HMO Licence for Buy To Let

Lee Grandin, Managing Director, Landlord Mortgages, the UK’s largest specialist buy-to-let broker, reacts to the recent press comment on Homes in Multiple Occupation* (HMOs) from RICS: www.ricsfirms.com

“When HMOs became mandatory in April 2006, many industry pundits predicted that this would cause rents to rocket and landlords to leave the market in droves. However, almost six months on, we have not seen this pattern emerging; despite recent comments from RICS.

When this legislation was introduced, we predicted that the regulation would only affect selected areas of the buy-to-let market and the RICS figures which suggest that only 3% of rental properties are let on this basis, support this statement. However, while we be agree with this aspect of the release, we believe that it overemphasises the impact this legislation has on the market.

“n you review the background data for this RICS release, you will see that 85% of agents nationally believe that following the HMO regulation there has been little or no impact on rents. This would suggest that landlords have not been hit by massive costs for HMOs as otherwise they would have passed this on to their tenants in the form of increased rents!

Of course some types of property will be hit harder than others. Student property is likely to be a cause for concern from a HMO point of view as the properties will tend to be larger. Landlords will have to be diligent in this market to make sure that they are compliant with the rules.”

About HMOs

HMOs were born out of changes in the Housing Act 2004 and came into effect on 6th april 2006. A property is classified as a HMO if it falls into one of the categories:

An entire house or flat which is let to 3 or more tenants who form 2 or more households and who share a kitchen, bathroom or toilet.

A house which has been converted entirely into bedsits or other non-self-contained accommodation and which is let to 3 or more tenants who form two or more households and who share kitchen, bathroom or toilet facilities.

A converted house which contains one or more flats which are not wholly self contained (ie the flat does not contain within it a kitchen, bathroom and toilet) and which is occupied by 3 or more tenants who form two or more households.

A building which is converted entirely into self-contained flats if the conversion did not meet the standards of the 1991 Building Regulations and more than one-third of the flats are let on short-term tenancies.

In order to be an HMO the property must be used as the tenants’ only or main residence and it should be used solely or mainly to house tenants. Properties let to students and migrant workers will be treated as their only or main residence and the same will apply to properties which are used as domestic refuges.

Information taken from the Department for communities and Local Government www.communities.gov.uk

A mandatory HMO which will require licensing is a rental property which is three or more storeys, is let out to five or more tenants who make up two or more households, and where the tenants share facilities.