Residential  

Landlords need to be aware of property market rule changes

  • To come up to speed with the changes to licensing rules relating to houses in multiple occupation
  • To understand which properties now fall under this category
  • To appreciate what landlords need to do in the next few months
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Approx.30min

Alongside this change is the introduction of minimum room sizes, meaning it will be illegal to let a room that is less than 6.51 metres squared for single occupancy. This increases to 10.22 metres squared for double occupancy.

The government previously announced there would be a grace period of six months. This has been retracted and now all applications for a licence must be made by 1 October 2018, when the new legislation comes into force.

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Government estimates show that around an additional 160,000 properties will be classified as HMOs, increasing the workloads for local authorities to administer these schemes. We believe this number is too low, and if there are delays from local authorities in awarding these certificates, lenders will not be able to lend.

If landlords aren’t aware of these regulations now, they will only find out when the lender does their valuations.

<160,000 – the number of additional properties set to be classified as HMOs

The valuing agent will then see that it should be an HMO and thus advise the lender not to lend. The landlords will have paid for the valuation and searches, among other charges, meaning they will be out of pocket; advisers should be reviewing their clients' portfolios now to understand whether any of their properties fall under the new HMO classification.

We have already seen predictions from lenders that there will be a rush in applications for finance in the coming weeks as landlords seek to remortgage ahead of the autumn, which is no surprise from our perspective, not least because failure to meet the required licensing standards could see landlords hit by an unlimited fine.

One of the sectors likely to be most affected, and consequently hardest hit, is student accommodation. It has been a real growth sector in recent years for developers and investors, with city centre high-rise schemes appearing up and down the country, so owners of these types of homes will face a significant amount of work and cost to comply with the legislation. 

For advisers with clients who are landlords it is hard to predict the actual impact come October.

Preparation is clearly key and, as a broker, our advice is to seek clarity early on for portfolios and for which properties have the potential to require a licence.

Regardless of the legislative change, for all the potential upside landlords thinking about taking on an HMO should not make the decision lightly; managing these properties is a hands-on job, and not for everyone.

The rules stipulate that properties must be up to a minimum standard, safe for occupation, with adequate fire safety, gas safety certificates, smoke alarms, safety certificates for electrical appliances, and that the behaviour of the tenants must also be monitored.