than 10.22 sqm. Rooms slept in by children of ten years and younger will have to be no smaller than 4.64 sqm.

Meanwhile, the National Approved Letting Scheme (NALS) has warned that more and more landlords will leave the private rented sector (PRS) as they struggle with rising costs and the complexity of licensing schemes.

NALS yesterday revealed findings that licensing fees can be vastly different depending on locations, with London boroughs charging significantly different fees.

It said that following the Government’s decision to widen the mandatory HMO licensing scheme to another 160,000 properties across England, the issue of fees was even more important because increasing costs could also drive rents up across the country.

NALS research, conducted by London Property Licensing, shows that in 2017, licensing fees for a three-storey HHMO with five unrelated occupants can range from £125 (City of London Corporation) to £2,500 (Lewisham Council).

It found that in 23 of London’s 33 boroughs licensing fees are over £1,000 for a similar sized property. Overall, average fees have climbed every year since 2014 and the average cost has risen by 12.9% in 2016/17 and a further 5% this year (standing at £1,119).

There are now 29 separate additional and selective licensing schemes in operation across London with more schemes on the way, which means that landlords can potentially face licensing their properties through different schemes in different parts of the city, NALS said.

Isobel Thomson, NALS chief executive, said: “We should be clear: licensing HMOs helps protect tenants and drives up standards in the PRS.

“At the same time, the maze of licensing schemes operating in the capital is a huge financial and administrative burden on landlords, with some councils seeing them as a new revenue stream.

“With landlords under pressure from a host of regulatory changes, this increased burden is likely to push them out of PRS exactly at a time when they have a key role to play in providing much-needed housing.”

Source: Property Industry Eye

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Company director loses court appeal following claims of ‘significant overcrowding’ at Leominster property

A LANDLORD who allowed ‘significant overcrowding’ at a Leominster property has lost her appeal following a two-day trial.

Mayya Kostyuk, 58, of Bishopstone, Hereford, along with her company Herford Housing Solutions Limited, had appeals against eight housing-related offences under the Housing Act 2004 dismissed at Hereford Crown Court earlier this month.

Officers from Herefordshire Council’s Environmental Health Housing team gave evidence as to how Company Director Kostyuk and Herford Housing Solutions Limited had breached conditions of their licence for the House in Multiple Occupation (HMO) at Broad Street in Leominster.

The court heard that council officers obtained a warrant and entered the property in March 2015. They found significant overcrowding, a person sleeping in a prohibited room, and failure to maintain the protected means of escape in case of fire.

The case was originally brought by Herefordshire Council’s Environmental Health and Trading Standards Service to Herefordshire Magistrates Court in May 2017, but was subsequently appealed by Kostyuk and Herford Housing Solutions Limited.

Recorder Judge Brand, Q.C. heard the defence contend that the property was a hotel and not an HMO.

Kostyuk was initially ordered to pay a £1,750 fine and £1,750 costs.

Following the case Marc Willimont, Head of Regulatory and Development Management Services for Herefordshire Council, said: “This was one of the worst cases of overcrowding our officers have seen in a licensed House in Multiple Occupation – one tenant was even found sleeping in a prohibited boiler cupboard with no windows.

“Both the company and the director Mayya Kostyuk put profit before the lives of their vulnerable tenants.

“Herefordshire Council is taking housing crime seriously, and this result sends a clear message to other criminal housing landlords that they cannot hide behind their company and such behaviour will not be tolerated.

“We will continue to protect tenants’ safety and the livelihood of our decent housing landlords, by ensuring criminal landlords are brought to justice.”

It was Herefordshire Council’s first housing conviction of the director of a company, under offences by bodies corporate, meaning Kostyuk was also personally liable for the actions of the company.

Source: Hereford Times

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Leading PropTech entrepreneur backs stricter HMO regulations

The chief operating officer of a leading PropTech company says government proposals to increase mandatory licensing of Houses in Multiple Occupation provides an opportunity to crack down on “criminal landlords” operating in the private rental sector.

Neil Cobbold of automated rental payment provider PayProp says the new rules could also boost living standards for private renters while simultaneously reducing the number of overcrowded properties.

Under proposals from the Department of Housing, Communities and Local Government the current HMO licensing – applicable to properties with three or more storeys – will be extended to all properties occupied by five or more people from two or more households.

It has been estimated that the rules will bring an additional 160,000 homes under mandatory HMO licensing – around 60,000 properties are now included.

Cobbold says that while landlord licensing schemes are often criticised as money-making projects for local councils, bringing all HMOs under one framework appears logical.

“With HMOs adapting and more of these now two storeys or fewer, it’s important that the legislation is brought up to date. Overcrowding has become one of the biggest issues in the rental sector and this increased regulation could contribute significantly towards solving the problem” he says.

There is currently no date set for the introduction of extending HMO licensing, which has yet to be formally agreed by Parliament. However, the government says it is hoping to enact legislation later this year.

Other outstanding lettings legislation and policies include the ban on upfront letting agent fees, the movement to count private rent payments towards tenants’ credit scores, the reform of the leasehold sector and the national blacklist of criminal landlords and letting agents.

Cobbold adds: “For all these measures to have a long-term positive impact on the industry, there must be appropriate action and enforcement. The more proposals that are made and consultations carried out, the more we risk further delay to policies.”

PayProp recently encouraged letting agents to respond to as many consultations as possible, noting that as part of the consultation for the proposed HMO measures, only 11 of 395 responses were from letting agents – representing less than three per cent of the total number of respondents.

“It’s unlikely that the government will stop regulating and monitoring the rental sector so closely in 2018, so it’s vitally important that when presented with the opportunity, letting agents have their say and do their utmost to shape future legislation that benefits all parties,” Cobbold concludes.

Source: Letting Agent Today

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HMO properties continue to deliver superior yields

HMO properties produced the highest yields in 2017, at 8.9 per cent – according to the latest buy-to-let index from Mortgages for Business.

But while this looks like an attractive investment for landlords, Mortgages for Business points out that yields on this type of property have fallen over the past year.

This is the first time since their Complete Buy To Let Index launched in 2011, that average yields on HMO property have been below 9 per cent.

Yields on multi-units, such as blocks of flats came a close second in 2017, generating an average yield of 8.1 per cent. This was also down on the previous year, where  yields were 8.3 per cent.

In contrast yields on ‘vanilla’ buy-to-let properties generated a lower but more consistent 5.6 per cent return in 2017.

Mortgages for Business sales director Jeni Browne says: “The attractiveness of HMOs as a buy-to-let investment has increased in recent years, not only because of the higher yields on offer but because serious investors are keener to diversify their portfolios.

“With more landlords vying for these properties, prices have been pushed up more quickly than the rents, which is one of the main reasons we are seeing yields drop.”

She added that the fact fewer new HMO licences were granted may also be having an impact.

The average value of a vanilla buy-to-let property was £305,283 in 2017, a 19 per cent decrease on average values in 2016 (£375,409) according this data.

Browne says this indicates that landlords are seeking lower value properties. She adds  anecdotal evidence suggests landlords are increasingly looking further north to purchase buy-to-let properties.

Browne says the benefits of this strategy include paying less stamp duty, future capital growth and scope for rental increases which may allow for slightly higher yields.

Whilst there was no change in the number of lenders operating in the sector in Q4 2017, the number of buy-to-let products in the market continued to rise.

Mortgages for Business says there has been a 444 per cent increase in the number of since 2011.

Browne adds: “It is widely anticipated that buy-to-let lending will contract this year in response to the tax and regulatory measures being imposed on the sector. I would expect product number to peak in Q1 2018, and we have already seen some lenders trimming their ranges leaving a core of products designed to reflect the changing needs of landlords.”

Source: Mortgage Strategy

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HMO National Minimum Room Size and Suitability

The government has now published its response to its consultation on HMOs and residential property licensing. Alongside proposals to extend mandatory licensing, the government has announced that it will proceed with introducing a national minimum room size for bedrooms in licensed HMOs. The proposals, which were detailed in the government’s earlier response paper, will prohibit landlords from letting rooms in HMOs to a single adult where the usable floor space is less than 6.51sqm and 10.22sqm for a room occupied by two adults. It will be mandatory for a HMO licence to include a condition that states the maximum number of persons who may occupy each specific room in a property as sleeping accommodation.

Room size in HMOs is frequently a hotly disputed issue between local authorities and landlords and has resulted in a number of senior court decisions in recent years. This blog looks at some of the issues surrounding room size and the potential impact of a national minimum room size.

Currently there are no mandatory HMO conditions or prescribed standards relating to room size

The Housing Act 2004 provides for certain mandatory conditions that must be included in a HMO licence. For example, a licence must contain a condition requiring the licence holder to produce a gas safety certificate (if applicable) and ensure smoke alarms are installed. While there is a power for the Secretary of State to add further mandatory conditions, since the Housing Act 2004 was enacted there have been no mandatory conditions relating to room size. Local authorities regulate room size in HMOs by relying on their discretionary powers to impose licence conditions which restrict or prohibit the use or occupation of particular parts of the property.

The Housing Act 2004 does require the local authority to be satisfied that the house is reasonably suitable for occupation by not more than the maximum number of households or persons or that it can be made so suitable by the imposition of conditions. The local authority cannot be satisfied of this if the house fails to meet prescribed standards for occupation. Again, while a number of standards have been prescribed by regulations, there has never been a prescribed standard relating to bedroom size.

The government intends to change this by both prescribing a minimum room size standard and making it mandatory for licences to include a condition stipulating which rooms in the HMO are suitable for sleeping accommodation and the maximum number of persons who can sleep in each room.

Local Authority Standards – Clark v Manchester City Council

Because there are no statutory prescribed room size standards many local authorities have developed their own guidance setting out the local authority’s view on what size standards it considers acceptable in HMOs. This is to both assist local authority officers with their decision-making and to advise landlords. The problem with this is that local authorities frequently fall into the trap of treating their guidance as if it is a statutory prescribed standard and granting or refusing to grant licences on the basis of whether bedrooms meet their own standards rather than considering the suitability of the property as a whole.

This issue was highlighted in the key Upper Tribunal case of Clark v Manchester City Council [2015] UKUT 129 (LC). In that case the Upper Tribunal concluded that the Council’s adoption of mandatory minimum size standards for bedrooms in HMOs was unlawful. While local authorities were perfectly entitled to produce guidance on room size and while their views should be given weight by the tribunal, local authorities were not able to apply their standards as if they had statutory force. Ultimately the question is whether the property as a whole is reasonably suitable for occupation by a particular number of people. Clark made it clear that it is not permissible for local authorities to automatically prohibit the use of certain bedrooms simply because they fall below the standards set out in their own guidance.

Is the type of occupant relevant to room size?

The type of occupant has also been shown to be relevant in room size cases. This was illustrated in the case of Nottingham City Council v Dominic Parr and Trevor Parr Associates Ltd [2017] EWCA Civ 188which was heard last year in the Court of Appeal. The Council’s guidance suggested that 8sqm was an acceptable bedroom size and the licences issued prohibited the use of two attic rooms until the usable floor space had been increased. The First-Tier Tribunal had deleted the condition and imposed an alternative condition that the rooms could be used by full-time student who resided in the room for a maximum of 10 months of the year. This was upheld by the Upper Tribunal and the Court of Appeal concluded that there was nothing unlawful about a HMO licence restricting occupation of a bedroom to students only. The Supreme Court has granted permission to Nottingham City Council to appeal the decision.

How will the introduction of a minimum room size standard change things?

First, it will mean that landlords will have to stop letting rooms that fall below the nationally prescribed standard. If they do not then they will be in breach of licence condition and could be prosecuted by the local authority or alternatively receive a civil penalty under the new Housing and Planning Act 2016 provisions. Rooms below the prescribed standard that have previously been found suitable for occupation will no longer be capable of being let separately as sleeping accommodation by any person aged over 10. It is important to note that the new mandatory condition will not affect existing licences but will only apply to licences granted on or after the commencement of the new regulations. This includes renewals of existing licences. Even then there will be transitional arrangements to allow landlords affected by the new rules time to reduce the number of persons in occupation.

Second, local authorities will continue to be entitled, and are encouraged, to produce their own standards complete with figures which set out what size the local authority considers acceptable for sleeping accommodation. This can be higher than the national minimum. For example, in the case of Parrdiscussed above Nottingham City Council were of the view that 8sqm is an appropriate room size. As the government made clear in its response paper ‘the minimum room size is simply a standard below which a room cannot be used as sleeping accommodation. It is not intended to be the norm or the lowest common denominator.’ However, what local authorities are not able to do is apply their standards as if they have statutory force and automatically prohibit the use of rooms that fall below their own standards. To that extent, the decision of Clark will continue to be relevant in room size disputes.

Third, it will not mean that rooms that meet the new minimum size will automatically be deemed suitable for occupation. In fact, if applied correctly, the introduction of a national minimum room size should have limited impact on rooms that meet the national standard. As is the case now, the question of how many persons or households can occupy a HMO is not dependent on calculating the floor space of each bedroom in isolation. It comes down to whether a specific property, taken as a whole, is reasonably suitable for a certain maximum number of persons or households. The only difference now is that rooms below the national minimum room size will automatically be ruled out as being suitable for sleeping in. However, these rooms can still be taken into account when assessing the property as a whole. They could, for example, provide useful storage space for the occupants of a property freeing up floor space in the bedrooms.

The regulations still need to be approved by both Houses of Parliament but it seems likely that the new standard will come into force sometime later this year. While the introduction of a national minimum room size will bring some clarity to the HMO room size debate, questions surrounding suitability and how local authorities apply their own standards will not disappear. We are likely to see new challenges in the tribunals and senior courts as room size continues to be contested by landlords and local authorities.

Source: Lexology

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Record Fine For Luton Landlord

Safety breaches in his buy to let HMO property have led to a record fine for a Luton landlord.

Alyas Hussain of Dunstable Close, Luton, was fined £70,000 and ordered to pay additional costs of £1,148.79 plus a surcharge of £170 for a number of dangerous breaches of legislation designed to protect tenants.

The huge amount sets a new record fine for the council, and was imposed as the landlord was seen to have a total disregard for the safety of his tenants.

The HMO in question was found to be ‘overcrowded’, while tenants’ lives had been ‘put at risk’ through a lack of fire doors, automatic fire detection and heat detection, in addition to ‘obstructions to stairs and exits in the event of fire’.

The property also had unfinished electrical works throughout, with bare wires ‘hanging from ceilings and out of walls’, with bathrooms also said to be in a ‘terrible state of repair’.

Ceilings were found to be damaged in the property and an electrical meter had been tampered with, while the gas meter ‘had to be shut down due to a leak’.

The chair of Luton magistrates court said when sentencing: ‘It is clear to us that these offences are motivated by profit without any recourse to regulations or court processes. The defendant has two properties not subject to mortgage and received rent from the HMO in excess of £19,000.’

Tom Shaw, portfolio holder for housing, added: ‘We will not tolerate landlords who rent properties which fail to meet standards. The council has a commitment to ensure that private landlords in Luton do not take financial advantage of vulnerable tenants and put their lives at risk. We will not hesitate to prosecute landlords who show a disregard for the law and their responsibilities towards occupants.

‘At the start of 2018 this conviction sends out a really strong message to landlords: in every sense of the expression ‘Get your house in order’ or we will be on to you.’

Source: Residential Landlord

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Plans to convert Wrexham town centre offices into HMO is allowed on appeal

Plans to convert town centre offices into a House in Multiple Occupation have been allowed on appeal.

Wrexham Council’s planning committee had refused permission for the development at the former ISP Architects office in Regent Street, Wrexham.

Members cited fears about living conditions for occupants, particularly the lack of external amenity space.

But Planning Inspectorate officer Declan Beggan has overturned the committee’s decision, meaning the development can now go ahead.

It is proposed to convert the property into a five-bedroom HMO.

Mr Beggan said: “The proposed development would provide an enclosed amenity area to the side and rear of the property that would be used for drying purposes, and a bin and cycle store.

“The council have not provided any adopted Local Planning Guidance (LPG) or other approved standards that relate to the provision of amenity space for the proposed development.

“In the absence of such standards there is no reasonable measure of what constitutes a substandard amenity area as referred to by the council in its refusal notice.

“Nevertheless, along with their appeal bundle the council provided a copy of an adopted LPG entitled ‘Conversion of Dwellings to Houses In Multiple Occupation’ and whilst strictly speaking related to the conversion of dwellings as opposed to business premises, nonetheless it gives an indication of the council’s aspirations in terms of provision of amenity space serving Houses in Multiple Occupation (HMO).

“It states that where proposals lack garden space, then space should be provided on the premises for drying clothes and for bins storage – the proposed development would provide for drying and bin storage areas.

“Based on my observations whilst on site visit and in the absence of any minimum standards set by the council, I consider the amenity space being proposed at the property as indicated on the amended plan to be adequate to serve the needs of future occupants.

“In terms of the wider amenity/recreational needs of future occupants of the development I consider these would be adequately met bearing in mind the site’s location within a built up area of Wrexham where numerous public open spaces and parks are within a reasonable walking distance.

“I therefore conclude the proposed development would provide acceptable living conditions for future occupiers with particular regard to the provision of external amenity space and as a consequence would not run contrary to policy GDP1 of the UDP.”

Prior to the original meeting, Offa Community Council had objected to the proposal, citing a detrimental impact on the conservation area in which the property falls.

But now approval has been granted, the first floor will be turned into four bedrooms with a communal bathroom while the ground floor will house a further bedroom as well as a communal living space, kitchen, toilet and shower.

Offa Community Council members felt the change to the front of the property, formerly occupied by ISP Architects, would have a significant detrimental impact on the terrace of business on the street.

They added that to introduce a HMO to the traditionally non-residential area of established businesses would not be in keeping with the conservation area.

Source: The Leader

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Northampton Borough Council Considers Increasing Housing Enforcement

Northampton Borough Council could impose fines of up to £30,000 on rogue landlords and letting agents for misconduct in future.

Northampton Borough Council is planning to increase its housing enforcement team in order to better crack down on unsafe privately rented accommodation. The Borough Council has confirmed that the new fines are set to be imposed to ensure that privately rented accommodation is ‘safe, well managed and fit for purpose.’

The council also met last night to decide on whether to enforce a ‘section 4’ rule which would mean that landlords are required to obtain planning permission before converting family homes into houses in multiple occupation (HMOs).

A HMO is defined as accommodation with over three separate tenants. HMOs have received poor publicity from residents groups and communities as they occupy family homes. There have also been complaints that they lead to rubbish strewn streets and excessive amounts of cars.

Northampton borough council claims that their current private sector hosing enforcement team is ‘too small’ to be able to deal with the vast numbers of substandard, unlicensed and badly managed privately rented homes.

Council cabinet member for housing, Councillor Stephen Hibbert, said: ‘The Government has given local authorities the power to impose fines on landlords and managing agents, as an alternative to prosecution which can be more expensive and take a long time. Our housing enforcement team has already identified almost 500 properties which it knows or suspects are HMOs and should be licensed. The team is also aware of other substandard privately-rented accommodation in the borough which it doesn’t currently have enough time to tackle.’

Additionally, new government legislation also allows for an extension of rent repayment orders. This could result in up to a year’s rent being returned to those who paid it, be that the tenant or the council in the case of those whose rent is met by housing benefit. This is also likely to shake up the buy to let sector in Northampton.

Source: Residential Landlord

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Armley: Another shared house plan knocked back by council

Leeds City Council has continued its hard-line stance against plans for shared houses in Armley by refusing ANOTHER planning application.

A revised planning application for a house in multiple occupation (HMO) would have seen six single bedrooms created in the end terrace family home in Brooklyn Place – down from original proposals submitted last August for nine beds.

The plans received letters in both opposition and support from local residents.

In refusing the application, a council planning report says:

“The applicant argues that this will provide a much needed alternative form of low cost housing for this area. However, the area is not considered to be lacking in HMO’s or flats and there is no known need for such.

“There is however recognised to be a need for family housing across the district, and this would provide accommodation for a larger or extended family unit. The loss of this unit is therefore objected to.

“The intensification in use of the property is also considered to result in harm to amenity, through overcrowding (demonstrated by lack of bathroom facilities), noise and increased parking demand. The revisions put forward by the applicant have not overcome these concerns. The change of use is therefore objected to. “

There has been a spate of  HMO refusals by the council in Armley following a landmark decision last August which refused plans for a HMO in Conference Road. Developers are currently appealing against that decision. Similar plans in Barden Grove were also refused by the council.

A HMO is a house which has been converted entirely into bedsits or other non-self-contained accommodation. More details here.

Source: West Leeds Dispatch

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Twickenham landlord prosecuted for letting out his house to more than five people without a licence

A Twickenham landlord has been fined nearly £5,000 for illegally renting out his property as a house of multiple occupancy (HMO).

Maksim Arnautov bought the three-storey home in Whitton Road, which is also where he lives, in 2012.

Under the Housing Act 2004, properties which have three or more storeys and are rented out to five or more people must have a license.

The council carried out an investigation last year and found that despite more than five people living in the property, Arnautov did not have a licence.

Following a hearing at Lavender Hill Magistrates’ Court on January 9, Arnautov was found guilty of operating a licensable House in Multiple Occupation (HMO) without a licence.

He was fined £3,000, must pay a victim surcharge of £170 and £1,466 to the council in compensation.

Councillor Mark Boyle, Richmond Council’s cabinet member for housing, public health and community safety, said: “Following an investigation by council officers, this is a great result.

“This prosecution sends out a clear message that unscrupulous individuals cannot hide.

“It is our job to protect tenants’ safety and we will take appropriate enforcement action if landlords fail to obtain a licence or manage their properties.

“I am pleased that the courts are supporting the council in this approach through the sentence and fine issued.

“The growing issue of HMOs in our borough continues to be a problem.

“And whilst we will continue all our work on the ground, we will continue to make it clear to the Government that it must prioritise action over HMOs before sub-standard, over-crowded housing, and all its flow-on effects begin to impact the character and quality of life within our borough.”

The case comes one week after the Government announced a crackdown on HMOs.

Source: Richmond & Twickenham Times