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Only a week left before Mandatory HMO licensing is in force

With an extension of the rules bringing a wider range of houses in multiple occupation (HMO) into the mandatory licensing regime coming into effect on 1 October, landlords have just one week to apply for a licence.

This licensing requirement applies to all properties that meet the following criteria:

  • is occupied by five or more persons
  • is occupied by persons living in two or more separate households
  • and meets:
    • the standard test under section 254(2) of the Act
    • the self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats, or
    • the converted building test under section 254(4) of the Act.

Properties that fall into scope of the new definition but are already licensed under a selective or additional scheme, will be passported over to the new scheme at no cost to the landlord.

Richard Lambert, CEO of the National Landlords Association (NLA), says:

“The Government made the announcement about mandatory HMO licensing in January, but we’re concerned that many landlords may not have applied for their licenses. We encourage all landlords to make sure they do so before 1 October to be compliant.

“It may be that landlords thought there was a six-month grace period, as was originally proposed. This is not the case and we don’t want to see anyone committing an offence through ignorance.”

The NLA is also concerned that local authorities are not prepared for, or are still unaware of, the mandatory licensing for HMOs.

Mr Lambert says:

“We have been contacted by a number of our members who have tried to apply for licenses, but the local authority has purported not to know anything about it or simply didn’t have the systems in place to process the applications.

“This is an unacceptable failing on the part of the Ministry of Housing, Communities and Local Government, which should have ensured all local authorities were up to speed with the changes. It’s disappointing that more consideration hasn’t been made for the significance of this change and the challenges local authorities face in implementing it.

“Our advice to landlords who have encountered this is to apply for an HMO license using the existing process, even if the council hasn’t updated their forms.”

The guidance for local authorities on HMO and residential property reforms is available at gov.co.uk

Source: Property118

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Licensing lottery: Some councils unprepared for changes to mandatory HMO licensing

Too many local authorities are unprepared for the changes to mandatory licensing that are due to come into force in less than two weeks’ time, the RLA can reveal.

The changes will require landlords who let a property to five or more tenants forming two or more households to apply to their local authority for a licence, irrespective of building size. A licence is valid for up to five years, and each HMO property requires a separate licence.

Despite the legislation change set to affect over 177,000 properties, the RLA is concerned that there are still many councils unprepared for this change, and has now written to MHCLG about this.

A lottery

While some councils, for example Birmingham City Council, Newcastle City Council and Havering Council ARE prepared for the change to mandatory licensing, the RLA has discovered that many councils are completely unprepared.

Examples include Manchester City Council, which does not yet have an online system up and running for landlords to apply for a licence, and Hackney Council, which does not yet have the necessary forms available on its website for landlords.

Out of date information

Some councils also have out of date information around mandatory licensing on their websites. For example, in the definition of a HMO, they state the current ‘three storey rule’ – this is that HMOs compromise of 3 or more storeys, occupied by 5 or more persons from two or more households. However, the websites fail to state that as of 1st October 2018, this will change, with the three storey rule set to be phased out.

Yet others are issuing licences for a much shorter period than the standard 5-year licence.  All new HMO licences issued by Norwich will be for just one year, meaning a vastly increased amount of paperwork both the council and landlords have to deal with.

The RLA is therefore reminding landlords that if they have a HMO property that will fall into the extended scope of mandatory licensing which does not already have a licence, they MUST apply for one BEFORE the 1st October. There is no grace period, so it is imperative for landlords to apply for a licence, or else they could face a fine or prosecution and a rent repayment order.

What the RLA has been doing

In ongoing preparation for the changes, the RLA has written to over two hundred local authorities reminding them of the changes to mandatory HMO licensing. You can read the letter we have been sending to councils here

In addition to this, the RLA has also written to some local authorities in relation to licence fees. For example, Cheshire East Council has been increasing the cost of licences-which they say will ensure that they can respond to increased demand of properties which will soon fall into the scope of mandatory licensing.  You can read more about this here. 

What you need to do

If your property requires a mandatory licence, and you have not yet applied, you must get in touch with your local authority about this. Each local authority will have different communication strategies. As there is no grace period for the new law, you need to act now so that you are not in breach and at risk of being fined.

Source: RLA

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City landlord licensing charges set to increase

The price of a landlords’ licence in Nottingham is set to go up after plans were approved today.

For houses with more than four tenants, landlords in most areas must obtain a Houses in Multiple Occupation (HMO) licence.

For ‘less compliant’ landlords, the price of a licence will go up by £810, from £910 for a new licence to £1,720.

‘Standard’ landlords will pay an extra £420 for their HMO licence – up from £910 to £1,330.

Landlords with accreditation will pay an additional £80, up to £990.

Previously, there was a flat fee for HMO licences, but from January next year, those who will pay the most will be those deemed ‘less compliant’, meaning those who are ‘consistently non-compliant or provide a poor application.’

It is the first change in the price of a licence since 2014. As with selective licensing, the council cannot make a profit from the scheme.

A leading Nottingham property expert said the cost will have to be passed on to tenants and would hit those at the bottom of the ladder hardest.

Giles Inman is from East Midland Property Owners, which represents around 600 landlords and 150 agents in the city.

He said: “The cost of it all is just getting silly. We weren’t kept in the loop or given any advance warning. There was just a consultation and we didn’t hear anything back, and then all of a sudden we’re informed that they’re going up. We never expected it to go up by this much.

“From a landlord’s perspective it’s just crazy and it’s come out of the blue.

“It’s just them raking in the cash. They already have the powers to deal with the less-compliant landlords without charging them more for an HMO.

“The costs will be passed on. We’re a business at the end of the day. I know the council thinks we should take the cost ourselves, but no business does that.

“So it will be passed on one way or another, and it’s the tenants on housing benefit and at the bottom of the ladder who will be most impacted by that.”

The revised licence fee will now be made up of two payments – one at application and one when the licence is issued.

Each licence can last up to five years, as long as the conditions of the licence are met and no other offences occur.

Councillor Jane Urquhart is the city council’s portfolio holder for planning and housing, and represents the Wollaton East and Lenton Abbey ward for Labour.

She said: “This scheme, along with others, is a major part of our plans to improve all types of private rented housing in the city.

“We believe something as important as providing decent and safe housing should be monitored and kept in check via a licensing scheme in the same way as taxis, pet shops and some beauty treatments.

“Not only does the scheme help to improve poorer standards of accommodation, it means tenants know what is expected of their landlord in terms of the management of their home.

“It also helps us to tackle rogue and bad landlords by providing a clear set of guidelines which all landlords need to meet, and helps prevent bad landlords cutting corners or ‘undercutting’ good ones, creating a level playing field for all.”

Source: West Bridgford Wire

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​Deadline to new HMO licensing approaches

Agents and landlords are reminded that new rules about the licensing of Houses in Multiple Occupation (HMO) are set to come into force next month.

All properties housing five or more people from two or more separate households will be required to have an HMO licence, from Monday October 1.

At the moment, a property with five or more tenants from separate households only requires an HMO licence if it has three or more floors.

The new legislation – which was first announced in December – will also see minimum space requirements updated.

From October, the minimum bedroom space will be 6.51 square metres for a single bedroom and 10.22 square metres for rooms occupied by two adults. Rooms housing children aged ten or below will need to be a minimum size of 4.64 square metres.

Landlords will also be required to provide an adequate number of bins for their properties.

The cost of HMO licences varies depending on the local authority, with some charging a few hundred pounds and others charging more than £1,000.

An HMO licence is valid for five years and landlords need a separate licence for each HMO they let.

The Ministry of Housing, Communities and Local Government has said that the new rules are being introduced to minimise rogue landlords taking advantage of increased demand for HMOs.

It says that the previous system meant that it was ‘pot luck’ whether a vulnerable tenant ends up renting from a rogue or good landlord.

The aim of the new rules is to reduce consistent rental property problems, including overcrowding, failure to meet health and safety standards and housing illegal migrants.

Fines for non-compliance with HMO licensing rules are unlimited, while failure to comply with minimum bedroom sizes could see a landlord fined up to £30,000.

Source: Simple Landlords Insurance

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Agents and landlords ‘left in dark’ over new HMO requirements despite huge penalties

Letting agents are reminded that the clock is ticking towards the October 1 deadline, when the rules on mandatory HMO licensing change across England.

There has been no government campaign to raise awareness among agents and landlords, and nothing to explain what appears to be a little-known exemption. This is despite the possibility of swingeing penalties.

Currently, properties of three or more storeys, shared by five or more people in two or more households, where facilities such as kitchen or bathroom are shared, must have a mandatory HMO licence.

On October 1, the “storeys” criteria is removed and any property, of any height, that meets the other criteria must be mandatorily licensed.

What agents may not know is that there is an important exemption: purpose-built flats within a block containing three or more self-contained flats are excluded from the requirement.

Nothing from the housing ministry has explained this or other new HMO rules – and yet the penalties are potentially severe enough to close a business down.

An HMO that is not licensed when the law requires it could land the agent or landlord, or both, with a criminal prosecution and record, an unlimited fine, and an order to pay court costs and a victim surcharge.

Alternatively, the council could issue a civil penalty of up to £30,000 and a rent repayment order of up to 12 months’ rental income.

While a property is unlicensed, a Section 21 notice cannot be served.

Licensing expert Richard Tacagni said agents should be absolutely certain that HMO properties falling under the new rules are licensed promptly.

He said: “Many agents don’t yet fully appreciate the implications, and their criminal liability if an application is not submitted on time.”

An excellent guide by Tacagni for all agents in England is here:

https://www.londonpropertylicensing.co.uk/mandatory-hmo-licensing

A second article is especially aimed at London agents but does explain the exemption for flats in purpose-built blocks of three or more apartments.

It also reveals that many London authorities – and this may well apply to councils outside the capital – are not making the process for HMO licence applications particularly easy.

https://www.londonpropertylicensing.co.uk/three-week-countdown-mandatory-hmo-licensing-rules-change-1-october-2018-are-you-ready

Source: Property Industry Eye

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HMO landlords: prepare for new rules

The government is cracking down on overcrowded house shares. If you’re an HMO landlord, make sure you’re up to date.

Landlords have just weeks to ensure they’re ready for new “houses in multiple occupation” (HMO) rules, which come into effect in England on 1 October.

The new regulations will bring more properties into the category of “multiple occupation housing” – this is where five or more people from two or more separate households live in one property (house shares, in other words). While at present a property is only classed as an HMO if it has three or more storeys, according to the new rules an HMO is a building or a converted flat where tenants share toilet, bathroom or kitchen facilities. This will mean roughly 160,000 additional properties will require an HMO licence, reckons the Residential Landlords Association. The new rules form part of the government’s attempt to crack down on landlords letting out overcrowded, sub-standard properties.

As well as widening the scope of what constitutes an HMO, the updated legislation adds some new conditions. The first sets out minimum space requirements. Landlords will be prohibited from letting rooms to a single adult where the usable floor space is less than 6.51 square metres (sq m). Rooms occupied by two adults will need to be at least 10.22 sq m, while rooms slept in by children aged ten and below will need to be at least 4.64 sq m. Local councils will have the discretion to require larger room sizes, but they won’t have the power to allow smaller rooms to be occupied.

Where a landlord is found to be letting a room that doesn’t meet the minimum size, local authorities will be able to grant a period of up to 18 months to rectify the situation. If no action is taken in this time, the landlord will be in breach of their licence and could either be prosecuted by the local authority or receive a financial penalty of up to £30,000. Another update is that landlords are now required to provide an “adequate” number of bins. Failure to do so is a breach of the licence and a criminal offence.

In terms of current HMO requirements, landlords must ensure that the manager of the house – either the landlord or an agent – is “fit and proper”, which means no criminal record or history of breaching landlord laws. Landlords must also send the council a copy of their gas-safety certificate each year, install and maintain smoke alarms, and provide safety certificates for all electrical appliances.

To apply for an HMO licence, contact your local council. Licences are valid for five years and you need a separate licence for each HMO you run. Landlords who already hold an HMO licence can continue to let their property until it expires; they will then have to apply for a new licence and make changes to their property so that it meets the new rules.

Licence costs vary from council to council. For example, Cambridge City Council currently charges £580 for a licence for an HMO of up to nine rooms, and £470 for renewing a licence. Croydon Council charges £250 per habitable room, so a licence for a five-bed HMO would cost £1,250.

Landlords face unlimited fines for renting out unlicensed HMOs. Even if the council takes no action, the tenants could apply for a rent-repayment order to reclaim up to 12 months’ rent, and while the property is unlicensed, the landlord cannot use a Section-21 notice to seek possession of the property. Note too that local councils can add other conditions to licences, such as improving facilities.

Source: Money Week

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HMO licensing guidance for local authorities – and landlords

The Ministry of Housing, Communities & Local Government has today issued the document “Houses in multiple occupation and residential property licensing reform: guidance for local housing authorities.”
The guidance has been produced for local housing authorities, but is also intended to be of use for landlords.

Click Here to read the full document.

From 1 October 2018 any landlord who lets a property to five or more people from two or more separate households must be licensed by their local housing authority

This document has been prepared as a guide for local housing authorities to help them understand how to implement the reforms to houses in multiple occupation (HMO)licensing.

Under the Housing Act 2004, larger that are 3 or more storeys and occupied by 5 or more persons forming at least 2 separate households are required to be licensed.

With effect from 1 October 2018 mandatory licensing of will be extended so that smaller properties used as in England which house 5 people or more in 2 or more separate households will in many cases require a licence.

New mandatory conditions to be included in licences have also been introduced, prescribing national minimum sizes for rooms used as sleeping accommodation and requiring landlords to adhere to council refuse schemes.

Housing minister, Heather Wheeler MP, said: “Everyone deserves a decent and safe place to live.

“Today’s new guidance for landlords will further protect private renters against bad and overcrowded conditions and poor management practice.”

Source: Property118

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City Council seeks views on proposed new landlord licensing scheme

Consultation on a new licensing scheme for landlords renting out shared houses is running until 20 July 2018 and the City Council is urging residents, tenants, landlords and letting agents to have their say on the proposals.

An Additional Licensing for Houses in Multiple Occupation (HMOs) was introduced in parts of Nottingham in 2014 to help ensure safe and decent standards in these homes and contribute to raising the standards of private rented homes in the city overall.

The current five-year scheme will soon end, so the council is consulting on proposals for a new scheme, which would run for a further five years from January 2019.

Additional Licensing is a scheme that applies to privately rented Houses in Multiple Occupation (HMO) or shared houses. All kinds of people live in HMOs, but they are mostly associated with students and younger people.

The scheme requires a licence to be held for smaller HMO properties in certain areas of the city where between three and five people who aren’t related live together and share facilities like bathrooms and kitchens. Larger HMO properties shared by five or more people will be covered by a different scheme – Mandatory licensing, which is a national scheme, covering the whole city. Landlords are required to apply for a licence, which can last up to five years, for each HMO property they rent out in the area covered by the scheme.

The new Additional Licensing scheme is proposed to cover all or parts of the following wards: Arboretum, Berridge, Bridge, Dales, Dunkirk and Lenton, Mapperley, Radford and Park, Sherwood, St Ann’s and Wollaton East and Lenton Abbey.

The current licensing scheme has had a positive impact on problems associated with HMOs since its introduction in 2014, such as gas, electric and fire safety, overcrowding and insufficient facilities, poor internal and external property conditions as well as issues of noise nuisance and waste management.

Over half of the HMOs that applied to the scheme since 2014 did not meet the required standards at first inspection. However, the council has worked with landlords to improve the conditions and management of their properties with almost 3,500 certificates being issued for compliance with the required standards to date. This, along with the scheme still receiving 25 applications a month in its fifth year, shows that the scheme is effective but there is still work to be done to fully engage landlords and maintain improvements.

Councillor Jane Urquhart, the City Council’s Portfolio Holder for Planning and Housing said: “This scheme, along with others, is a major part of our plans to improve all types of private rented housing in the city.

“Not only does the scheme help to improve poorer standards of accommodation, it means tenants know what is expected of their landlord in terms of the management of their home. It also helps us to tackle rogue and bad landlords by providing a clear set of guidelines which all landlords need to meet,and helps prevent bad landlords cutting corners or ‘undercutting’ good ones, creating a level playing field for all.

“We are encouraging landlords, managing agents, residents and tenants to have their say on these proposals to help us shape the new scheme.”

A consultation on the new scheme began on 1 May 2018 and is running until 20 July 2018. To find out more information and have your say on the current proposals visit: http://www.nottinghamcity.gov.uk/additionalhmo.

Source: West Bridgford Wire

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All change for HMOs

As new rules come into force for landlords letting out Houses in Multiple Occupation (HMOs), the focus is on the move to professionalism, says Peter Foulds MRICS, chief valuer and head of risk at Allied Surveyors and Valuers.

There is no doubt that landlords, particularly the amateur and accidental landlords are feeling the pinch. Many have exited the market and new entrants are fewer as the stamp duty hike for investors is proving an effective barrier to entry.

HMRC’s phasing out of mortgage interest relief has meant that many landlords who have not explored limited company opportunities are, in reality, sleep walking into a negative return position.

The capital value to rent ratio, especially in the South had led to many investors seeking more adventurous opportunities. In the last few years, we have seen a flight to the North as investors chase yields. This has played a part in underpinning capital values but this model is heavily reliant on the diligence of local managing agents. Different areas have different challenges: managing a portfolio 100 miles away is very different to managing one in your home town.

Migration to HMOs

We have also seen investor migration to Houses in Multiple Occupation (HMO) investment opportunities. However, the HMO market can catch the unwary and further legislative changes this year will challenge the robustness of the investment class even further.

When interest rates rise, despite the ‘like of like’ provisions for existing mortgages, the PRA changes will result in some portfolio landlords struggling to remortgage away from their existing lender to take advantage of more favourable rates elsewhere.

Meanwhile, however well presented the HMO, the mantra ‘location/location/location’ is particularly relevant.
The most successful HMO operators are actively involved in their portfolios and are aware as soon as an issue presents itself, such as a non-paying tenant or a repair issue. More importantly they will also be aware of issues such as a new build student block coming on line, which will impact on the student supply chain.

Unaware landlords

Article 4 areas, which restrict the change of use from C3 to C4 (small HMO), continue to grow across the country. The number of landlords who are unaware of the requirements until they want to refinance alarms me. They then face the question of whether the property has a certificate of lawful use or relevant planning consent.

Similarly, the complexities of licensing – Mandatory, Additional and Selective – come as a very nasty surprise to many investors. Currently, Mandatory licensing applies to properties of three storeys and over with five or more occupants; Additional licencing is required for any HMO in an area designated by the local authority; and Selective licencing applies to any buy-to-let property (not just HMOs).

So, for example, from August 2018, most of Nottingham will be subject to a Selective licensing scheme and it will apply to the whole of the private rented sector. This will require landlords to supply full certification and to pay £780 per property to obtain a five-year licence. Compliance will be checked by the random selection of properties for inspection. So landlords face £780 for the licence plus the potential cost of obtaining insurance to cover for the provision of alternative accommodation for the tenant.

The October changes to Mandatory licensing will remove the three-storey rule, thus any property with five or more unrelated occupiers will require a licence. Thus, owners of previously unlicensed houses will have to pay a licence fee and potentially costs to upgrade the accommodation in order to achieve a licence.

Minimum room sizes

Alongside that change is the imposition of minimum room sizes meaning it will be illegal to let a room that is less than 6.51 m2 for single occupancy. This increases to 10.22 m2 for double occupancy.

Even this, however, could be trumped by individual local authorities who often require significantly larger rooms than that specified in the new minimum room sizes. This will result in some rooms in HMOs having to be taken out of use, with the consequential loss in rental income and capital value.

Furthermore, depending on the overall size of the bedroom accommodation, local authorities will also require a separate communal ‘living room’ to be provided.

MEES

The final consideration is that of the Minimum Energy Efficiency Standards (MEES), which are now in force, and give real meaning to Energy Performance Certificates (EPCs). Some landlords assert they are exempt because their lettings are on a room by room basis but this is certainly open to challenge.

Depending on circumstances, there should be an EPC for the building if a landlord requires to gain possession at the end of the term of the assured shorthold tenancy (AST). Moreover, if the EPC rating is an F or G then the tenant will be able to claim the landlord’s notice is invalid, remain at the property and demand upgrading to at least an E rating.

More than ever, let property has to be considered an opportunity for a professional business approach and not merely an investment. And the HMO asset class is certainly not one for the faint hearted – be that investors or lenders!

Source: Mortgage Finance Gazette

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If you rent a home, your landlord may need a licence!

Tenants, landlords, and neighbours are being urged to alert the council to licensable properties. From 1 October 2018 all houses in multiple occupation (HMOs) rented to five or more unrelated people must have a council HMO licence.

As things stand, a licence is only required if the property is three or more storeys high, but the law is changing this.

Landlords seeking an HMO licence will need to demonstrate to an Environmental Health Officer that the property meets national safety regulations.

The law change is designed to make sure that rented shared houses and flats are of a good standard and are safe to live in.
The council will be conducting inspections of properties over the coming months, and as of 1 October any landlord renting out an HMO without a licence will be committing an offence and could be subject to a large fine.

Those knowingly avoiding applying for a licence could be banned from renting out properties altogether.

Cllr Kim Caddy, Cabinet Member for Housing, said: “Don’t leave it to the last minute – any landlord who rents out an HMO without a licence after 1 October will be committing an offence. We’re also asking tenants, neighbours or anyone else who thinks a property could be licensable to get in touch.”

Source: Putneysw15