HMO Licensing... Are You Aware Of The Coming Changes

HMO Licensing... Are You Aware Of The Coming Changes
If you have been in property for a while, the chances are that you either already own 'Houses in Multiple Occupation' (HMO) properties or are at least considering the idea. After all, it can be a great cash flow strategy! If that's the case, then there's some very important news you need to be aware of. As a result of the Houses in Multiple Occupation Licensing Reform Consultation at the end of last year, there are due to be some significant changes made.

Currently, across the UK, approximately 60,000 properties fall under the 'Mandatory Licensing' requirements for HMO properties. This means that any property which falls under the criteria below is required, by law, to be set up in accordance with those regulations. Such a property is as follows:

 - 3 storeys or more and
 - Houses 5 or more tenants
 - Forming 2 or more households
 - Where those tenants share amenities such as bathroom and kitchen

In December of last year, the Government agreed that it would move forward with extending the current Mandatory Licensing of HMO properties. On the 23rd January 2018, the Housing Minister, Dominic Raab, stated that, subject to Parliamentary approval, the new regulations could be brought into force from October 2018.

At the moment, the current legislation covers these larger property types as they are seen to be higher risk than other styles of house. However, more and more local authorities have introduced additional licensing schemes for properties with fewer storeys and tenants in an effort to combat poor housing in certain areas.

So, what's in store...?

Well, the rules have not changed since licensing came into force in 2006 following the Housing Act of 2004 which allows the Secretary of State to determine the type of property which falls under the definition of mandatory licensing.

The Government has now decided to include other types of property within the scope of the scheme. From later this year, these following types of properties will now be affected:

 - All HMO's with 5 or more tenants forming 2 or more households regardless of the number of storeys.
 - Purpose built flats with up to 2 flats in the block and where one or both of the flats are occupied by 5 or more people forming 2 or more households. This will apply regardless of whether the flat is above commercial premises or within a residential block.

It is important to note that it is the individual HMO which requires a licence, not the landlord. Therefore each and every property you own which falls under the new scheme will require a licence.

The implications of this change mean that this reform is estimated to treble the number of mandatory licensable HMO's within the UK.

What do we need to do now?

The Government intend to implement the extension of mandatory licensing in 2 phases.

The first phase will last for 6 months, wherein landlords will be expected to apply for a licence and comply with any changes needing to be made. If a landlord has not made an application within this 6 month 'grace period', they will not be allowed to serve a Section 21 notice seeking possession from a tenant.

Is it crucial to note that applying for a licence is not optional, the 6 month change over period just allows you to comply with the new legislation.

If, after this time period, you have not complied with the new mandatory scheme, then you could face serious penalties, including hefty fines and criminal prosecution.

If you already hold a licence under an additional licensing scheme, then your licence will be 'passported' into the new mandatory scheme without any further cost or alterations to the licence conditions for the remainder of the licence period.

It is therefore highly advisable to ensure that you review your properties ahead of the expected changes so that you are well ahead of the game when the time comes and are fully prepared for licensing.

If in doubt, it is advisable to speak to your local authority to find out exactly what the implications are in case you either own or intend to own this type of property in the near future.

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Until next time, happy landlording!


Hazel de Kloe

Property Investor | Property Mentor | Speaker | Author

The contents of this article are for educational purposes only and we make no recommendations of any particular property purchase. The price of property can decrease as well as increase and you make any purchase in property at your own risk.

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