More than 177,000 landlords will need licences for his or her buy-top-let properties under a new scheme which expands on 1 October. And failure to comply with the challenging new rules could cause fines of up to lb20,000.
New rules because of work in England in only three weeks will broaden the definition of a home in Multiple Occupation (HMO), bringing a large number of landlords under the scheme, and introduce new minimum requirements for that property.
Which? explains how the rules might affect landlords and what you need to do.
New HMO rules for buy-to-let
A HMO is a property that's shared by unrelated people forming more than one household. Not every one of these have to be licensed.
Under the present rules, landlords operating a HMO require a licence when the rentals are rented to five or more people from several household, is at least three storeys high and the tenants share facilities.
But, from 1 October, the meaning will be changed to get rid of the requirement of your building to become three storeys top meaning any large flat or house share in excess of five individuals will be brought under the rules.
The Residential Landlords Association estimates that 177,000 additional landlords will need licences as a result.
Editor’s note: an earlier version of this short article mistakenly stated that the rules also apply in Wales.
New minimum room sizes
For landlords who come under the licensing scheme, there’ll be a new challenge from October – the rules also introduce minimum size requirements for each bedroom.
But you also have to check your local regulations, as local authorities can choose to increase these limits.
Your HMO licence will specify the maximum number of persons that can occupy any room and also the total number of tenants allowed.
If an inspection finds these requirements are breached, the neighborhood authority can give you up to 1 . 5 years to fix the issue, either by moving out the tenant or making the area larger. However, the rules may be enforced more strictly (and fines applied) if you allow the room towards the tenant knowing you had been in breach.
The rules will apply to all landlords seeking new licences. If you curently have a licence and it comes up for renewal, you might be granted 18 months to help make the necessary changes.
Other rules with HMOs
Aside in the minimum room sizes, landlords seeking a HMO license must also meet other criteria.
One is showing that the house is ideal for the number of occupants. Aside from the size sleeping areas, the neighborhood authority will consider the home’s shared facilities and it is current condition. In some instances, councils may impose conditions in your licence, such as improving the standard from the property.
As the landlord, you and your managing agent should be a ‘fit and proper’ person to hold a licence, and that means you have no criminal record and no prior breaches of landlord regulations.
In addition, you’ll need to provide a current gas-safety certificate, install smoke alarms and have safety certificates for appliances.
Non-HMO licensing rules
In more than 70 local authorities, you’ll be required to obtain a licence even if your home isn’t classified as a HMO.
Hefty fines may apply if you operate without a licence during these areas, check the guidelines carefully.
All landlords should also adhere to other regulations, including maintaining the home inside a safe condition, putting the deposit inside a registered scheme and carrying out Right to Rent checks on tenants.
As of 1 April, you’ll also need an Energy Performance Certificate for the property with a rating with a minimum of E – properties rated F or G can't legally be discrete.
Mortgages on HMOs
Getting a mortgage on the HMO is a touch diverse from a normal buy-to-let.
Mortgages tend to be more expensive than those on offer for traditional buy-to-let properties, and costs can also be higher. The lending company could also need you to undergo a specialist valuation process.
If you currently own a buy-to-let that'll be classified as a HMO underneath the new rules, you may run into challenges whenever you come to remortgage.
Rental stress calculations – used to calculate how much you can manage to borrow – is only going to consider rooms that satisfy the minimum size requirements. You may even need to switch to a specialist HMO mortgage.