Hello Readers,

I’m sure you will be familiar with how Article 4 now applies to certain areas within Medway, well, in addition to this Medway council is exploring additional and selective licensing for HMOs.

I have been having quite a few questions from landlords as to what this means and whether it’s different to Article 4, so I thought I’d cover everything you need to know in this article.

The first point to note is that Article 4 is a planning matter, whilst additional and selective licensing is a council-mandated regulation and they are two completely separate things. Simply put, Article 4 controls whether you can create an HMO, while additional and selective licensing stipulates the requirements around operations and management.

Before we get onto what this actually means, it’s important to clarify that proposals are currently at a consultation stage, with a report expected in April and, if approved, implementation around the summer this year.

The easiest way to outline these changes is in an FAQ format, so here are the most common questions I find I am asked:

What is additional licensing?

Currently, Medway properties with five or more tenants forming two or more households sharing facilities such as kitchens and bathrooms are required to have a license. Smaller HMOs with four or less occupiers are not required to have a license under national rules.

If Medway proceeds with its proposal, this means than HMOs with four or less occupiers will require a license, need to meet prescribed standards and have routine inspections.

What areas will additional licensing cover?

Additional licensing proposals focus on the same wards as article 4 proposals:

• Chatham Central
• Brompton
• Fort Pitt
• Gillingham North
• Gillingham South
• Luton
• Strood North
• Frindsbury
• Watling

What does retrospective mean in this context?

This is an important point, as the article 4 directive only applies to new HMO applications, however retrospective means any qualifying HMO operating at that time will need a license, so operating without one after the scheme goes live will become an offence.

This means if the property has been operating for years, never previously needing a license and was set up to specifically stay below the five-person threshold, it will require a license should it come into force.

What does additional and selective licensing mean for Medway HMO investors?

 There are four main areas that investors need to be aware of and these are:

• Increased costs – Meaning license fees, possible upgrade works (fire safety, room sizes, amenities), compliance administration and ongoing inspection risk
  
• Pressure on margins – Without the lower regulatory burden and compliance fees, margins will be squeezed and rents will need to rise to offset the increased costs
  
• Professionalism – Personally, I have no problem with the property market being more professional. We may, however, see more casual landlords exiting with an increased market share of strong operators
  
• Regulation being a risk factor – As well as the ongoing risks, mortgage lenders and other bodies will require additional information when underwriting finance for HMOs within the area

The message that the council is sending is simply that HMO landlords need to maintain a high standard and they will be policing this (somehow) through increased legislation.

What should Medway HMO landlords be doing to prepare for additional and selective licensing?

Of course, legislation has not yet passed but I highly suspect it will do so I recommend affected landlords to assess and prepare for the changes as soon as possible.

My suspicion is that the required standards here would be the same as HMOs with five or more rooms already in place, so the place to start would be assessing those requirements. This means things such as carrying out a compliance audit, getting a fire risk assessment, checking room measurements and amenity standards etc.

After you know what changes might be needed, you can assess the cost. Landlords will want to also budget for licensing fees (£800 – £1,200 every five years) and then assess their current financial model – for example, will rents need to increase (almost certainly they will) and/or will a different property configuration be needed to add additional rooms and tenants.

If you need any help or advice here, I’d be more than happy to set aside some time to help. The best way to reach me is by emailing hasan@home-share.co.uk.

Hasan