Are you HMO compliant? What landlords need to know about planning and licensing

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Planning and licensing for a house in multiple occupation (HMO) aren’t the same thing. We frequently work with HMO landlords who have either mistaken for one another or assumed to be the same thing. This oversight often leads to significant legal issues or financial consequences that we help clients navigate their way out of.

In this article, we bring clarity to the issue for HMO landlords. At the end of this piece, we give details of our specialist advice service that you can contact to help you out with any difficulties you may be facing now or in the future.

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    HMO licensing versus HMO planning – the differences

    Here are two definitions that explain what HMO licensing and planning matters concern in the simplest possible form:

       

        • Planning relates to the use class of a property.

        • Licensing relates to how fit a property is for its intended use.

      HMOs and planning permission

      If you want to change to use class of a property, conversion from a dwelling house (Use Class C3) to a small House in Multiple Occupation (Use Class C4) which is shared by three to six unrelated individuals is generally considered a Permitted Development if the property is not in an Article 4 area. For HMOs with more than six residents, which fall into the ‘Sui Generis‘ category, planning permission is typically required regardless of location.

      At the conclusion of the planning process, the planning department of your local authority will issue a decision notice affirming the chance of use to an HMO.

      HMO licensing

      Licensing is concerned with making sure local authorities see that your property is fit for HMO use and meets the required standards. Confusingly, licences are issued by different departments within local councils and they may or may not communicate with the Planning Department.

      In most cases,  you first purchase a property and get planning permission to turn it into an HMO. And then you apply for HMO License that remains valid for a maximum of 5 years before you need to renew it.

      You should also check whether your local authority has their own additional and selective licensing schemes.

      HMO licensing and planning issues for landlords

      You may have problems refinancing your HMO, selling your property as an HMO or renewing your HMO license if you don’t have an HMO planning change of use in place.

      What should you do in this situation if you have an HMO without planning change of use in place? There are two options open to you.

      Demonstrate previous use as an HMO

      Show your local authority that your property has been used over an extended period of time as a house in multiple occupation.

      Look for evidence like:

        • HMO Licensing History: Any previous HMO licences that have applied to the property and a receipt for each licence fee paid.

        • Letting History: Tenancy agreement documents showing that rooms within the property were rented out to three or more tenants at one who were unrelated people.

        • Historical Rental Ads: Any “room for rent” ads placed in newspapers or the internet.

        • Council Tax History: Council tax bills paid by you or previous owners as the HMO landlord.

        Documentation like these can help affect a Lawful Development Certificate so that your property now meets the legal definition of a compliant HMO. With reference to residential properties of multiple occupation in Article 4 areas, this may be the only way you can get a change of use approved.

        Assert grandfather rights

        You can asset grandfather rights to secure retrospective HMO use if your property has been in constant use over the past 10 years as an HMO.

        Be aware however that how grandfather rights are interpreted may vary from one local authority to another.

        If you don’t have evidence to present

        If this is the case, you’ll need to make a Full Planning Application.

        Please be aware though that your application may be rejected or a condition of approval may be a reduction in the number of bedrooms in your property.

        Several tenants standing outside an HMO

         

        HMO licensing and planning issues for when purchasing new properties

        In our experience, this is how most landlords find themselves owning an uncompliant HMO.

        Without wishing to sound patronising, please do not take the current owner’s word that all issues related to HMO compliance, licensing and planning have been sorted. especially if the property is in an Article 4 area.

        Treat the transaction as if you were buying another business and run a full due diligence exercise prior to proceeding. Make sure you ask for, see, and have verified the following at the very least:

           

          • Previous and current letting agreements (letting history) to establish a pattern of tenancy type

          • Invoices to construction firms relating to HMO conversion is a “nice to have”

          When the deal completes and the HMO doesn’t have planning for change of use but requires one,  these documents will make the application for a Lawful Development Certificate much quicker.

          If the current owner does not have this documentation, you can legitimately call into question the value of the property as part of the value will be based on its income potential.

          Just three tenants standing in the kitchen of an HMO

          HMO licensing and planning issues for rent-to-rent sector

          The rent-to-rent sector is a faster, less expensive way for property professionals to expand their profolio. You lease a property from a buy to let landlord and then use your expert property management skills to find tenants, charge higher rents and reduce maintenance costs.

          If you rent-to-rent an HMO property, the property must have a licence even though you’re not the property owner.

          Legal responsibility to remedy the situation as a rent-to-rent service provider is almost certainly not yours.

          However, we have worked with rent-to-rent service providers where, in this situation, the property owner has panicked providing our clients with uncertainty. You may have grounds however to reclaim the rent you’ve paid to the property owner however you need to check with a solicitor for more certainty on this.

          HMO planning and licensing FAQ

          What is an HMO?

          A Small HMO has at least three tenants up to a maximum of 6, from more than one household, sharing facilities whereas a large HMO is 7+ tenants, from more one than household, with shared facilities. The definition can be quite complex however and include bedsits, shared houses and some self contained flats.

          For the purposes of the Housing Act 2004, a household could be:

            1. Couples in a marriage or living together as if they were married, as well as equivalent same-sex relationships.

            1. Various relatives cohabiting, such as siblings, parents, children (along with step-children), grandparents, grandchildren, aunts, uncles, cousins, nephews, and nieces.

            1. Foster children living with their foster parents are considered part of the same household.

            1. Domestic staff members living in rent-free accommodation provided by the person they work for are part of a household.

            Why convert a property to HMO?

            Depending on location and property type, it can be more financially advantageous than rented properties where the tenant is a single person or the tenants belong to the same family.

            What happens to HMO landlords who get licensing or planning wrong?

            The list is long. The consequences shown are by no means exhaustive but they should provide landlords with sufficient motivation to ensure they get it right:

              • Expect heavy financial penalties: Many think that the maximum fine for renting out an HMO without a licence is £20,000. It’s not as several landlords discover each year. A landlord in Coventry was recently fined £60,000 for running an unlicensed property with no gas and electricity.

              • Entry onto the Rogue Landlord and Agent Checker system: Local councils participate in the collection and distribution of information on private landlords and letting agents who have been fined or prosecuted for failure to abide by renting rules and regulations.

              • Receive Section 21 notices: You can’t evict tenants with a Section 21 notice unless you have a temporary exemption from the local authority.

              • Be forced to pay rent refunds: You could be forced to reimburse the rent paid to you by tenants in full under a Rent Repayment Order.

              How do you maintain your HMO licence once it’s been granted?

              Compliance with the government’s regulations on HMO properties doesn’t stop at the granting of the initial licence. There are some 400 requirements across 160 different statute laws.

              To maintain your HMO licence, you need to:

                • Follow health and safety rules: Local council officials in the Environmental Health Department are quick to follow up on health and safety issues reported by tenants quickly. You also need to make sure you keep up to date on safety issues like fire doors and signage in communal areas.

                • Gas safety certificates: You need to renew your gas safety certificate every year and remedy any faults found.

                • Fire risk assessment: There is no statutory definition of the term “regular” in the rules regarding fire risk assessment but you should aim to carry one out at least once a year.

                • Electrical certificate: You are required to carry out an EIRC every five years but you should probably regularly check your electrical systems more.

                What are minimum room sizes in HMOs?

                The minimum room size for sleeping accommodation in HMOs are a minimum of 6.51m² for a single person over ten years old and 10.22m² for two people subject to a ceiling height of at least 1.5m.

                When applying for HMO planning, what does the council want?

                In addition to minimum room size requirements, you also need to make sure that fire safety requirements are met (like fitting and maintaining carbon monoxide and smoke alarms), rubbish disposal facilities are adequate and that tenants in a shared house having access to adequate cooking, cleaning and washing facilities.

                What is mandatory HMO licensing?

                By law, HMO properties require mandatory licensing if it has 3 or more people living in it that come from two or more different households and the property passes either the standard or self-contained test.

                However, you don’t need a license if the property is a purpose-built flat in a building with at least 3 self-contained flats or if it passes the converted buildings test.

                Landlords need to pay a fee and have their property inspected for safety to get a license.

                Expert advice and guidance for HMO landlords on planning and licensing

                HMOs provide landlords with the greatest returns from their residential property portfolios.

                However, many landlords have been stung by the disconnect between the licensing and planning departments and their apparent inability to communicate with each other. You can see more about common pitfalls in this guide

                When situations like those detailed in this article occur, they are complicated and time-consuming to rectify. But, for over 10 years, HMO Architect has done just that for our clients.

                If you’re aware of an issue now or concerned that one may appear in the near future, you should not delay in contacting us.

                To take advantage of our HMO Compliancy Call Service, please contact us as soon as possible.

                 

                Picture of Giovanni Patania

                Giovanni Patania

                (Architect Director, Co-Founder)

                Giovanni Patania is the Lead Architect and Co-Founder at HMO Architect and Windsor Patania Architects.

                Originally from Siena, Italy, Giovanni worked as a Project Lead Architect at Foster+ Partners, designing Apple stores across the world,

                An HMO Investor himself, Giovanni understands property thoroughly, both from an investor's perspective and technically, as an Architect.

                With over 15 years of HMO development experience, working on over 150+ HMOs and a 95% Planning and Building Regulation success rate, Giovanni has the expertise and credentials to help you on your HMO journey."

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