Are you looking for an HMO Licence Renewal, but not sure how to go about it?
Or you’ve heard that Councils are now asking for evidence of the correct Use Class before renewing an HMO Licence?
There are 3 main steps to running a compliant HMO
1) Planning Permission which formalises the Use Class as a C4-HMO or Sui Generis Large HMO
2) Building Control Final Certification
3) HMO Licence
In this blog, you will learn everything you need to know about an HMO Licence renewal in 2021/22.
You’ll also learn how to do due diligence if you’re buying an existing Licenced HMO.
So, stick around and read till the end.
- Scenario 1 — Started HMO Before Article 4 Came Into Place
- Scenario 2 — Started HMO After Article 4 Came Into Place
- Scenario 3 — Non-Article-4 Area
What Is An HMO Licence And Why Do You Need It?
There can be some confusion surrounding HMO licencing. What is it, and why do I need it?
To put it simply, an HMO Licence allows you to rent out your property as an HMO.
The Government introduced HMO Licencing to hold landlords accountable for providing good standards of living.
HMO landlords must ensure the safety of their tenants.
For example, HMO landlords need to ensure their property is Fire Compliant, so tenants can get out safe and quick in case of a fire.
It’s important for all landlords to learn about HMO Fire Regulations so everyone can stay safe.
Based on the number of occupants, there are 2 types of HMO Licences — Selective and Mandatory.
Selective Licensing applies to HMOs with up to 4 Occupants while if you have 5+ Occupants, Mandatory Licensing applies.
If you’re wondering do I need a hmo licence, if you have 5+ occupants, you definitely need a Mandatory Licence.
For up to 4 occupants, it’s best to check with your Local Council.
Making sure HMO owners have a licence also ensures the places on the rental market are of good quality.
Here’s an HMO Compliance Checklist to make sure you have everything up to speed.
How To Renew Your HMO Licence?
As an HMO landlord, you must renew your licence every five years.
You can apply for an HMO licence online and you’ll need to provide a few things to be approved for a renewal.
For example, in the case of a more complex Mandatory HMO License, you’ll have to provide:
**1. Evidence of granted full planning permission (If Sui Generis HMO or HMO in article 4 area) or Lawful development certificate for existing use (if article 4 area)
2. Gas Safety Certificate
3. EPC certificate
4. Fire Safety Certificate
5. Emergency Lights Installation Certificate
6. Electric Safety Certificate
PAT test and fire risk assessment are optional, not all Local Authorities will ask for them.
**If the property is not in an Article 4 area and has less than 7 occupants, no planning evidence is required. However, we always recommend to at least have a Lawful development certificate in place to future proof the HMO against new Article 4 enforcements.
You’ll also need to think about HMO licensing fees. We’ll talk about licencing fees later in the article.
As HMO rules and regulations keep changing, it can be confusing to know how to proceed.
So, here are three scenarios you could find yourself in when it comes to an HMO licencing and how to navigate them.
Scenario 1 — Started HMO Before Article 4 Came Into Place
If you started your HMO before Article 4 came into place there are some things you need to consider.
Under Article 4, you must get planning permission from the council to turn a property into an HMO (Change of Use). This allows the council to control the housing market in each area.
Having control of the housing market means that there’s no overload of one type of housing, ensuring a balance of living accommodation in the community.
But, if you had an HMO before Article 4 including a licence, it doesn’t mean you’re in the clear.
You need to make sure that you have the correct Use Class to operate the property as an HMO.
If you’re unsure of your current Use Class, it’s important you address it at the earliest.
Renting out your HMO without the correct use class exposes you to huge penalties and even closure.
The Council could ask you to tear down any extensions and rebuild them with the correct planning permission.
It’s called a ‘planning breach.’ Even though it’s not illegal, you can still run into trouble with law enforcement.
If permission wasn’t given, the council will allow for retrospective planning. If the retrospective application is denied, then the council can enforce you to put the property back to how it was before.
If you don’t go through with the necessary changes, you can be prosecuted in a court of law.
Thus, it’s not advisable to get a licence or to start renting out your HMO without the Correct Use Class allowing you to operate the property as an HMO.
Here are some options for your HMO Licence Renewal if you started operating it before Article 4 was introduced.
Proof Of Operation As An HMO
Here’s what you need to provide the council with to prove you were running an HMO before Article 4 was enforced.
1) Evidence of HMO licence history (Required)
2) Tenancy Agreement history (Required)
3) Evidence of the deposits, DPS details (Required)
4) Evidence of the works carried out to convert the property into HMO – Invoices and quotes from different trades and builders (Nice to have)
You can also provide your existing plans of the property (optional).
You need to apply to the Council for Lawful Development Certificate for existing use as an HMO. This application costs around £462.
There are some exceptions that can come into play when it comes to Article 4 directions.
Some HMO’s have “Grandfather Rights”. This means HMOs that have been running safely for 10 years or more and are compliant, do not need planning.
However, they still require a Lawful Development Certificate to demonstrate historical use.
Scenario 2 — Started HMO After Article 4 Came Into Place
If you’ve been running your property as an HMO after Article 4 went into place, you need a different approach.
In this case, you’ll need to submit a Full Planning Application for the Change of Use.
You need to work with someone who understands the entire process from Design to Planning and Licensing.
You can choose to work with technical draftsmen, planning consultants, solicitors or architects.
But the critical issue lies in understanding the design detail needed for compliance, which is where Architects can help.
For example, let’s say your property falls below the standards, is your property licensable based on modern standards?
If not, you’ll need to optimise the layout to reduce the number of rooms, check for fire compliance, correct use class etc.
It’s always best to future proof your property against stronger regulation. For example, designing rooms to a minimum of 8.5 sqm.
- Existing Plans
- Sections, Elevations
- Proposed or Concept Designs
- Design & Access Statement
We can then have a consultation call to understand where you are in the process. Followed by submission of the planning application and follow-ups with the Council.
Depending on the scheme, we might need to hire a Transport Consultant if the scheme proposes a high number of occupants (at an extra cost).
Scenario 3 — Non-Article 4 Area
What if you operate an HMO in an area that doesn’t have Article 4?
Well, that’s good news. This process seems to be a lot less complicated.
You can get a Certificate of Lawful Development through Permitted Development (PD) Rights for up to 6 Occupants.
If you’re planning to have more than 7 occupants, you’ll need Full Planning Permission regardless of Article 4 Status.
It’s as simple as that.
Operating An HMO Without A Licence? (Risks and Dangers)
If you’re operating an HMO without a licence, you’re exposing yourself to some big risks and fines. Usually ranging between £10,000-£40,000.
If you unable to get an HMO licence or don’t want the hassle of an HMO Licence Renewal, some options may include
1. Running it as a Buy-To-Let (BTL)
2. Flip and Sell It
3. Operate it as Serviced Accommodation (SA)
Although for SA you’ll need to make sure it complies with SA regulations. Our recommendation is to get the SA licensed as an HMO to make sure there is a minimum level of quality guaranteed anyway.
Is An HMO Licence Transferable?
HMO Licenses are NON-transferable so if you buy a property to operate as an HMO, you’ll need to apply for a brand new one from scratch.
Rent-Rent and Lease Option
If you’re looking to rent an HMO, for Rent-to-Rent or a Lease Option, you’ll need to do some due diligence.
You’ll need to make sure the Landlord has an HMO Licence and correct planning permission/building regulations in place.
Rent-to-Rent is a great option to earn some income without having to buy the property upfront.
What is Rent-to-Rent?
Rent-to-Rent is when you find an existing property and pay rent to the owner. Then you rent that property out to other tenants at a higher cost and pocket the difference.
Rent-to-Rent landlords make a profit off the difference between what their tenants pay and what they pay the property owner.
If you rent the property from a landlord, you won’t need a new license as you are effectively a tenant subletting the property to third parties.
Although, you’ll need to make sure the property has the correct Use Class, planning permission and meets all building regulations.
If you run an HMO without the correct Use Class, the council can force the landlord to shut it down or issue hefty fines.
What Is Lease Option?
A Lease Option is a way to lease property for several years with the option to buy at the end of the term.
There are a wide variety of Lease Options, not necessarily each one has the option to buy at the end. It’s a way to control an asset without owning it.
With both strategies, make sure you do your due diligence before entering into an agreement with the landlord.
Note On HMO Licencing & Re-Mortgaging
If you’re looking to remortgage your HMO, you’ll need to show proof that you’re playing by the book.
This includes having the correct Use Class, planning documentation, licence, building regulations, tenancy agreements etc.
An increasing number of lenders are now directly liaising with the Council before issuing a mortgage.
This is to check and confirm your credibility as a landlord before lending.
Hence, it’s important to ensure you have everything in place before approaching a lender.
An HMO Licence Renewal is just the first step in making sure you keep up with regulations.
In this article, you learnt how to deal with HMO Licencing based on when Article 4 was introduced and in the case of PD Rights.
It’s important to keep up to date on any changes to HMO regulations — like Article 4.
If you need support with your HMO Licencing, we offer an HMO Licence Renewal Service which covers everything you need to for a speedy HMO Licence Renewal.
Make sure you have the correct Use Class, planning permission/certificate of lawful development to ensure a smooth HMO Licence Renewal or Remortgage.
So please get in touch. We’d love to help you.