What are the requirements of the new HMO Regulations?
Adam Smith, Partner at Hempsons, talks about the new rules regarding HMOs whilst, as the first in a series of complementary articles, Quentin Hunt, a barrister and expert in the field, explains more of the consequences of non-compliance.
As a landlord, you may have read that from 1 October 2018 a new definition of HMO (Houses in Multiple Occupation) will come into force. As always with the plethora of rules and regulations in the rental sector, the devil is in the detail and whether your property will fall within the new definition will depend on the precise circumstances.
The key change is that, whereas currently an HMO (subject to mandatory licensing) must be at least three storeys high, from October 2018 one storey will be enough. The requirement of at least 5 occupants (including children) forming 2 or more separate households sharing at least one basic amenity (kitchen/bathroom/toilet) remains. “What does ‘household’ mean?” you ask. Essentially a household comprises members of the same family (which includes cohabiting partners).
Many landlords will already be familiar with the licensing requirements for HMO’s, but what if your property will fall within the new definition where it didn’t previously (e.g. a flat over a shop or a 2-storey house without an attic, occupied by more than a single family)? You are not alone. The Residential Landlords Association estimates the revised definition will capture 177,000 new HMOs! Below are some of the key considerations.
Do I need a licence for my HMO?
HMOs within this definition are subject to mandatory licensing. You will need to obtain (every 5 years) a licence from your local housing authority and pay the licence fee. (‘Additional licensing’ of HMOs of 3 or 4 occupants, on 1 or 2 floors, in an area which the local housing authority has designated as subject to additional licensing remains unchanged, subject to the new floor space requirements.)
Floor space
This is the other area of significant change as of 1 October 2018. Strict minimum floor space requirements will apply to each room used as sleeping accommodation. This will vary according to the age and number of occupants (and structure of the room, e.g. if it has a sloping ceiling) and, to complicate matters further, each local housing authority may impose its own minimums above the new statutory requirement! This change has caused consternation amongst existing HMO landlords, who may find their existing property no longer licensable as an HMO, at least not without costly renovation.
Will I need planning permission?
Apart from any planning permission required in the usual way for any building works, you may also need permission for a change of use. Small HMO’s (usually up to 6 occupiers) fall under use class C4, as opposed to a ‘dwellinghouse’ (use class C3). A change from C3 to C4 might fall under the permitted development rights of your local housing authority. However, if the local housing authority has removed those rights (with what is known as an ‘Article 4 Direction’), planning permission will be required if the change of use is considered ‘material’.
What are the fire safety requirements?
As with all rented accommodation, working smoke alarms must be installed on each floor which contains living accommodation, and carbon monoxide alarms in any room which contains a solid fuel burning combustion appliance. But the requirements for HMOs are somewhat more rigorous. You must ensure that the means of escape from fire are kept free from obstruction and maintained in good order and repair. In practice, there will be a range of requirements in terms of notification, internal doors, locks, windows, emergency lighting, fire-fighting equipment and an alarm system. Unsurprisingly, the equipment you provide must be maintained in good working order and appropriate certification held. A comprehensive fire safety risk assessment will be advisable, if not essential, to obtain an HMO licence.
Must I furnish the property?
Legally, no, but if you want your property to be marketable you almost certainly will (and your local housing authority may make it a pre-requisite of a licence), in which case the furniture must be clean at the outset of each tenancy and kept safe throughout.
Electrical safety
All electrical installations must be inspected and tested at least every 5 years, and a certificate obtained.
Gas safety
You will need an annual gas safety certificate (this is no different from a non-HMO let).
Can I get round the HMO requirements?
Maybe. However, there are only very limited instances in which the HMO requirements do not apply. The extent to which these might be applicable will depend on the particular circumstances of your property and, in practical terms, there is likely to be little opportunity to circumvent the HMO obligations.
Moving in to share the accommodation with existing tenants (unlikely, I know) would not work, as only a maximum of 2 ‘lodgers’ are permitted. If you are contemplating evicting one tenant to come in under the magic 5, this might well be treated by the local housing authority as amounting to a threat to the welfare of the tenant and result in service of a ‘management order’. And don’t even think about lying to your local housing authority – knowingly providing false or misleading information to them is a criminal offence!
Perhaps the most realistic exception is if your property can be occupied by students in full time education, provided the management of the property is undertaken by the educational establishment (which might have the doubly positive effect of taking the management out of your hands).
How long do I have to comply?
Interestingly, the new regulations provide a grace period of up to 18 months from the first licence granted subsequent to 1 October 2018 within which to rectify any issues specifically in terms of the new floor space requirement (although this period may vary between different local housing authorities), but there is no grace period generally regarding the change to the definition of an HMO. So if yours is one of the estimated 177,000 properties that will fall under the definition for the first time, you should be aiming for compliance and the necessary application for a licence by 1 October.
Conclusion
HMOs can still be a good investment, but they need to be set up properly in order to be compliant and to avoid the risk of costly enforcement action by your local housing authority and problems in obtaining mortgage finance. This article is necessarily limited in its scope. There is far greater detail within the legislation and the way in which the requirements are applied is very fact specific, with variation between different local housing authorities and even some of the legal requirements varying as between England and Wales. This is a complex area in which early expert input on how to be compliant could save you a huge amount of stress, not to mention cost, in the future. This is where Eastwoods can help (working alongside expert counsel in the field, where necessary). If you wish to seek advice on how to avoid the pitfalls, or you have already succumbed and need to get out as unscathed as possible, get in touch.
Adam Smith