HMO property Plans HMOs
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Five reasons to consider including an HMO property in a portfolio

It’s hard to think of a time when landlords have faced such an uncertain playing field as today.

A raft of regulation and taxation changes have had a significant impact on bottom lines, whilst the market has slowed as we wait and see what the impact of Brexit will be.

Unsurprisingly then, landlords have been looking for alternative ways to increase yields as well as diversify their portfolio to minimise any potential risk.

For many, HMOs have been one such way.

The number of landlords who have gone down this route already speaks for itself: the BVA BDRC’s latest survey shows that one in five landlords now have an HMO property in their portfolio.

Knowing this, it’s highly likely that brokers will be facing an increase in enquiries from landlords considering diversifying into HMOs and wanting to know the considerations to factor in.

Higher yields

The well-publicised advantage of HMOs is that rental yields are often higher than for a typical rental property.

The same BVA BDRC research suggests the average yield for an HMO is one-fifth higher.

For example, a landlord taking in nearly £12,800 in rent each year for an HMO, compared to £10,750 for a standard property.

Before we get carried away, we should remember that costs are also likely to be higher than a standard rental property.

An HMO license can range considerably from under £100 to over £1,000 depending on the property location.

Work may be needed on the property to ensure that it is compliant with regulation.

This could involve ensuring bedrooms are a minimum size, providing the right number and location of bathrooms or even extending the kitchen worktop.

Day to day, the potential higher turnover of tenants and more intensive use also means higher costs in terms of maintenance.

It’s important to do your sums but if costs can be kept reasonably low, yields can still be good.

Rental voids have less impact

Letting each room individually, inevitably involves more work at the start due to vetting each individual tenant when they move in but careful investigation at the start will pay off when it comes to them moving out.

When a tenant moves out of a single let property, there’s a total loss of income but with a multi-let property, the remaining rooms remain tenanted therefore limiting total impact.

Less exposure to arrears

The same ‘eggs in multiple baskets’ logic applies to arrears. Having several sources of income – with tenants paying smaller monthly rents for a room within a property – a landlord is less exposed if a tenant falls behind on their rent.

In the current economic climate, with fears of a downturn post-Brexit and potential job losses being bandied around, this potential benefit might sit well with some landlords.

Tax advantages

One difference between HMOs and single-let properties is the potential to claim income tax relief on qualifying items.

This applies to the costs associated within the communal areas, which are treated as an expense of the rental business.

Normal rental losses are only rolled forward for offset against future rental properties.

However, capital allowances can be offset against non-property income to generate tax rebates, which could add up to a significant amount.

However it’s important not to advise on any tax related questions yourself, always point your clients towards a professional tax adviser.

There is a need for flexible, affordable housing

Keeping costs affordable for your target audience is particularly important as you want to try and attract long term tenants rather than a series of short-term lets.

Renting is popular with students, young professionals, mobile workers and single people so keep this mind.

The private rented sector as a whole has doubled since 2000, and now accounts for one fifth of all homes in Great Britain.

With the rising cost of living, particularly in cities, combined with population growth and a shortage of affordable housing, HMOs or “house shares” could help to fix the problems we face in the housing market.

HMOs offer a far cheaper alternative to renting an entire property by enabling tenants to split household bills, while allowing them the privacy of their own bedroom.

In this shifting market, brokers’ advice is likely to be valued even more by landlords. This area of the market requires brokers to stay one step ahead, always on the lookout for any regulatory changes and trends.

By Adrian Moloney

Source: Mortgage Introducer

HMO failures
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Agent is fined £80,000 over HMO failures discovered after blaze in attic

A letting agent has been fined £80,000 for HMO failures after a fire at one of the properties.

Orange Living, trading as Loc8me, had failed to license four HMOs, an investigation by council officials in Leicestershire revealed.

The investigation by Charnwood Borough Council was triggered by a fire in the attic of one of the homes managed by Loc8me in Loughborough.

All four properties were shared and had three storeys.

At Leicester Magistrates Court, the firm admitted four offences and was fined £20,000 for each. It was also ordered to pay costs of £3,690.

The attic blaze was attended by firefighters who found that the smoke detector had batteries missing, and that there were insufficient fire doors.

One of the occupants said they had emailed Loc8me’s maintenance team twice before the fire with concerns, but no one came.

There were no phone numbers for Loc8me displayed in the property, with tenants having to rely on email or a WhatsApp group.

Applications for HMO licences had been received by the local council, but had information missing, and so the properties went unlicensed.

Raffaele Russo, one of the directors of Orange Living Ltd, was interviewed by council officers and he confirmed that none of the four properties had a licence.

He stated that the lack of HMO licensing was a clerical error.

Russo said the fire alarms had been tested on a number of occasions.

With regard to failure to provide name, address and telephone number in a prominent position in the HMO, Russo did not know whether emergency contact details were displayed in the property. He said that tenants used a WhatsApp group.

During the court hearing, Russo accepted that there should have been mains-connected smoke alarms on an interconnected circuit and fire doors where needed.

After the hearing, Cllr Margaret Smidowicz, the council’s lead member for licensing, said it was a significant sentence and that she was pleased the courts had taken the matter seriously.

She said: “Licensing is there to ensure living and safety standards are met, and we will not hesitate to take action and use the full force of the law to make sure those standards are being met.”

By ROSALIND RENSHAW

Source: Property Industry Eye

wrexham Landlord
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Wrexham lettings agent and landlord prosecuted by council over HMO regulation breach

A private landlord in Wrexham has been prosecuted by Wrexham Council for operating an unlicensed house in multiple occupation (HMO).

At Mold Magistrates Court yesterday, landlord Jane Sabio – who had pleaded guilty at an earlier hearing – was fined £5,000, with costs of £1,697 and a £170 victim surcharge also imposed.

An officer from the council’s Environmental Health and Housing Standards team found the unlicensed HMO during an inspection following up on a complaint due to lack of repairs.

Letting agents Countrywide, trading as Beresford Adams, also pleaded guilty to a number of breaches at the same property, including inadequate fire safety measures and failing to supply an electrical safety certificate to Wrexham Council.

In sentencing at Wrexham Magistrates Court earlier this month, Countrywide was fined a total of £22,500, plus a £107 victim surcharge and £2,819 costs.

Cllr Hugh Jones, lead member for communities, partnerships, public protection and community safety, said: “The council is proactively working with landlords and letting agents to assist them in raising standards for tenants.

“But if they choose not to cooperate and not to comply with the legal requirements, we will have no hesitation in taking firm enforcement action, as this case demonstrates.”

Wrexham Council say: “Most landlords and letting agents ensure HMOs are properly licensed and maintained, but if your landlord or letting agent fails to acquire an HMO licence or carry out the necessary repairs and make adequate fire safety arrangements, you can contact the Environmental Health and Housing Standards team by e-mail at HealthandHousing@wrexham.gov.uk or on 01978 292040.

“We keep a list of currently licensed HMOs on our website, and also provide information on what an HMO is, and how they can be licensed.”

Source: Wrexham

HMO property Plans HMOs
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Appeal launched over refusal of plans to increase rooms at Wrexham HMO

An appeal has been launched after a bid to increase the number of bedrooms at a house in multiple occupation (HMO) near Wrexham town centre was turned down.

Landlord Arran Pritchard applied to Wrexham Council in January to up the amount of bedrooms at a property on Poplar Road from six to seven.

However, the local authority issued a decision to reject the proposals after planning officers said there were not enough parking spaces outside.

Mr Pritchard has now submitted an appeal to the Planning Inspectorate in an attempt to have the outcome overturned.

In documents entered to support his case, he claimed most people living in HMOs don’t own a car, meaning the small increase would not cause a problem.

Highlighting a survey of the number of vehicles owned by tenants across the 23 properties he lets in the town, he said: “Here attached are two “vehicles per room” assessments, conducted in September 2015 and May 2016.

“They show that for 146 rooms/ occupants, there are just 17 to 25 occupants with vehicles, or one vehicle for every five rooms.

“This is largely due to all the rooms being in the town centre and tenants generally not being able to afford a vehicle.

“The planning application is to increase the number of rooms by the minimum possible, from six rooms to seven rooms. A comparable planning application, refusal, and successful appeal is the planning case for 33 Park Street, Wrexham.”

Mr Pritchard previously attempted to increase the total number of bedrooms at the property to eight but permission was denied on similar grounds.

Despite appealing the decision on the original application, a planning inspector appointed by the Welsh Government agreed with the council’s views.

In her decision notice, Siân Worden said she felt the proposals would impact on the safety of drivers at a busy junction.

She said: “The appeal property is in a busy area where there are widespread parking restrictions and many of the dwellings do not have off-street parking. There thus appears to be a high demand for on-street spaces.

“The proposed development would result in a small increase in the number of vehicles requiring parking spaces in the vicinity.

“Even so, it would increase the hazard on the local road network, and reduce its efficient use, by resulting in more drivers searching for a parking space.”

Mr Pritchard’s latest appeal will considered at a future date.

By Liam Randall

Source: Wrexham

landlord company Coventry
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HMO landlord in Birmingham hit with £2,000 penalty

A landlord has been hit with a £2,000 penalty for fire safety breaches at a two-storey property housing nine people in a landmark case for Birmingham City Council.

Officers visited the house in multiple occupation (HMO) in Small Heath in November and found there to be no interlinked fire alarm, fire doors or fire blanket, and a lack of fire separation in the building.

The council stated the landlord co-operated with the investigation and swiftly completed the necessary work to a high standard meaning the penalty was reduced to £2,000 after it was originally set at a higher a figure.

The property owner is the first to be punished under new civil penalty regulations in Birmingham after the council updated its policy earlier this year.

The move gave them powers to issue penalties of up to £30,000 for offences such as overcrowding and failure to comply with management regulations.

The council said it was not allowed to provide the exact address of the Small Heath HMO or name the landlord saying the Ministry of Housing, Communities and Local Government had issued ‘strict guidance’on what information could be released.

A spokeswoman added: “The ultimate goal of civil penalties and our BCC policy is to prevent any further offending but to also help ensure that the landlord fully complies with all of their legal responsibilities in the future.”

Now, all rented buildings occupied by five or more people from two or more households require a HMO licence from the council.

A law change in October saw a three-storey threshold scrapped.

There are around 1,900 licensed HMOs in Birmingham but the council estimates there are more than 4,000 unlicensed properties.

The authority stated it is working to raise awareness of the October law change and encourage landlords to proactively apply for a licence as opposed to taking immediate enforcement action at this stage.

The council charges a £1,150 fee for a new licence application, which is typically granted for five years, with income ring-fenced to cover costs associated with issuing licences and finding other unlicensed HMOs.

While money from penalties will be spent on housing matters.

The Small Heath property was not licensed at the time of the inspection but was not penalised for this due to a three-month grace period from October for landlords to apply.

Cllr Sharon Thompson, cabinet member for homes and neighbourhoods, said: “While there are a great many landlords who provide excellent accommodation, inevitably there are some who will only respond and make necessary improvements on threat of financial penalties or legal action.

“With that in mind, I’m delighted that the recent change in policy has improved our effectiveness and ultimately enabled us to take enforcement action against landlords who are letting substandard accommodation.

“HMO properties have a massive role to play in providing affordable housing to people in Birmingham, particularly as we are in the midst of a national housing crisis.

“However, these properties must also meet building and fire safety standards, be properly regulated, appropriately licensed and ultimately provide good quality housing for citizens who are paying a monthly rent.

“We’ll continue to work closely with the private-rented sector to ensure that people have a broad range of choice for housing in Birmingham.”

By Carl Jackson

Source: Express and Star

court case Highland landlord agent
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Court hands agent £4,500 bill after HMO fire safety breaches

An agent has been fined £3,000 after admitting three offences relating to a House in Multiple Occupation. It was also ordered to pay £1,496 in costs plus a £120 victim surcharge.

Miller Metcalfe Estate Agents appeared at Bolton Magistrates Court, which heard how the building had two businesses on the ground floor, and a single tenant on the first floor.

When Miller Metcalfe took over the management of the second and third residential floors, this formed a second flat which was let to three more tenants.

This meant the property was reclassified as an HMO.

However, Bolton Council officers found that it did not have the fire safety measures required in an HMO. There was no fire-protected escape route, or interlinked fire alarm.

The council served an emergency prohibition order requiring the upper floor not to be used as residential accommodation. The tenants were found alternative accommodation.

In court Miller Metcalfe admitted it had not taken all reasonable measures to ensure the safety of their tenants.

By ROSALIND RENSHAW

Source: Property Industry Eye

Leicestershire landlord Brent landlord
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Brent Landlord Ran Illegal HMO Earning Almost £70k Per Year

A Brent landlord running an illegal HMO (House in Multiple Occupation) was estimated to be raking in £68,400 a year.

Officers from London’s Brent council found 16 people crammed inside the unlicensed HMO, a converted three-bedroom semi – including three in the shed.

The Council raid followed tip-offs from neighbours. Fly-tipping and the constant coming-and-going from the property had led neighbours to complain to Brent council’s enforcement team.

The three tenants in the shed were found to be paying the Brent landlord up to £800 per month for the privilege.

One family of four told officers they were paying the landlord £800 a month to live in a single, windowless room on the ground-floor.

Tenants had no written tenancy agreement from their landlord or any cash receipts for their rent payments – with the Brent landlord estimated to be raking in £68,400 a year.

The illegal house in multiple occupation operated by the Brent landlord also lacked a working fire alarm system, had poor maintenance, and also had poor ventilation.

Cllr Eleanor Southwood, cabinet member for Housing and Welfare Reform, confirmed that the Brent landlord ‘faces a hefty fine for breaking the licensing laws around houses in multiple occupation’.

She said: ‘We will do everything in our power to protect vulnerable tenants from this kind of gross exploitation. Every renter in Brent deserves to live in a home that is safe and maintained to a decent standard.’

Earlier this week, Brent council’s cabinet backed changes to the way limited social housing is allocated in the borough – with homelessness increasing and a third of the borough’s residents in PRS.

The cabinet is driving forward an ambitious programme to build 1,000 council homes, increasing affordable housing through the council-owned company i4B and London-wide Capital Letters initiative, and driving up standards in the private rented sector.

Source: Residential Landlord

Houses of Multiple Occupation Family home
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Family home turned into multi-occupation house despite concerns

Retrospective plans to turn a family home into a seven-bed house in multiple occupation in Coventry have been approved, despite a councillor’s claims it is a deliberate attempt to circumvent the planning process.

A bid for a nine-bed HMO was previously refused by officers on the grounds it was intensified use but a second application was passed by a committee on Thursday (June 13) after the size reduced by two rooms.

Councillor Tim Sawdon had criticised how the applicant sought retrospective approval for 30 Old Mill Avenue, and blasted the proposals as gross over-development of the site.

But planning officer Shamim Chowdhury said: “The use is clearly different to a family house and increases the potential of noise, however in this case it is a large property and does not share and walls with other houses.

“Retrospective applications are acceptable and we cannot control that.

“In terms of assessment we do the same as a normal application.”

One of the conditions was for the house to be occupied by no more than seven residents, with planning policy manager Mark Andrews adding the authority will be monitoring the licence.

Concerns were also raised about whether the parking was adequate, with officers stating up to six cars would be catered for, but only with four at a time would they be able to manoeuvre on the drive independently.

Cllr Naeem Akhtar said: “Our local plan requires all HMOs to provide adequate parking, this is not adequate parking.”

Council officers said the local plan indicates the application requires ‘up to six spaces’ and was therefore acceptable.

By Tom Davis

Source: Coventry Telegraph

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Plans to turn Rhosddu property into HMO for up to eight people given go ahead on appeal

Plans to convert a terrace property in Rhosddu into a HMO have been allowed on appeal – despite being rejected unanimously by planning committee members.

The application for 33 Park Street proposed that the four bedroom property was turned into five-bedroom house in multiple occupation (HMO) for eight residents.

The plans had been recommended for approval by the head of environment and planning Lawrence Isted, who said he was satisfied that the development “would not result in an over concentration of HMOs in the immediate locality.”

But the plans were were turned down by councillors in January 2019 amid concerns over a lack of parking and amenity space for residents.

Objections had also been raised by several neighbours who fear that tenants would be ‘crammed in’ and may include substance abusers. The council’s highways department said it was also against the scheme because it did not include enough parking spaces.

However planning inspector Clive Nield has now overturned the council’s decision and approved the application on appeal.

In his report Mr Nield says that although there is a lack of parking along Park Street, the proposed HMO “would be in a suitable location for tenants who rely on walking, cycling and public transport”

Addressing concerns about a lack of amenity space, Mr Nield continues onto say: “The council’s Local Planning Guidance Note 5 (Houses in Multiple Occupation) says that HMOs should have a large enough private outdoor area to provide space for external drying areas, cycle parking and bin storage and to provide for the amenity of the future occupiers.

“It goes on to say that for an HMO accommodating 8 tenants it will normally seek a minimum private outdoor area of 32 m2.

“In this case, the space in the back yard of the appeal property is reported to be 27 m2. There is also a small area at the front of the property. However, that is not private space, as required.

“The limited amount of private amenity space available also falls well short of the level normally considered acceptable for a family dwelling and is a feature of this densely developed urban area.

“However, there are public open spaces only a few hundred metres away, and the yard is adequate for clothes drying and the storage of bicycles and bins.

“Whilst it does not fully meet the standard sought by the Council’s Guidance Note 5, I consider this shortcoming to be insufficient reason on its own to justify refusing the proposal.

“I conclude that the private outdoor amenity space provided would be adequate, despite its limited area.”

He also notes that whilst there have been concerns from residents about potential occupiers of the HMO and antisocial behaviour, the “licensing requirements for HMOs also provide an element of control, including a condition that the landlord is held accountable for antisocial behaviour.”

It is the second HMO in the Rhosddu to have been allowed on appeal in the past 12 months.

Grosvenor councillor Marc Jones, said: “This goes against the local planning committee‘s decision and ignores the concerns raised by myself and local residents.

“The inspector claims parking for 8 people would not be any worse than for a family. He also states that being close to public transport makes it less likely that people will need a car. What public transport?!

“He admits that the amenity space is below guidance levels for eight people but says it’s no big deal and it’s limited for a family anyway. There’s a big difference between eight individual people living under one roof and a family in terms of needing outdoor space.

“This is a poor decision by the Planning Inspectorate and confirms my view that local communities do not have enough say in planning matters.”

Source: Wrexham

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Shotton landlord fined for leaving tenants without fire alarms, faulty electrics and an inadequate bathroom

A private sector landlord has been prosecuted for a number of offences under housing legislation designed to protect tenants living in shared accommodation

Flintshire Environmental Health Officers inspected a House in Multiple Occupation (HMO) at  7 Connaught Avenue in Shotton last July

They discovered the house had no working fire alarms, no fire doors, defective electrics and inadequate bathroom amenities.

The property owner Glyn Roberts had ignored requests made under HMO to produce gas and electrical testing certificates.

An Improvement Notice was served under the Housing Act 2004, a follow up inspection found that the Improvement Notice had not been complied with and that the gas boiler had been condemned for safety reasons.

Glyn Trevor Roberts pleaded guilty to all 6 offences relating to the property at Wrexham Magistrates Court.

Offences included failing to comply with an Improvement Notice, failing to register rental property, failing to obtain a licence to manage rental property and failure to supply gas and electrical test certificates.

In mitigation it was heard that Mr Roberts was in financial difficulties and was expecting to complete a sale on the property within the next six weeks and would then no longer be a landlord.

Mr Roberts was found guilty of all 6 offences and in sentencing was fined £600.

He was also ordered to pay a contribution of £200 to Flintshire County Council’s costs.

In sentencing, Mr Roberts was warned that breaches of such legislation could end in tragedy and that if it weren’t for his financial situation, the scale of the fines would have been much greater.

Flintshire County Council’s Chief Officer for Planning, Environment and Economy, Andrew Farrow, said:

“This successful prosecution sends a clear message that Flintshire County Council will not tolerate the poor management of Houses in Multiple Occupation.

This legislation is designed to protect the health, safety and wellbeing of some of our most vulnerable residents. 

It reflects Flintshire County Council’s commitment to ensuring homes in the private rented sector are in good repair, have all the necessary amenities and are properly managed.”

Source: Deeside