An interesting occurrence happened to me earlier this month which I thought would make a great topic to write about in this month's article. Most landlords operate standard Buy-to-Let properties in their portfolios, but some also have HMO property. In case you're not sure what an HMO property is, let me explain. An HMO is a property which is run as a House of Multiple Occupation. The proper definition is as follows:
Your property is a House in Multiple Occupation
(HMO) if both of the following apply:
- At least 3 tenants live there, forming more than 1 household
- You provide shared toilet, bathroom or kitchen facilities with other tenants
(There are actually several types of HMO, however, I won't go into that here. The information is easy enough to obtain online or from your local authority.)
So let me explain what happened. I had a phone call from a letting agent regarding a particular property of mine. It is a 2 bedroom flat which is currently let out to 2 sharers. They are friends and are therefore not related, therefore forming 2 households. The question from the agent was whether an additional person could move in to the flat. They were the partner of one of the existing tenants and this seemed like a reasonable request. They were prepared to pay more rent due to the slight increase in wear and tear at the property.
Having HMO properties in our portfolio, as soon as I was asked, a red flag came into my mind. I immediately knew this configuration would form an HMO. I therefore rang up the local council and asked whether there were any implications under the Article 4 Direction (to do with planning permission needed) or additional licensing schemes (other than mandatory licensable HMO's) within the borough, to which the answer was a resounding 'No'.
The next step was to ask the mortgage company what their opinion was of us having 3 sharers forming a more informal HMO and their resounding answer was...'No' as well! Except that this
meant we were prevented from being able to accept the tenants' request. Not only this, but the insurance policy would've needed to be changed to an HMO policy too...phew!
This made me think a little. I wondered how many people were out there who had agreed to a slightly different configuration of tenants and were therefore now unwittingly operating an HMO.
If you think you are, you need to be aware of the implications and see how you can redress the situation. The most important thing you need to be able to do as a landlord is ensure the safety of your tenants, yourself and your property. Thus, it is advisable to look at which course/s of action you may need to take under these circumstances without compromising yourself, your tenants or your property.
At the end of the day, it is your responsibility to know who is occupying your property. I have known instances where people just happen to 'move in' and the lead tenant doesn't tell anyone. If this occurs and the property ends up being an HMO, then you must take the relevant action.
When I mentioned these salient points to the letting agent, even she hadn't realised the implications! It is therefore wise to know who is allowed
to be living and who is actually
living in your property and keep ahead of the game in case this happens to you.
To your continued property success!
Hazel de Kloe
Property Investor | Property Mentor | Speaker | Author
The contents of this article are for educational purposes only and we make no recommendation of any particular investment. The price of property can decrease as well as increase and you make any investments in property at your own risk.
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