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Shawbrook helps investor with £3.35m refinance on nine HMOs

Shawbrook partnered with Sirius Property Finance to help an experienced investor remortgage nine HMO properties worth £3.35m.

The properties were purchased using bridging finance in June 2018, however as the term was coming to an end the client wished to remortgage quickly to avoid any fees.

Robert Collins, co-founder of Sirius Property Finance, said: “Along the way we had to liaise with the valuer to have the original reports readdressed and to clarify the net rental position as they had originally used a 20% discount that affected affordability.

“However, due to the partnership between me, the client and the team at Shawbrook we were able to provide a solution within the short time frame. It was a fantastic team effort and I’m delighted that our partnership with Shawbrook had a positive outcome for the client.”

Peter Turner, senior development manager for Shawbrook Commercial Mortgages, added: “The turnaround on this case was tight but the teams from both Sirius and Shawbrook worked together to re-mortgage the nine HMOs of the customer, avoiding the bridging finance penalties.

“I’m delighted we were able to help with this case and look forward to continue working with our newest strategic partner.”

Using Shawbrook’s LRI2 product on a 10-year, interest-only term, the team worked with Sirius to ensure the deal was completed in time.

The AIP was submitted on 6 November and the case was completed before Christmas ensuring that the bridging finance was repaid within the term and allowing the client to avoid over-run penalties.

Source: Mortgage Introducer

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Fife Council seeks views on future of HMOs

Fife Council is seeking views on the future accommodation needs of university students and St Andrews’ residents in the town.

The issue of HMOs (houses in multiple occupation) has caused much debate in St Andrews over the years, particularly how best to ease pressure on the over-crowded housing market and meet demand from all sections of the community.

Now the local authority is asking for views on a change to its housing policy which would limit the number of new HMO licenses granted in the town.

Convenor of the council’s community and housing services committee, Cllr Judy Hamilton, said: “We’ve previously looked at different ways to reduce pressure on accommodation, particularly in the centre of St Andrews. This included a moratorium on new HMOs in the central conservation area of St Andrews through planning legislation but unfortunately this hasn’t solved the problem.

“There are around 1,000 HMOs in Fife and nearly 860 of these are located in St Andrews. Across Fife the number of HMOs has grown by 8% in the last 10 years and 27% of all St Andrews residents currently live in HMOs.

“We’re now surveying the community with a view to changing our housing policy. Residents are being asked their opinion on options within the range of 0% (no further growth) to a maximum of 3% (limited further growth). The council’s preferred option is for no further growth based on information available at this point.”

Representatives from the Students’ Association and Residents’ Association in St Andrews were invited to speak at the last community and housing services committee meeting to inform the debate on the issue. Councillors then agreed in principle to introduce a strategic overprovision policy for Fife and to survey St Andrews residents on the detail.

Questionnaires will be distributed to St Andrews’ households from the end of January and a separate survey will be issued to local organisations and students.
The issue will be debated again at committee on April 11.

Cllr Hamilton added: “This is a major issue for the town and we will continue to work with the University to find long-term solutions that will meet the future needs of both students and residents.”

Source: Scottish Housing News

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Government announce new room size guidance

Houses in Multiple Occupation and residential property licensing reform Guidance for Local Housing Authorities Click here

“3. 4 What is the minimum sleeping room size?

The minimum sleeping room floor area sizes (subject to the measurement restrictions detailed in the paragraphs below) to be imposed as conditions of Part 2 licences are:
• 6.51m square for one person over 10 years of age
• 10.22m square for two persons over 10 years

The minimum size for sleeping accommodation does not apply to charities providing night shelters or temporary accommodation for people suffering or recovering from drug or alcohol abuse or mental disorders.

The Mandatory Conditions Regulations 2018 amend Schedule 4 of the Act, introducing the following new conditions:
•Mandatory national minimum sleeping room sizes (See paras 3.3 – 3.10); and
• Waste disposal provision requirements (See paras 3.11). 15
• 4.64m square for one child under the age of 10 years

It will also be a mandatory condition that any room of less than 4.64m square may not be used as sleeping accommodation and the landlord will need to notify the local housing authority of any room in the HMO with a floor area of less than 4.64m square. The measurement is one of wall to wall floor area where the ceiling height is greater than 1.5m. No part of a room should be included in the measurement where the ceiling height is less than 1.5m.”

RLA: Landlords are today welcoming new guidance for councils on room sizes in rented homes.

The guidance addresses concerns raised by the Residential Landlords Association (RLA) that recent changes to room size regulations could have led to landlords being in breach of the law where a pregnant tenant gave birth.

Since October this year, rooms used for sleeping by one person over 10-years-old have had to be at least  6.51 square metres, and those slept in by two people over 10-years-old will have had to at least 10.22 square metres. Rooms slept in by children of 10 years and younger have had to be at least 4.64 square metres.

Whilst the RLA believes that tenants should never face the dangers of overcrowded accommodation, it was concerned that the changes could have seen councils required to take action against landlords where a tenant gave birth and as a result there were two people in a room sized for one. A landlord who sought to evict in this scenario would be carrying out unlawful discrimination.

Following extensive discussions with the Government, newly published guidance makes clear that this will not happen. It notes that in instances where a tenant has given birth to a child since moving into a House of Multiple Occupation (HMO),  that there is an expectation that local authorities will not be acting in the public interest if they commence a prosecution.

David Smith, Policy Director for the RLA said: “We warmly welcome this new guidance. It reflects considerable work between the RLA and the Government in addressing serious concerns about the consequences of the room size changes.

“The Government has clearly listened to our concerns and this document should provide much greater assurances to landlords and tenants alike.”

Source: Property118

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Local authorities still unsure how many HMOs should be licensed under new rules

New analysis claims to highlight how unprepared local councils are for the extra regulations on HMO licensing.

A freedom of information request by Simple Landlords Insurance to 90 local authorities found that 65 (72%) had no idea how many unlicensed HMOs there may be in their area, while 29 (32%) had no idea how many properties should come in under the new regulatory scheme.

Since October 1, the old HMO rules changed, and now apply to properties of any height where there are five or more sharers in two or more households.

Previously, only properties of three storeys or more were covered.

The research also found 31 (34%) councils out of the 90 had not prosecuted any landlords for infractions of existing rules in the past two years.

There were only 103 HMO licences rejected at application over the past 12 months, with a total of 18,881 licenses granted.

It echoes similar data from property investment firm Touchstone that found only a minority of local councils had an idea of how many properties would need to be licensed under the new rules.

Housing minister Heather Wheeler said at the time of the changes in October that the new rules would increase the number of mandatory HMO licensed properties in England from 60,000 to an estimated 220,000 properties.

However, Richard Truman, head of operations at Simple Landlords Insurance, said this research shows local authorities are hamstrung in their efforts to apply the new legislation, due to a combination of poor intelligence about housing stock and stretched resources.

He said: “Earlier this year, we found that 85% of landlords we spoke to weren’t aware of the looming HMO regulations. A month on from their implementation, we wanted to find out exactly what those landlords are facing on the ground.

“The changes may be well-meaning, but a failure to support local authorities to communicate about them and enforce them is bad news – for good landlords and for tenants.”

Source: Property Industry Eye

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Is the government’s HMO legislation failing?

New figures obtained by Simple Landlords Insurance appear to show that government plans to protect tenants from poor living conditions through the expansion of mandatory HMO licensing look set to fall way short of their ambition.

According to the data, the majority of local authorities don’t know how many unlicensed HMOs are in their area – let alone where they are – leaving them ill-equipped to seek those who break the rules or take advantage of new enforcement powers.

The findings reveal that the rules are “practically unenforceable”, according to one HMO licensing expert, with the government’s recent commitment of £2m of additional funding to help implement the scheme unlikely to have any real impact.

The freedom of information requests returned by 90 local authorities have shown that two thirds (65/90) of local authorities have no idea how many landlords are breaking HMO licensing rules, nearly one third (29/90) have no idea how many properties should come in under the new regulatory scheme and over a third (31/90) did not prosecute any landlords for infractions of existing rules in the last two years.

There were only 103 HMO licences rejected at application over the last 12 months, versus a total of 18,881 licenses granted.

Houses in Multiple Occupation (HMOs) containing five or more people in two or more households with shared facilities such as a kitchen, bathroom or toilet must be licensed.

To gain a license, landlords must now pass a ‘fit and proper’ test as well as providing proof of compliance with fire safety regulations and provide tenants with a written statement of the terms of their occupancy. The rules were widened on 1 October, removing a minimum three storeys high requirement whilst new conditions on minimum room size and waste collection were imposed.

The known unknowns

The government’s Housing Minister Heather Wheeler MP claimed the new rules would increase the number of mandatory HMO licenced properties in England from 60,000 to an estimated 220,000 properties.

However, this new research shows local authorities are hamstrung in their efforts to apply the new legislation – due to a combination of poor intelligence about housing stock and stretched resources.

Carl Agar, founder of The Home Safe Scheme and managing director of property management company Big Red House, says: “It’s a big worry that local authorities don’t seem to have the resources available to manage this new workload. And the new rules are going to be practically impossible to enforce. The government is essentially relying on honest landlords coming forward to apply for a licence – leaving the so-called rogue or down-right criminal landlords that really need to be identified – out of scope. The £2m promised support is literally a drop in the ocean.”

Cities overwhelmed

Amongst the local authorities that have the intelligence and data to make a prediction about how many more HMOs would need a license, cities unsurprisingly show a major hike.

Liverpool City Council had 1,195 HMOs with a mandatory license before 1 October, and expects that 5,000 will require licensing. Birmingham expects numbers to swell from 1,853 to 4,000 and Southampton expects the numbers will increase from 551 to 2500.

Many London boroughs had no idea at all how many additional HMOs would come under scope, whilst those that did are expecting a huge jump – in Greenwich from 147 to 3,250 HMOs under scope.

66% of the local authorities who responded were able to estimate how many HMOs were likely to require a mandatory license from 1 October, and the average increase recorded was 227%.

Carl adds: “Many local authorities are now faced with at least twice as many licences to process and check with the same amount of human resource – leaving even less time for enforcement. The major conurbations will be swamped.”

Mystery housing stock

Environmental Health Officer and Chair of the National HMO Network Paul Fitzgerald, explains: “Most local authorities simply do not fully understand the housing stock in their area, and they are kidding themselves if they claim that they do.

Trying to identify an HMO from scratch is an incredibly challenging job, made harder by the failure to join up systems like council tax and benefits registers, and immigration databases. Those who are determined to break the law do not apply for a licence in the first place.

Once they have been identified, dealing with criminal HMO landlords will be yet another problem. Pursuing a prosecution – or applying for a banning order – takes time, stretches resources and is not guaranteed. Many local authorities will opt for issuing fines, but there’s no guarantee that these will be paid without going to court, and that’s another resource and cost-heavy process.”

The bottom line” sums up Carl Agar “is that the Housing Act, in its current form, is no longer fit for purpose and the government need to prioritise helping local authorities know who is renting property in their areas and what type of properties are being let. A central government funded national register would be a major step forward.”

Richard Truman, Head of Operations at Simple Landlords Insurance commented: “Earlier this year, we found that 85% of landlords we spoke to weren’t aware of the looming HMO regulations. A month on from their implementation, we wanted to find out exactly what those landlords are facing on the ground.

The changes may be well-meaning, but a failure to support local authorities to communicate about them and enforce them is bad news – for good landlords and for tenants.

We want to see the emerging class of professional landlords supported by central government and local authorities, and that can clearly only be achieved with more effective regulation and resource.”

Source: Property Reporter

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Could HMOs turn out to be not the golden goose that investors hope for?

It’s a funny old world. When I was at my busiest, the type of properties that investors now actively seek out were considered sub-prime and to be avoided.

Specifically, these include student lets, lets to sharers, sitting/assured tenancies and Houses in Multiple Occupation (HMOs).

A corollary of the rush into buy-to-let is that many now see BTL as a way of augmenting their income.

Certainly in London most of the ‘total return’ on BTL has come from capital appreciation, but elsewhere income has become important, and possible.

But as yields have suffered, especially in the last five years off the back of unprecedented and market distorting low interest rates, those seeking income have moved into alternative asset classes.

Many would say student housing has been over-played. However, we all know that many renters are now forced to share houses – which has made HMOs look particularly attractive.

This has not gone unnoticed by the authorities, which have brought in a raft of changes, including licensing schemes.

The result will be a step-change in the number of HMOs being registered – but is there a hidden issue here that doesn’t seem to be talked about?

An HMO has historically been considered as being worth less than a standard residential property, being valued up to 25% less.

Once designated as an HMO the local authority would resist the change back to residential because the new rooms within an HMO each count towards their precious number of available ‘dwellings’.

Indeed I used to do deals for clients where we’d buy a centrally placed property with an HMO use, then buy another in a less salubrious part of the same borough, transfer the use and hey presto, a significant uplift on the more valuable property was realised when a reversion to straight residential was granted.

Recently, I sat in front of a highly placed government official with some responsibility in the area of drawing up new legislation, and asked if the same rules would still apply, i.e. that change of use back to residential after a new HMO licence would be resisted – and they weren’t able to answer.

Anyone thinking of venturing into this area should carefully consider their options, or at least ask the right questions.

Losing a large chunk of capital value to gain a slightly higher yield might just be too high a price to pay.

Source: Property Industry Eye

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Advisers urged to help landlords with HMO licencing changes

Advisers need to help landlords who may be receiving letters from lenders about their mortgages due to HMO licencing changes, two lenders urged at FSE Midlands in Coventry today.

The changes are thought to mean 177,000 properties now require a HMO license.

David Whittaker (pictured), managing director of Keystone Property Finance, and Adrian Moloney, sales director at OneSavings Bank, highlighted how some landlords are already receiving letters from their buy-to-let lenders regarding properties which may now require a license.

Whittaker said: “Landlords are punch-drunk from the regulatory changes of the last few years.

“This is the law of unintended consequences in full effect and you would expect some common sense from lenders.

“Lenders should say that, as long as there are no changes to the property or that the landlord doesn’t want a further advance, that they can keep the loan.”

Before the Budget there was a suggestion that landlords might be able to get capital gains tax relief if they sold their properties to long-standing tenants.

Both Whittaker and Moloney were not surprised that this didn’t happen.

Whittaker said: “It was never going to fly. Anything that would line the pockets of landlords is not going to happen.

“HMRC and the Chancellor see the landlord community as a group that traditionally hasn’t paid its wedge.

“Landlords do not draw any empathy in the corridors of Whitehall.”

Moloney said: “If your investment is good why would you get rid of it?

“Sales of property investments have not been really picked up in the main by first-time buyers anyway, they’ve been picked up by other landlords.”

Source: Mortgage Introducer

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Redbridge Landlord Fined £7,500 For Overcrowded HMO

A Redbridge landlord has been fined £7,500 after he was found to be cramming 23 people into a house in east London. The property in question, situated in Beehive Lane, Gants Hill, had room for just six occupants.

Housing officers at Redbridge council raided the property following complaints from neighbours about overcrowding. The officers discovered 16 people currently in the house as well as evidence of another seven living there. The people inside did not have access to sufficient cooking, washing and toilet facilities. The residents inside were also all adults.

The property’s managing agent, Marvel Estates Limited, held a house in multiple occupation (HMO) licence, however it was only valid for six tenants.

Following the raid, which took place in June last year the firm, based in Forest Gate, appealed against a financial penalty imposed by the council. However, at a tribunal hearing last month it agreed to pay the fine.

The cabinet member for housing and homelessness at Redbridge Council said: ‘We are determined to root out rogue landlords and this financial penalty makes it clear we mean business. It’s unacceptable for tenants to be living in conditions which fail to comply with legislated requirements. We want to work with landlords to prevent this kind of situation but if they are not willing to do so, our message is clear – we will find and fine you.’

The fine for the Redbridge landlord is part of a wider crackdown on rogue landlords in Redbridge and across London. Last month in Brent a landlord was found to have crammed 26 mattresses into a dangerous three-bedroom house. Officers forced their way into the property and found over 20 men who were residing in conditions described as ‘appalling and unsafe’. The house, located in Kingsbury, was described by the council as one of the worst illegal HMOs it has ever experienced.

Source: Residential Landlord

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New HMO and Section 21 rules start today

Landlords and agents should be aware of important changes to the rules covering HMOs (house of multiple occupation) and issuing Section 21 notices, which come into force from today.

New HMO rules

From today, all landlords, or managing agents, of properties which have five or more occupiers who form two or more households will need to have, or have applied for, a mandatory HMO license.

If you have a property with five or more occupiers who do not form just one household, and this includes children, regardless of the number of storeys the property has, you need an HMO license issued by your local authority.

There is no grace period and the penalties for not complying can be severe: up to a £30,000 fine, a First Tier Property Tribunal Rent Repayment Order and a Banning Order, and a criminal record.

Some landlords may need to make structural alterations or improvements to safety standards to comply with the new minimum room sizes in HMOs.

New section 21 rules

From today, all landlords in England with Assured Shorthold Tenancies (ASTs), regardless of their start date, will need to comply with the requirements of the Deregulation Act 2015 as to when and how a landlord can serve a Section 21 Notice, which enables them to terminate a tenancy agreement.

When issuing a Section 21 Notice of Possession, landlords will now be required to use Form 6A.

The form, prescribed by government, combines the two previous types of Notices into a single Notice for both periodic and fixed-term tenancies. Therefore, landlords should stop using their old Notices from today.

In addition, under the Deregulation Act 2015, landlords wishing to issue their tenants with a Section 21 Notice should ensure they have shared the ‘How to rent: the checklist for renting in England’ guide with tenants; make sure the property has an up to date Gas Safety Certificate and the tenants have seen it.

Landlords must also publish the property’s Energy Performance Certificate (except when the property isn’t required to have one); inform tenants which scheme their deposit is protected in; where the property is licensed, provide a copy of the licence to all of the tenants.

Source: Simple Landlords Insurance

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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