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What do the new HMO regulations mean for landlords?

Last year the UK government announced plans to review regulations surrounding Houses in Multiple Occupation (HMO) although this was delayed by the snap general election. However, on 23 February 2018 the government announced details of changes to HMO regulations which will come into effect on 1 October 2018. While many of the changes are subtle they will force many landlords to apply for HMO licences and potentially fund changes to their properties.

SUMMARY OF HMO REGULATORY CHANGES

As of 1 October 2018 the following changes to HMO regulations will apply:

Definition of an HMO property

At this moment in time an HMO property is defined as one which is occupied by five or more people, forming two or more separate households and comprises of three or more stories. The new definition is much simpler and any property occupied by five or more people forming two or more separate households will require an HMO licence.

Floor space requirements

While the vast majority of HMO landlords offer floor space which is more than adequate for single rooms and those sharing, there have been many cases of bad practice highlighted in the press. As a consequence, the new guidelines will recommend floor space of no less than 6.51 m² for a single tenant and 10.22 m² for two adults sharing. At this moment in time it is unclear when this guidance will become law.

Properties previously exempt from an HMO licence

There are many HMO properties in the UK which do not currently require a licence under the old HMO definition. Those that fall under the criteria for the new HMO definition from 1 October 2018 will need to apply for a licence from their local authority. It is also worth remembering that a licence is required for each individual property as opposed to individual landlords.

Impact on landlords

Until the new regulations are brought onto the statute books nothing is actually set in stone but the indications are that around 170,000 additional properties will be impacted by the new HMO regulations. This is on top of the existing 60,000 properties already under licence. Those who fail to comply with the new regulations will be open to potentially unlimited fines.

Additional funding requirements

There is some debate at this moment in time as to whether the minimum room requirements will be guidance or firm regulations when the changes come in on 1 October 2018. It is likely that many landlords will at some point need to make changes to the layout of their HMO properties. Depending upon the type of property this could have a serious impact upon long-term rental income as well as requiring additional capital to fund changes.

PLANNING FOR THE FUTURE

At this moment in time the HMO changes will only relate to England although it is highly likely that Scotland, Wales and Northern Ireland will adopt their own form of regulatory changes in due course. We know for a fact that the definition of HMOs which require a licence will change and at some point the minimum room size guidance will become law. There is still plenty of time for HMO landlords to review their own individual investments and consider how the changes will impact their assets and their income.

Source: Property Forum

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Rogue landlord prosecuted for the second time in six months for HMO offences

An Oxford landlord with a previous conviction for housing offences was fined £10,000 and ordered to pay the City Council £1,535 in costs when he appeared at Oxford Magistrates’ Court on 20 March 2018.

The City Council successfully prosecuted Mr Imtiaz Gulzar for the second time in six months for failing to comply with his responsibilities under the Management of Houses in Multiple Occupation (HMO) (England) Regulations 2006 at a large HMO on Cowley Road, Oxford.

Mr Gulzar, (41) of Cowley Road, pleaded guilty to:

  • failure to keep his property in good order and repair;
  • failure to ensure that all notices indicating the location of means of escape from fire are displayed in positions within the HMO that enable them to be clearly visible to the occupiers;
  • failure to maintain property in good and clean decorative repair, and
  • failure to maintain property in a safe and working condition

After hearing the facts of the case and considering a written statement of mitigation, as well as a notice of intention to cite a previous conviction, the Court proceeded to fine Mr Gulzar £10,000 and ordered him to pay £1,535 towards the Council’s costs.

In November 2017, Mr Gulzar was prosecuted for failing to comply with the conditions attached to an HMO licence for a property in Iffley Road, Oxford. In that case, he was fined £2,500 and ordered to pay £1,425 in costs.

Councillor Alex Hollingsworth, Board Member for Planning and Regulatory Services, said: “The City Council is committed to ensuring high standards in the private rented sector and protecting tenants against landlords who do not meet their responsibilities under the law. I am pleased that in this second prosecution of Mr Gulzar, the Court imposed a higher fine than in the first case.

“This is one of the last cases to go through the courts as we are now using the new financial penalty powers that came into force in April last year. These powers allow us to issue financial penalties of up to £30,000 for certain housing offences rather than take up cases to the courts for prosecution. On average, we have issued penalties that are nearly four times what the courts used to fine landlords, so we believe the new powers will provide an even greater deterrent against violations of housing regulations by landlords.”

Source: Oxford City Council

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HMO minimum room sizes to come into force 1 October 2018

The Ministry of Housing, Community and Local Government has published the expected regulations confirming that from 1 October 2018 HMOs licensed in England under part 2 of the Housing Act 2004 will be required to have a floor area no-smaller than 6.51 square metres.

Licenses issued from 1 October will have to contain the following conditions:

  • to ensure that the floor area of any room in the HMO used as sleeping accommodation by one person aged over 10 years is not less than 6.51 square metres;
  • to ensure that the floor area of any room in the HMO used as sleeping accommodation by two persons aged over 10 years is not less than 10.22 square metres;
  • to ensure that the floor area of any room in the HMO used as sleeping accommodation by one person aged under 10 years is not less than 4.64 square metres;
  • to ensure that any room in the HMO with a floor area of less than 4.64 square metres is not used as sleeping accommodation.

Where a breach is found to exist, local authorities will be able to grant a period not exceeding 18 months to rectify the situation.

Additionally, a condition will be included to mandate that landlords of licensed HMOs comply with any relevant local authority waste scheme – although no further details or minimum requirements are specified.

The full draft SI may be found here: The Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licences) (England) Regulations 2018

Source: Landlords

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More landlords will be caught in HMO licensing net

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.

Current rules

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.

Licence requirements

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.

Comment

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

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New HMO rules for landlords set to take effect from October 2018

The government will implement new regulations for houses in multiple occupation (HMOs) from 1 October 2018 after a mandatory HMO licensing extension was confirmed in Parliament last week, which spells big changes for some landlords.

It has been more than two years since the issue of mandatory licensing for HMO properties was discussed by the government, and a date has now been set for the new rules to come into effect. It will mean that mandatory conditions and licences will apply to all HMOs that fall under the stated criteria, and the landlords who own them, further tightening up the market and minimising the number of unfit properties and rogue landlords in operation.

What are the licensing changes?

The new mandatory licensing policy from October 2018 will apply to HMOs that are occupied by five or more people, comprising individuals living in two or more separate households – frequently but not exclusive to groups of cohabiting adults – regardless of the number of storeys. The property is also classed as an HMO if it is not made up of self-contained flats, the people who live there treat it as their main residence, and two or more of the occupying households share one or more of the basic amenities. More detailed information can be found here.

Owners of properties that fall under the above criteria will need to obtain licences when the new regulations take effect, which is expected to bring an additional 177,000 HMOs under the mandatory licensing scheme in England. Where selective or additional schemes are already in place for landlords, which accounts for about 20,000 HMOs, the new scheme will replace existing licences.

Current licensing rules already apply to large HMOs, where five or more people rent rooms in the property from more than one household, if the building is more than three storeys high.

What if landlords don’t comply?

The Ministry of Housing, Communities and Local Government has confirmed that landlords are legally required to submit their applications for mandatory HMO licensing by the deadline of 1 October 2018, with no allowance for a grace period after this date. The government is expected to publish guidance in the coming months on the issue to make local authorities aware of the obligation, but landlords who fail to apply for the correct licence will be in breach of the law.

Will there be any other changes?

Implementing a minimum room size rule has been part of the talks, and more specific details on this are still to be announced. The minimum sizes will apply to rooms that are slept in, and local authorities will be required to enforce this by specifying appropriate rooms in HMOs, and the number of people allowed to occupy them. If the conditions are breached, the local authority will issue a warning to the landlord to remedy the situation, after which point legal action can be taken.

Another condition of the licences will relate to refuse disposal and storage facilities, with minimum numbers of bins and storage facilities for waste expected to be set out by the government.

Source: Buy Association
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Extension of mandatory HMO licensing set for October 2018

The Government has confirmed that the extension of mandatory HMO licensing is due to come into force form 1st October 2018, subject to Parliamentary approval.

The regulations bring purpose built flats where there are up to two flats in the block, into the scope of mandatory licensing. They also remove the three storey rule -at present mandatory licensing applies to HMOs of at least three storeys and five occupants comprising of two or more family units.

How will it affect me?

Research from RLA PEARL has found that 16% of landlords rent to people in HMOs.  It is estimated that an additional 177,000 HMOs will become subject to mandatory licensing in England as a result of this extension.

Properties will be subject to mandatory licensing if they meet the following criteria:

  • It 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.

The Order, which can be read here applies to HMOs in England, but does not apply to converted blocks of flats, to which section 257 of the Act applies. These are buildings that have been converted into and consist of self-contained flats where the building work undertaken in connection with the conversion did not comply with the appropriate building standards and still does not comply with them, and less than two-thirds of the self-contained flats are owner-occupied.

Six month grace period

There would be a grace period of six months to give landlords time to comply and local authorities time to process licences.

The RLA believes many of the changes are unnecessary and says they will put a huge strain on local authorities. The Association made its points in its formal response to the Government consultation.

Source: RLA

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Additional Licensing proposal in Bristol

The council proposes to introduce an Additional Licensing scheme for houses in multiple occupation across Bristol City.  Specifically 12 wards that make up central Bristol – Ashley, Bishopston & Ashley Down, Central, Clifton, Clifton Down, Cotham, Easton, Hotwells & Harbourside, Lawrence Hill, Redland, Southville and Windmill Hill – with the aim to improve poor management and poor housing conditions.

The Proposed Additional will capture most HMO’s that are not defined as HMO’s under the expected Mandatory Licensing regulations expected in April.

It would apply to all private rented houses or flats in this area that are let to three or more people who aren’t related and who share some facilities, like kitchens or bathrooms.

Landlords would need to apply for a licence and meet licensing conditions.

The basic proposed licence fee under this scheme without any discounts, would be £1,660, valid for up to five years. With discounts (early application/proof of in date & satisfactory Gas, Electrical & EPC Certificates and membership of an approved West of England Rent with Confidence scheme) the licence fee would be reduced to £885. For renewals this would be £785.

Further information about this proposal can be accessed by clicking here.

“Rob Crawford, Chairman for the Association of Local Landlords (Wessex) encourages all landlords that may be affected to read the proposal in detail before responding to the consultation survey.  The consultation closes on 13th May 2018.

The proposal was not unexpected after Councilor Paul Smith’s (BCC’s Cabinet Minister for Housing) outburst at a recent landlord meeting, where he revealed plans to introduce City Wide licensing were due to “Labour Policy!

Together with recent changes in tax legislation, higher tax threshold landlords with large portfolios now face bankruptcy.  Irrespective as to whether the landlord is compliant or rogue. Additional licensing does not discriminate sufficiently between the two!

The Council has not demonstrated how a basic Additional Licensing fee of £1,660 can possibly be justified.  If the Council maintains that this level of fee reflects its costs of administering the scheme, then it must be so inefficient that it must be challenged.  While the Council may have the legal power to introduce new measures, it is also under a duty to do so in the most cost-effective manner possible.  ALL Wessex is aware of at least one significantly lower cost alternative scheme.

Furthermore, the Council needs to be reminded that there is a legal obligation on Councils to only spend the funds raised from Additional Licensing on the scheme.  It is simply illegal to spend this money on other Council services.

The Council is proposing that a discount of £775 can apply, resulting in a net fee of £885.  However, the Council has not justified why its costs would be so much more if landlords cannot comply immediately with these requirements.  Even at a proposed discounted fee level of £885, ALL Wessex has some difficulty in understanding how the Council’s costs can be so high.

Whilst we wish to support the eradication of rogue landlords and where necessary support landlords in meeting an acceptable rental standard, we do not believe Additional Licensing as proposed is in the interest of landlords or their tenants.

We will be providing landlords with guidance on how to best respond to the consultation in due course.   All landlords must play an active part in objecting to this proposal”

Rob Crawford, Chairman for the Association of Local Landlords (Wessex)

Source: Property 118

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Southampton City Council to discuss renewal of HMO scheme

CALLS are being made for a crackdown on Southampton landlords in a bid to stamp out anti-social behaviour across the city.

Housing bosses say landlords need to take a tougher stance against tenants who make life a misery for neighbours.

The calls come as residents across the city are given their say on how landlords who run houses of multiple occupancy (HMO) are licensed.

The council’s current scheme, which covers Bevois, Bargate, Portswood and Swaythling, is set to expire in July.

Council housing bosses hope to renew the current policy, which they say has been a “success”.

But they are required to consult with residents first.

Ahead of the launch of the consultation, residents and councillors are calling for the council to toughen up the scheme, in order to tackle absent landlords and unruly tenants.

Sandra Lockhead, chair of the Central Portswood Residents’ Association, said the Portswood area has been “completely changed” by the influx of HMOs.

She said: “We’ve had major problems with anti-social behaviour, noise, damage to cars and rubbish piled up in the streets.

“It’s not acceptable behaviour.”

Mrs Lockhead blamed “marauding students” and “absent landlords” for the bulk of the problems.

She said: “Normally the agencies are quite good, but some of the landlords just don’t care.”

Mrs Lockhead’s concerns have been echoed by Portswood ward member, councillor Paul O’Neill.

He said: “I’ve had reports of late night parties, fireworks being set off in the early hours of the morning.

“They leave the bins out and in some areas you can’t even walk on the pavement.”

He added: “I think the scheme is working but within a certain remit.

“I think landlords need to be accountable to the residents in neighbouring properties.

“It should be similar to pub landlords, who have a responsibility to local residents.

“If they don’t get their customers to behave they face losing their licence.”

The council’s current additional licensing scheme was launched in 2013.

All HMO properties which have three or more occupiers from two or more households must be licensed and must comply with any set conditions.

This excludes those covered by the government’s Mandatory Licensing scheme.

The council says it has handed out 3500 HMO licences since the scheme launched five years ago – half of those with set conditions.

The authority says almost 40 per cent of properties do not comply.

In a report, set to be discussed by councillors tonight, housing chiefs says their is “still work to do to raise standards”.

But it states that since the introduction of the scheme, noise nuisance and waste complaints have fallen by more than 50 per cent.

Complaints by tenants about housing conditions have also fallen by 75 per cent.

Council leader, Simon Letts, said he was pleased to see the scheme supported by a Conservative councillor.

Meanwhile, the Southern Landlords Association, which represents members across the south east, has promised to work with the council during the consultation.

However, one of its directors, Peter Littlewood, rejected calls for tougher regulations.

He said: “In general, landlords as a whole do work with tenants to control anti-social behaviour.

“But if someone continues to do it, all you can do is evict.

“It is the council and police that have the powers to deal with it.”

The city council’s cabinet are set to make a final decision on the launch of the consultation at a meeting tonight.

The cabinet will then make review the result of the consultation at a meeting in June, in the hope of implementing a new scheme before the current one expires in July.

Source: Daily Echo

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Agency prosecuted for breaking HMO and licensing regulations

A lettings agency apparently trying to get around HMO regulations has been prosecuted for licensing and housing offences.

Easy Let Agency let out properties from landlords in order to re-rent them as Houses in Multiple Occupation without the landlords’ knowledge.

Staff from the firm, which also operates under the name Focus Property Management Limited, were hit with fines in two court hearings at Willesden, north London.

In the first case, the owners of a five bedroom terrace house in Willesden, let out their property to Claudio Crisafulli who was working as a freelance estate agent for Easy Let.

Crisafulli then illegally sublet the house as an HMO behind his landlords’ backs.

Brent council’s licensing enforcement team became involved when neighbours complained about lots of people coming and going from the property. Investigating officers found it difficult to track down the people responsible because Easy Let Agency was listed under a false address.

Now Easy Let company director, Marcio Da Silva has been fined £2,000 for failure to licence and a further £2,000 for breach of management regulations as well as £1,670 in costs. Fellow director, Marcio Auriello Do Prado, was fined £3,000 for failure to licence and £3,000 for breach of management regulations alongside £1,670 fines.

Claudio Crisafulli was fined £400 for failure to licence and £400 for a breach of management regulations on top of £40 costs. The agency was also slapped with a £5,000 fine and £170 in costs. The total fines and costs for the case amounted to £19,180.

In a separate sentence hearing, Focus Property Management Limited was sentenced to a total of £20,229 in fines for management regulation and licensing breaches for another rented property in Willesden Green.

Source: Letting Agent Today

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New HMO rules expected in October amid warning that complexity of licensing is driving landlords out

The Government is planning to introduce an extension to rules on Houses in Multiple Occupation (HMOs) in October, according to Housing Minister Dominic Raab.

The Government set out its proposals last year, which involve mandatory licensing for properties — regardless of height — that are occupied by five or more people from two or more households.

Currently, HMOs that must be mandatorily licensed are of three or more storeys.

The new rules still have to be approved by Parliament, but in response to a question in Parliament by Liberal Democrat MP Wera Hobhouse, Raab set out a timetable for their introduction.

He said: “The Government proposes to extend the scope of mandatory houses in multiple occupation (HMO) licensing, so that a licence is required for HMOs with five or more occupiers.

“We published our response to our HMO reforms consultation in December 2017, and we plan to lay the necessary regulations before Parliament shortly with a view to bringing them into force (subject to approval) in October 2018.”

New rules will also come into force setting minimum size requirements for bedrooms in HMOs. As part of the licensing requirements, local councils will be able to make sure that only rooms meeting the standard are used for sleeping.

Rooms used for sleeping by one adult will have to be no smaller than 6.51 sqm and those slept in by two adults will have to be no smaller than 10.22 sqm. Rooms slept in by children of ten years and younger will have to be no smaller than 4.64 sqm.

Meanwhile, the National Approved Letting Scheme (NALS) has warned that more and more landlords will leave the private rented sector (PRS) as they struggle with rising costs and the complexity of licensing schemes.

NALS yesterday revealed findings that licensing fees can be vastly different depending on locations, with London boroughs charging significantly different fees.

It said that following the Government’s decision to widen the mandatory HMO licensing scheme to another 160,000 properties across England, the issue of fees was even more important because increasing costs could also drive rents up across the country.

NALS research, conducted by London Property Licensing, shows that in 2017, licensing fees for a three-storey HHMO with five unrelated occupants can range from £125 (City of London Corporation) to £2,500 (Lewisham Council).

It found that in 23 of London’s 33 boroughs licensing fees are over £1,000 for a similar sized property. Overall, average fees have climbed every year since 2014 and the average cost has risen by 12.9% in 2016/17 and a further 5% this year (standing at £1,119).

There are now 29 separate additional and selective licensing schemes in operation across London with more schemes on the way, which means that landlords can potentially face licensing their properties through different schemes in different parts of the city, NALS said.

Isobel Thomson, NALS chief executive, said: “We should be clear: licensing HMOs helps protect tenants and drives up standards in the PRS.

“At the same time, the maze of licensing schemes operating in the capital is a huge financial and administrative burden on landlords, with some councils seeing them as a new revenue stream.

“With landlords under pressure from a host of regulatory changes, this increased burden is likely to push them out of PRS exactly at a time when they have a key role to play in providing much-needed housing.”

Source: Property Industry Eye