How new HMO legislation will impact Medway landlords

Hello readers. Winter is almost here and there is a chill in the air with the prospect of frost. This means we need to be prepared for any problems that might strike our heating systems and radiators. Do check them over!

At the same time we need to keep an eye on changes on the political weather front when it comes to HMO legislation. In short, there may be a storm brewing for local landlords.

Currently in Medway, HMO licensing only applies to buildings that are three or more storeys high (including basements and loft conversions) and occupied by five or more people. However, a government consultation has been running on updating this legislation to increase the number of properties subject to mandatory licensing. It is looking at:

  • Removing the storey rule so that all houses with five or more people from two or more households are in scope of licensing
  • Extending mandatory licensing to flats above and below business premises (regardless of storeys)

This is due to come into force in April or October 2017 and, it seems despite a change in government ministers, it will happen. Landlords should however have six months to apply for a licence from when the changes are enacted.

If you are not compliant when this happens you will be at risk of incurring a penalty, including a fine of up to £3,000 and even prosecution at the end of the grace period. If you are already subject to Additional Licensing, then you will be able to passport in your licence to the mandatory scheme free of charge during the grace period, but the same expiry date applies to the licence.

This means a whole number of new properties and landlords will have to pay for and have an HMO licence – when before this wasn’t needed. Currently the fee in Medway is £974; a second licence costs £865.70, as do any subsequent applications.

But this is not the only proposed change. The consultation also proposes a national minimum room size. New regulations will amend schedule 4 of the Housing Act 2004 by inserting a new compulsory condition in every licence granted in England (mandatory and additional).

These new regulations mean local housing authorities are to disregard rooms of less than a prescribed size from being included as a room suitable for sleeping accommodation in a licence. This means that rooms have to be 6.52sqm for one person and 10.23sqm for two persons. If the rooms are below this, and are let or occupied for sleeping, you will be breaching the licence and committing an offence, making you liable on conviction to an unlimited fine or civil penalty of up to £30,000 – not a very nice prospect.

This will not apply to temporary visitors, but children will be counted as full adults for this condition.

Quite frankly, this is ridiculous and will make a massive impact on landlords and drive up prices and reduce the number of rooms available for tenants (especially student lets) and create headaches and reduce profits for landlords.

It also leaves a number of questions unanswered. For example, what happens if you rent out two smaller rooms to the same tenant that fall below these sizes?

It is proposed that the mandatory condition will apply to HMO licences issued for applications received after implementation.

Other Measures

Some of the measures were brought up by consultees to the original technical consultation, on which the government has decided to consult further.

This includes the fit and proper person test asking if criminal record checks should be made mandatory for licences, and if so, whether they should be made through the DBS. Further investigation will discuss whether there should be a mandatory condition relating to household refuse, and providing “adequate receptacles for the storage and disposal of normal household waste”.

I will keep you posted on developments.

Later this month we will also have the chancellor’s Autumn Statement from Philip Hammond. Some are predicting that he will reconsider the landlord tax relief changes due to come in 2017, which were first proposed by the ex-chancellor, George Osbourne. Hopefully then we will have some good news.

In regards to what we’ve discussed today, you may be wondering if HMOs make good business sense. Despite all the proposed changes, HMOs still provide a great way of generating consistent income and yields. Just take a look at my past blogs to see some great examples, some of which I have linked to below.
Why it’s a great time to invest in a Medway HMO

How overwhelming demand and low supply makes Medway Property a sound investment

Medway Property outperforms rest of country

I am always happy to hear from you, so if you need advice on another area or want to source a property as an investment, then please don’t hesitate to contact me. Email me via hasan@bullfinchproperties.co.uk, or give me a ring on 07944 726 676.

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