The new HMO property laws and buy to let

Updated: December 17, 2018

What is a HMO?

House in multiple occupation, or HMO, is a property shared by a number of unrelated people on a room basis. They used to be referred to as multi-let or house share. In late 2016, a consultation took place to assess possible changes to licensing. As a result, a set of changes were drafted and will drastically increase the number of properties in the UK that need to have a licence. Initially, 60,000 HMOs across the UK required a permit, but this tripled once the new HMO property laws came into play.

Brightly painted English HMO properties

Are you up to date with the latest HMO law changes? Do you need a licence?

Properties that fall under any of the criteria listed here are required to apply for a HMO licence.

1. Property inhabited by five or more people

The first category is a property inhabited by five or more people which makes up two or more households. A household is classed as immediate family, partners – which include married civil partnerships – or cohabiting individuals.

2. Three storey properties

A landlord who owns three-story properties, single, and two-story houses must license their properties if they fall in the above classification.

3. Properties above a commercial building

Properties above commercial buildings, such as shops or restaurants, must also be licensed. Generally, only where there are 5 or more tenants forming 2 or more households.

4. Check with your council

Different councils have other licencing rules for specific HMO types. Check with your local council to determine if your property requires a licence.

There was a six-month grace period, but any landlords who have not sorted out their licensing requirements will be liable for criminal prosecution and civil penalties of up to £30,000. Don’t get caught out by these changes to the laws.

Minimum room size

Another rule that is gaining heavy criticism is the change to minimum room sizes. Box rooms are no longer suitable. 6.52 square metres for one person and 10.92 square metres for two people is the new minimum.

Selective licensing

Selective licensing is increasing around the country, and although the new national regulations came into effect on October 1st 2018, many councils were already implementing restrictions and property legislation to suit their needs.

One such council is Greenwich, where permitted development rights for using a house as a HMO for six or fewer people are changing. The new rules make it compulsory for landlords to apply for planning permission. The council says it will improve living standards and force out rogue landlords. We recommend that you keep an eye on the news and stay in touch with your council for updates.

Blacklist for rogue landlords

In another initiative to clamp down on rogue landlords, a new database has been launched by the government detailing all those banned from working in the private sector. Maintained by local councils, the list contains details of agents and landlords who receive a financial penalty concerning a banning order twice or more often within three months. The database was introduced as part of the Housing and Planning Bill 2016, which also included measures for banning orders and rent repayment orders.

However, the decision to keep the database private and only accessible to government departments is controversial. Meanwhile, the Mayor of London published a similar list of persistently bad London-based landlords and letting agents. London’s database may have a greater chance of success due to being accessible to all parties.

Buy to let returns

Finally, if part of your investment strategy is buy-and-hold for capital growth, interesting statistics just released show you could be looking at a 1000% return over 21 years. Since 1996, when buy-to-let mortgages were introduced, an investor who invested £100,000 in four houses worth £100,000 each and did nothing other than maintaining the properties and collecting rent would now be sitting on over £1.2 million worth of property.

Most experts believe that landlords are still reaping the benefits of a thriving property market. Over the past 21 years, the property market has churned through its typical cycle. Even after suffering the effects of the 2008 crash, landlords have still seen over 1000% returns. This is good news, especially when investors are finding it tough. This model can still work even in the current climate.

Are you the Landlord of an HMO?

At lettingaproperty.com we are currently offering a free rental valuation service. Find out exactly how much rent you could achieve with your HMO property. We offer a range of lettings packages to suit all landlords. You can save £1000’s per year when compared to traditional high street agents.

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5 Comments

  1. Marshall December 17, 2018 at 5:22 pm #

    Re the following text;
    3. Properties above a commercial building
    Properties above commercial buildings, such as shops or restaurants, must also be licensed.
    There was a six-month grace period, but any landlords who have not sorted out their licensing requirements will be liable for criminal prosecution and civil penalties of up to £30,000. Don’t get caught out by these changes to the laws. Does this mean that for instance a flat above a shop, with one occupier, requires a License?
    Thank you.

    • Shannon Hall December 17, 2018 at 10:57 pm #

      A flat above a shop with one tenant doesn’t require a licence. The flat would generally only require one if there were 5 or more people living in the property.

  2. teracy meachen December 15, 2018 at 2:30 pm #

    If I only have 4 people living in a house I assume that this is NOT a HMO?

    • Shannon Hall December 17, 2018 at 10:44 pm #

      Thanks for your question. If you have four unrelated tenants living in a property that form more than one household and if the toilet, bathroom or kitchen facilities are shared, the property is a HMO. However, if your property inhabited by five or more people which make up two or more households you are required to apply for a HMO licence

  3. Linda Shinner December 15, 2018 at 10:26 am #

    Worded very simply and easy to understand. Thankyou.

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