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Back to basics – why the increase in interest in HMOs and MUFBs

Houses in multiple occupation (HMOs) have become much more popular over the past few years.

So what exactly are HMOs, how do they vary from multi-unit freehold blocks (MUFBs) and why should you be interested in them?

The definition of an HMO as defined by the government is: ‘A property rented out by at least three people who are not from one ‘household’ (for example a family) but share facilities like the bathroom and kitchen.’

In comparison an MUFB is multiple, separate, independent residential units held under a single title.

So a unit of self-contained accommodation to put it clearly, this means it has its own bathroom and toilet and a kitchen or cooking area for the exclusive use of the individual or household living there.

If the individual or household needs to leave the unit or flat to get to the bathroom or kitchen, then it is not self-contained.

Examples of an MUFB include: purpose-built blocks of flats, houses converted into flats or it can be a number of houses all held under one freehold title.

It is also important to note that properties which do not fall within any particular use class for the purposes of planning permission are classified as ‘sui generis.’

This is Latin for ‘of its own kind’ and means that more bespoke and local rules will exist. Buildings falling under sui generis include HMOs with seven or more bedrooms.

There are many advantages to the landlord or investor in investing in an HMO, for a start the yields are higher.

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By having multiple different tenants each paying rents then the yields are a lot higher and present a lower risk as the chance of void periods where the property is completely empty is much lower than it is when renting a property to a single family or household.

Demand for HMOs is high at the moment too. Students are one of the biggest drivers of demand of HMOs as this provides affordable – and arguably more sociable – accommodation, something in high demand at this time of lock down.

But HMOs are no longer just the domain of students; as single-household accommodation becomes less affordable, the demand for HMO accommodation is rising, which is good for investors looking to expand into this area.

There are things to be aware of with HMOs however. If the property is let to five or more tenants from more than one household, and some or all the tenants share toilet, bathroom or kitchen facilities, then it is mandatory for the landlord to hold a licence.

This licence is granted by the local authority that the property sits in. In addition, different local authorities can require additional licensing, so it’s imperative for the landlord to know its local authority’s position before investing in the property.

The sort of things that a local authority will look for in order to grant a licence is floor area. There are strict rules on how big a bedroom needs to be based on how many people are sleeping in it.

There will also be additional rules around fire safety, with fire doors, fire extinguishers and sometimes and additional fire escape being mandatory.

Article 4 direction

Landlords also need to be aware of what is called ‘Article 4’. Article 4 direction is a statement made under the Town and Country Planning Acts.

The ‘direction’ removes all or some of the permitted development rights on a site.

Existing HMO’s rented prior to the planning requirement coming into place automatically qualify, however any gap in HMO rental means you lose Article 4 permission.

Therefore a landlord who purchases a property to convert to an HMO has to be aware of any current or potential Article 4 directives.

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Particularly when purchasing, for example, a three bedroomed property to convert into an HMO where they may not be aware that Article 4 will then apply.

It is only very rarely that a council gives Article 4 retrospectively either, so brokers can play a valuable role by flagging this up to their clients.

This also occurs with ‘sui generis’ properties. Any landlord who purchases a six-bedroomed dwelling who wants to make it larger and add an extra room or more will have to get local authority planning for sui generis use – even if the property already has Article 4 permissions.

Finally, the type of valuation that an investor needs to have also depends on the size of the property.

For an HMO with up to six bedrooms, the investor will need an investment valuation. If they then own seven or more properties they will need a ‘red book’ commercial valuation.

While a number of lenders will lend on HMOs, MUFBs and those falling into the sui generis category, the criteria will differ from lender to lender.

Different lenders will lend on HMOs with different room numbers, for example Landbay will lend on a property with up to 12 bedrooms, but others will not go up that high.

Finally, lenders will typically look at how much experience a borrower has in letting out that size of property.

Most lenders will expect the borrow to have experience of letting a similar sized property, so don’t expect your client to be able to go from renting out a couple of standard, single household residential properties to an HMO with 12 rooms.

Demand for flexible accommodation is on the rise in the UK and with HMOs no longer seen as simply a residence for students, they can be a sound investment, delivering higher yields.

HMO’s stand strong against market fluctuations and can deliver a consistent demand.

Just ensure your client is aware of the rules, regulations and tax policies when expanding into this arena.

By Paul Brett

Source: Mortgage Introducer

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Plans submitted to create new five-bedroom HMO in Connah’s Quay

Plans have been submitted which could see a three-bedroom house in Flintshire converted into five bedsits.

The application would see the use of the property on Howard Street in Connahs Quay change to become a house in multiple occupation (HMO).

A letter submitted on behalf of the landlord states the proposals have been put forward due to the need for small housing units in the area.

Although concerns have previously been raised in Flintshire regarding the impact of HMOs, planning consultant Adrian Thompson said the development would make “efficient use” of the house.

He said: “The change in use safeguards the living conditions of neighbours and the character of the area.

“Granting permission will not lead to proliferation of HMOs in the area, because this is the only known HMO on Howard Street, and the nearest known HMOs are on another street. It is a semi-detached property.

“The original internal layout has been retained, with the first floor as it was and on the ground floor the lounge and sitting room re-purposed as bedrooms.

“The ground floor retains the kitchen, dining room, a downstairs toilet and a shower room.”
Questions have been raised in the past by councillors regarding the living standards provided to tenants in HMOs.

According to the documents, the smallest bedroom at the property measures 8.2 square metres, which is below the amount suggested by Flintshire Council in an advice note to developers.

But as the guidance has yet to be adopted formally, Mr Thompson said the indication that living quarters should measure at least ten square metres would carry little weight.

Comments are currently being invited on the application via the local authority’s website.
Planning officials are aiming to make a decision towards the end of June, but timescales are currently delayed due to the coronavirus pandemic.

By Liam Randall

Source: Deeside

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Increased HMO charges ‘should not be passed onto students’ says Fife Council

There is no need for any increase in charges for HMO (house of multiple occupancy) licenses to be passed on to students who are concerned about rent rises, Fife Council has reiterated.

Every HMO needs a licence to make sure health and safety standards are met for residents. The council has recently updated the charging structure for licenses, bringing it into line with other local authorities, and making sure the increasing costs of administering the system were not passed on to taxpayers. Fees have not been increased since 2006.

John Mills, Fife Council’s head of housing services, said: “Any suggestion that the council is somehow responsible for a rise in student rents is just scaremongering.

“Based on current figures, the University charges £21,000 for an individual student over three years. Our HMO fee for one student in that time (in an HMO of five people) is under £300. My understanding is that St Andrews University charges one of the highest residential fees in Scotland. There has to be some perspective here.”

Mr Mills added: “The new charging structure now covers the full cost of the HMO licensing service, including administration, property inspections and verification, democracy and compliance costs. We’ve moved from a flat-based fee structure to one that takes account of the number of occupants in an HMO, and the resources spent on each application through a sliding scale of charges.

“There should be no suggestion that this will lead to rent rises for students. Any rises in rent are at the discretion of the University, and there is nothing to suggest that a rise in the fees the council charges for HMO licenses should be passed on to students. Any charges are a very small proportion of the rental income received by HMO owners.

“I would urge any parents or students who are concerned about a potential rise in rents to raise this directly with the University, as the organisation deciding how much should be charged for student housing.”

Source: Scottish Housing News

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Councillors aim to examine Wrexham’s licensing of houses in multiple occupation to review local standards

Calls for councillors to scrutinise the licensing of houses in multiple occupation (HMOs) across Wrexham have been made.

A topic request form signed by Holt councillor Michael Morris and Smithfield councillor Adrienne Jeorrett has been submitted for consideration by members of the homes and environment scrutiny committee.

It states that: “For some time members have expressed concern over the quality, appropriateness and size of accommodation which is offered to individuals residing in houses in multiple occupation (HMOs) and which is controlled by the licensing regime rather than through the planning process.”

Such concerns over the size of accommodation and amenity space provided in some HMO proposals have been raised numerous times over the years by councillors and planning committee members.

Speaking about plans to convert a property on the outskirts of the town into a HMO last December, Cllr Jeorrett said it was a “great disappointment that adults are having to live in one room with a long term impact on health and wellbeing.”

As part of the work looking into the licensing of HMOs, it is suggested that scrutiny “undertake a review of how the current standards were arrived at” and if they are nationally prescribed or determined locally.

It also proposes that the committee:

– Compare with other Local Authorities to establish if our standards are more or less generous than others and if they need reviewing.
– Consider the issue of bed spaces versus bedrooms and occupancy numbers.
– Consider how to ensure that HMOs offer a reasonable standard of accommodation by providing rooms of an adequate size for the number of occupants and reasonable communal living areas/ circulation space.
– Establish if there need to have differing standards for the various types of HMO eg. those that primarily house contractors who are working in the area and those that are conventionally let to tenants – (the former having a much greater parking need)
– Possibly look at a “Landlords Charter” on how they will deal with complaints

It is hoped that the scrutiny committee will help “remove the tensions between determining planning applications and and the licensing regime for HMOs” – along with “ensuring a better quality of accommodation for the tenants” and “reducing the tensions with the adjoining community neighbours”.

It is estimated that the topic will take four months to be examined by scrutiny members.

Previously in 2017 we have reported how there has been concerns that there is a lack of staff due to council cuts for inspections, as well as the implication there could well be a large number of unregistered HMO’s out there.

At the time we reported, “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” and “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.”

Source: Wrexham

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Edinburgh landlord stripped of HMO licence but maintains Airbnb listing

An Edinburgh landlord has been stripped of his HMO licence after he caused flooding to a neighbour’s property, but he has been allowed to continue to use the property as an Airbnb.

Edinburgh City Council’s licensing sub-committee refused Mr Tahir Ali’s renewed HMO application for his flat on Clerk Street after councillors heard complaints over flooding and anti-social behaviour, all whilst building work was carried out on the property without proper permissions.

Catherine Scanlin, the council’s licensing manager, told councillors that the objection, by Graham Muir, was due to a “breakdown in the relationship with the owner of the property” and that there “seems to be a history of flooding into another property”.

Mr Muir, who runs a laundry cafe below the flat, said that as many as 11 people stayed in the flat at any one time, despite having a capacity of just five.

It was also confirmed by building standards officers that en-suite showers had been installed in the flat “without permission” after a building warrant application was refused.

Mr Muir told the Edinburgh Evening News: “The shop has been flooded on a number of occasions. The ceiling caved in and it’s now propped up with scaffolding. It’s a complete disaster. There are people coming and going all the time, there are junkies that get in. He refuses to help – he’s just not bothered. He’s not a responsible person – it’s a ghost hostel.”

A ghost hostel or hotel is where an unsupervised property has each room let out individually without adhering to regulations required by law.

Mr Ali argued that Mr Muir “has had it in for me since day one” and insists on “sticking his nose into everybody else’s business except his own”.

Mr Ali did admit that he shouldn’t have carried out the work on his property without securing permission. He said: “Applications have been submitted. In hindsight I should have waited but because the workmen were in place, I carried on. Nothing is illegal, everything is above board. I offered to do his ceiling up and he said he didn’t want my ‘cowboys’ going in there.”

He added: “It’s not a hostel, it’s a HMO – it always has been. The current situation is that it’s let as an Airbnb holiday let. There have never been 11 people, not to my knowledge – and I manage the premises.”

The property currently has one permanent resident, while the remainder is let out as Airbnb-style short term lets.

Licensing officials told Mr Ali that he does not need any planning permission to operate as an Airbnb.

Source: Scottish Housing News

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New charges for houses in multiple occupation in Coventry – what it means

Action to tackle irresponsible landlords has half-succeeded at Coventry council after one of two schemes was passed by councillors.

A city-wide ‘additional licensing’ scheme was approved at full council on Tuesday, January 14, but ward-specific ‘selective licensing’ came to a halt after it was voted down to allow for further investigations.

The new additional licensing policy will focus on houses in multiple occupation (HMO).

The scheme is likely to impact a number of student homes, which the council hopes to reduce through the introduction of more purpose-built student blocks.

Under additional licensing, a landlord who has been operating an unlicensed HMO could pay £1,250 for a one-year licence; £1,055 could be charged for a one-year licence if they are not listed as part of the council’s ‘proactive enforcement regime’; £705 for a two-year licence; £640 for a five-year licence; and £545 for a renewal.

Selective licensing would have been in certain wards, although councillors voted it down after citing an upcoming selective licensing review from the government and ‘out-of-date’ data from a 2011 census which was used to determine the areas the new scheme would fall into.

In consultation, landlords also claimed it added ‘unnecessary financial burden’ and could lead to increased costs being passed onto tenants.

Both schemes were planned to hold landlords to account and help set and maintain minimum standards across the city.

Combined the schemes would have introduced fees potentially worth thousands of pounds on landlords.

Around a dozen councillors were forced to leave the meeting and not take part in the vote as they are landlords themselves.

Cabinet member responsible Cllr Tariq Khan said the selective licensing scheme will be revisited once the government’s review has been published, while his deputy Cllr David Welsh welcomed the new additional licensing.

Cllr Welsh said: “This is probably one of the biggest steps this council has taken to improve the quality of housing in many years.

“Members will be aware what HMOs have done to the quality of housing across the city and the issues they have created.

“I look forward to working with the good landlords we have in the city and I’m very aware there’s many who do take responsibility for the properties they own and manage them well.

“But this scheme will tackle those who fail to do this, people who seek to invest in the city in terms of owning a property but don’t want to be responsible for the state of the properties and the behaviour of the tenants within.

“This scheme will give the council power to put conditions on the licence in terms of the quality of accommodation and others that we have not been able to do until now. That will make a big difference.”

Additional licensing requires all owners of HMOs that are occupied by three or four tenants and all converted self-contained flats that are wholly tenanted to apply to the council for a HMO licence.

Selective licensing would have required owners of rented properties in designated areas to apply and pay for a property licence and pass a ‘fit and proper person’ test.

Additional licensing will come into force on May 4 for a period of five years.

By Tom Davis

Source: Coventry Telegraph

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HMO conversions for 3 to 6 people will require planning approval from June 2020

A citywide direction on houses in multiple occupation (HMO) will be introduced by Birmingham City Council from 8 June 2020.

The Article 4 direction will mean that planning approval is required for the conversion of a family house to an HMO accommodating between three and six people. Current planning rules only require planning approval for properties larger than this.

The direction will be supported by a proposed new planning policy set out within the Development Management in Birmingham document, which is subject to a six-week public consultation period from 9 January 2020. The consultation will close at 5pm on Friday 21st February 2020.

An existing direction for this purpose is already in force in Selly Oak, Harborne and Edgbaston and has been successful in limiting the growth of HMOs in those areas.

Ahead of the direction coming into force, landlords are being advised to declare existing HMOs to the council. Any existing HMOs declared after that date are likely to require a retrospective planning application or a certificate of lawful use, both of which will incur a charge. New HMOs created after 8 June 2020 will require a planning application.

Councillor Sharon Thompson, Cabinet Member for Homes and Neighbourhoods, said: “Shared accommodation or houses in multiple occupation provide an important way of meeting the city’s housing needs. However, high concentrations of HMOs can have a negative impact on the character of neighbourhoods and create unbalanced communities.

“This direction will enable the council to manage the growth of HMOs across the city more effectively as any new proposals will be assessed in line with planning policies.”

Further information about the city-wide direction and the process for declaring existing HMOs can be found at www.birmingham.gov.uk/hmoarticle4

By Kyle Moore

Source: Birmingham Updates

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Armley Park Road HMO application withdrawn

An application to convert a four-bedroomed house in Armley Park Road into a six-bedroomed house of multiple occupation (HMO) has been withdrawn, writes Keely Bannister.

According to a notice issued by Leeds City Council, the application was withdrawn following an e-mail from Michael Sunderland from DMS Architecture Ltd, who is the development’s agent.

Details of the e-mail has not been made publicly available.

Mr Carpenter lodged the application with Leeds City Council in July, with the notice to withdraw being placed in December.

The proposed development would have involved the lowering of the properties basement floor and the conversion of this space from storage into a living room and en-suite bedroom.

The ground floor living room would also have been converted into a bedroom.

As reported previously in The Dispatch, objections were lodged against the application with other residents on the street stating that the property was being “kept in a state of disrepair” and that the road is “already packed full of cars” which “packing in more renting tenants” wouldn’t improve.

Consultation was sought from the Canal and River Trust, who had no comment to make and the council’s Highways Team, who had no objection to the application, subject to a number of conditions around cycle and bin storage being met.

Source: West Leeds Dispatch

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Bid to turn Wrexham town centre house into HMO refused over parking issues

A bid to create a house in multiple occupation (HMO) near Wrexham town centre has been thrown out because of fears it will added to parking issues.

Proposals to turn a three-bedroom house on Oxford Street, which is close to Eagles Meadow shopping centre, into five bedsits were originally submitted in October.

Objections were raised ahead of the application being considered by councillors on Monday as a result of the lack of parking spaces on the road.

Local councillor Adrienne Jeorrett said the situation had become so bad that one resident who lives on the street was forced to return their disability car.

Addressing Wrexham Council’s planning committee, she said: “Whilst I accept the need for low cost housing, it’s a great disappointment to me that in 2019 adults are having to live in one room with a long term impact on health and wellbeing.

“In Oxford Street and the surrounding roads parking is a major problem for residents. This proposed HMO will add to that problem.

“To say that Oxford Street is near town does not mean that residents work in town.

“It does not mean that someone does not need a car, especially if they work somewhere where public transport no longer reaches.

“One resident in this street has already had to send back a disability car because they couldn’t park in the street.”

The local authority’s chief planning officer had recommended the scheme should be given the go ahead.

In a report, Lawrence Isted disputed claims that it would make the parking situation worse as the property was located close to the town’s bus and railway stations.

But the council’s highways department backed refusal because of the “significant” demand for parking in the area.

Highway development control engineer Peter Douthwaite said: “We’ve looked at it and the proposal is deemed to be increasing the level of parking requirement in an area already suffering from parking problems.

“We think it should be refused due to lack of parking provision.”

Councillors unanimously voted to reject the proposals at the end of the debate.

By Liam Randall

Source: Wrexham

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Plans to increase capacity of HMO refused amid parking and litter concerns

Plans to increase the capacity of a house in multiple occupation (HMO) on the outskirts of Wrexham town centre have been rejected because of concerns over parking and litter.

An application was entered in May to increase the amount of residents able to live at a property on Beechley Road in Hightown from six to eight.

It came as owner Andrew Shield said he wanted to allow couples to live in two of the rooms to meet the demand for accommodation in the area.

The scheme was given the backing of Wrexham Council’s chief planning officer ahead of a meeting on Monday to decide the plans.

However, members of the local authority’s planning committee refused permission after being told about the lack of parking and issues with overspilling bins on the street, which is already home to several HMOs.

Speaking at Wrexham’s Guildhall, local councillor Graham Rogers said: “The proposed development would result in an over-concentration to the detriment of the social fabric of the area.

“Beechley Road currently has six HMOs within a 50-metre radius, and I consider the likelihood that the proposed suggestion to increase from six to eight occupants will result in an increase in parking demands.

“For those reasons I am requesting that the approval be refused for the proposed development, which does not make adequate provision for the parking of vehicles.

“The current HMO on Beechley Road carries an increase in the amount of refuse with bins being overused, resulting in litter over spilling onto the footpaths and carriageway. On most weekends I’m having to clear litter with the aid of the community payback team.”

Members of the Beechley Road Residents’ Association also wrote to planning committee members to highlight issues with noise from the HMO properties.

It came after they previously campaigned against a separate bedsit application on the same street.

The latest scheme was recommended for approval by the council’s chief planning officer, who said it was unlikely to lead to an increased demand for parking spaces.

In his report Lawrence Isted said: “I have considered the concerns of the residents in regard to parking and noise nuisance.

“With regard to parking, I appreciate that there are a significant number of vehicles that park on the carriageway with no provision for parking on site.

“Highways have no objections to the proposed development on the grounds that the proposed development is unlikely to result in parking demand compared with its current residential use.

“Noise nuisance can be addressed by public protection.”

Despite his recommendation, councillors chose to refuse permission because of the impact on parking with 15 votes against the plans and two abstentions.

By Liam Randall

Source: Wrexham