HMOs: the changes explained
In a lettings industry feeling the squeeze from multiple angles, HMOs – houses in multiple occupation – are back in fashion. House shares, as they are also known, are delivering mouthwatering yields that can help balance the books of landlords hit by a triple whammy: the scrapping of the wear and tear allowance, higher stamp duty costs for second property purchases and the phasing out of mortgage interest tax relief.
For letting agents, HMOs are another income source to offset losses the tenant fee ban might cause. HMOs bring extra compliance and can be high maintenance, so landlords venturing into this sector often choose an agent’s full property management service.
It came as no surprise that Government recently stepped in to make offering and managing HMOs more wregulated, with a focus on tenant safety. Poor publicity surrounding the new rules (which came in to effect on 1st October 2018) has, however, led to some confusion.
Viewber has kept track of the HMO changes, bringing them together in this blog – useful reading for current HMO owners and any landlords thinking of investing in the house share domain. Given many landlords choose to self manage the more information at your fingertips the better:
- It is now mandatory for HMOs shared by five or more people in two or more households with communal facilities to have a HMO license, obtained from the local council. Additionally, some councils now require all HMOs to have a license, so it’s worth checking.
- Before 1st October 2018, only HMOs of three stories or more used to require a license but that element has been abolished to include HMOs of all heights.
- There is a small exception to the new licensing rule: purpose-built flats within a block containing three or more self-contained flats are excluded from compulsory licensing.
- Landlords, or their instructed letting agent, will be criminally liable if an HMO they manage doesn’t have the appropriate license after the 1st October 2018.
- A Section 21 notice can’t be served on a HMO where the required license isn’t in place or an obtained license has expired.
- A tenant can apply to a tribal to recover some of their rent payments if their landlord has been running an unlicensed HMO.
- Landlords renting out HMOs have extra legal and compliance obligations that cover: fire, gas, Legionnaire’s, carbon monoxide and electrical safety; occupation levels in relation to overcrowding; adequate cooking and bathroom facilities; hygiene and repair standards in communal areas and shared facilities, and refuse/waste management.