Updated government rules are set to draw thousands more buy-to-let landlords into the HMO licensing net and failure to comply could see them subjected to unlimited fines.
In early March, the Government introduced the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 (2018/221) (LHMO 2018), which comes into effect from October 1, 2018.
Houses in multiple occupation (HMOs), are defined by the Government as “a property rented out by at least 3 people who are not from 1 ‘household’ (eg a family) but share facilities like the bathroom and kitchen. It’s sometimes called a ‘house share’.”
The Residential Landlords Association recently predicted that as many as an additional 177,000 homes could be subject to HMO licensing and 16% of landlords currently rent to people in HMOs.
At present, landlords operating an HMO, are subject to the Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2006 (2006/371), which is applied in certain regions of England and Wales.
Under the present rules, landlords must have a licence if renting out a large HMO. This is defined as five or more people who form more than one household, is at least three storeys high and tenants share toilet, bathroom or kitchen facilities.
However, some local councils still demand a licence even if the property is smaller and rented to fewer people.
At the moment, HMO licensing is limited to specific local authorities, so whether a landlord’s property is subject to one, depends on its location. Landlords can check whether their local council requires an HMO licence on a relevant property, by visiting the following page https://www.gov.uk/house-in-multiple-occupation-licence
The new rules
Under the new rules, licensing will apply to HMOs occupied by five or more people, irrespective of the number of storeys. Also, HMO licensing will apply to purpose-built flats where there are up to two flats in the block.
A licence is valid for five years and a separate licence must apply to each HMO property.
There will be transitional provisions for HMOs that are already licensed under the selective licensing provisions, which will last for six months, but which will be subject to mandatory licensing from 1 October 2018.
In order to operate a licenced HMO, landlords must comply with a number of standards:
- the house must be suitable for the number of occupants;
- whoever manages the property – whether that is the landlord or an agent, must be considered ‘fit and proper’ and must have no criminal record or history of breaching landlord laws of code of practice;
- the local council must be sent an updated gas safety certificate annually;
- the landlord must install and maintain smoke alarms;
- the landlord must provide safety certificates for all electrical appliances within the property when requested.
Jorden Abbs, director of operations at Commercial Trust Limited commented: “It is imperative that landlords check whether their property is classified as an HMO requiring a licence by October 1, or they risk falling foul of the updated laws.
“This extension of the HMO laws will place further pressure on landlords and local authorities, but can also be viewed as a further initiative aimed at raising standards within the private rental sector.
“We have not, as yet, received any comment from lenders as to whether this will affect existing borrowers, although realistically we can expect a couple of potential outcomes.
“Lenders who currently offer mortgages to HMOs that are not currently licensed, but will be under the new rules, can either change their criteria to accommodate these properties and continue to transact; or they will not and at renewal the borrower will have to look elsewhere.
Source: Mortgage Finance Gazette