If your portfolio of buy to let properties includes one or more Houses in Multiple Occupation (HMO), you need to be aware of the warning published by Landlord News on the 28th of September 2017.
The article explains that stricter new rules are likely to be introduced for landlords of HMOs this spring requiring them to invest in extensive improvements to their property or risk hefty financial penalties.
As one of the many consequences, landlords who continue to use such property under the new rules are also likely to see a significant impact on their HMO landlords’ insurance premiums – not least because of the increase in the value of the property after the renovations have been made.
As part of the government’s efforts to encourage a general improvement in the standards of accommodation offered by HMOs, the main thrust of the new rules is likely to see a threefold increase in the number which need to be licensed by the relevant local authority. An additional 174,000 HMOs, over the 60,000 buildings which already require licences are expected to be brought under more stringent new requirements.
The new rules
Not only are some of the essential benchmarks for HMOs set to change, but councils are also likely to be given greater freedom to modify their existing licensing criteria and the fees charged for those licences.
Briefly, the new rules:
- remove the distinction between HMOs of less than or more than three storeys high – under the new regime, an HMO of any number of floors may be subject to local authority licensing requirements;
- suggest that the minimum floor areas for each unit of accommodation with an HMO is also likely to increase – to at least 6.52 square metres, but as large as 10 square metres for units which incorporate their own bathroom, but rely on shared kitchen facilities;
- extend the definition of an HMO to include flats with shared kitchen or bathroom and toilets that are situated above shops;
- require that in future, landlords of HMOs ensure that there is provision for the storage – until its disposal – of all household waste; and
- the rules may include changes to the nature of the way in which landlords applying for an HMO licence are considered to be “a fit and proper person”.
If you fail to upgrade your HMO to meet the new standards, you stand to lose rental income on the accommodation you may no longer let. If you go ahead and break the rules, the penalties are potentially hefty. Bath and North East Somerset Council, for instance, reminds landlords that they may face unlimited fines or a Civil Penalty Notice of up to £30,000.
The impact on landlords
The overall impact on landlords is likely to result in considerable expense in bringing their HMO properties up to the required new standards. These costs follow on from other financial pressures, introduced by such changes as the removal of income tax relief on mortgage interest payments and the increase in the rate of Stamp Duty.
You might help to lessen the impact on your HMO landlords insurance premiums by ensuring that you arrange the necessary cover with a specialist provider of such protection.