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IN APRIL the Houses in Multiple Occupation Act (Northern Ireland) 2016 came into force. It brings the regulations for Houses in Multiple Occupation (HMOs) in line with the rest of the UK and imposes tough new requirements on landlords to avoid overcrowding in residential properties. It is a legislation that landlords, managing agents and lenders need to be aware of.

An HMO is a property in which three or more people from two or more different families live. It includes properties that have been converted into self-contained flats. Previously, it was the property that was the subject of the HMO Licence – and licences were granted by the NI Housing Executive, subject to certain works undertaken by the landlord to bring the property to HMO standards.

But this has now changed, and the responsibility for licensing is now passed to local councils. A landlord now must apply to register themselves as an HMO provider and must prove they are a fit and proper person to hold a licence and that granting the licence will not breach planning.

This regulation will impact landlords and managing agents across Northern Ireland, particularly those owning properties let to Queen’s University and Ulster University students at their various campuses and those intending to sell residential property portfolios.

Generally, the licence will be granted for a five-year period, but this can be shortened by the council. Licences are also subject to renewal and can also be revoked. An owner of an HMO must apply and have a licence before it can be used as an HMO and the council can refuse to grant a licence if it is not satisfied that the property has the relevant planning permissions. Though, if applications are revoked or refused, there is an option to appeal.

When ownership of a property is transferred, any existing HMO licence also ceases to have effect. This may cause difficulties for vendors and purchasers with properties being sold with existing tenants in sit. The onus will be on the purchaser to apply for and be granted a new licence as the landlord for each property it acquires.

If a property does not have the relevant planning, then a Certificate of Lawful Existing Use or Development (CLEUD) must be obtained to evidence planning, before any HMO application is made by a prospective landlord.

In order to make a CLEUD application, five years continuous use of the property must be demonstrated and proven. It will be important to have five years’ tenancy agreements and rental statements showing payments in this regard. In the alternative, a purchaser may lodge a planning application for change of use but given the over saturation of HMOs in certain areas in Northern Ireland, though there is no guarantee that planning will be granted and could be refused. This could leave a purchaser and a lender in a difficult situation.

Landlords can be prosecuted and fined if they are found to be operating an HMO without the appropriate licence and managing agents can also be prosecuted if they are complicit in the landlord’s activities.

It is therefore imperative proper advice is obtained from both a legal and planning perspective whenever a client is considering acquiring an HMO (and a lender is funding that purchase) – to ensure the property and the landlord do not fall foul of the new legislation.

Managing agents should also ensure their clients meet the HMO requirements when letting such a property on their behalf. This is a complex piece of new legislation and those dealing with residential real estate and HMOs, must familiarise themselves with it to avoid issues in the future.

By Alison Reid

Source: Irish News

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