Landlords – are you ready for the new HMO laws?

To remind you – on 1 October, if your property has five or more people living in it who form two or more ‘households’ – your property will be in breach of HMO licensing rules. You can find the new regulations here.

By the way, this is only in England so if your property is in Wales – relax!

What is a household?

A ‘household’ by the way, in the main, means family – brothers and sisters, mothers and children, cousins, step and foster children, half brothers and so on. Along with cohabiting couples (including same-sex couples) and people who live with you as part of their job, such as au pairs and carers.

Its got nothing to do with eating together, putting your food in the same kitchen cupboards or the type of tenancy agreement you have.

When do the HMO licensing laws apply to you?

Under the legislation, two people can never be an HMO – whether or not they are family. Three or four people sharing can be an HMO. But you will only need a license if your Local Authority has an additional or selective licensing scheme going.

However, after 1 October, if you rent to five or more people sharing – you will always need an HMO license unless they are one household. The old rule limiting this to properties with three or more stories will no longer apply.

Lets see how that plays out in

Some examples:

• Couple with six children – not an HMO, as they are one family. Not licensable.
• Couple with two children and a lodger – HMO as the lodger is not family. Licensable as there are 5 occupiers.
• Single parent with two children and a lodger – HMO as the lodger is not family. Not licensable as only 4 occupiers.
• Couple with two children and the father’s cousin – not an HMO, so not licensable.
• Couple with two children and the mother’s best friend – an HMO as the friend is not family. Licensable as there are 5 occupiers.
• Four students and live in partner of one of them – an HMO as they make up four households. Licensable as there are 5 occupiers.
• A homeowner with four lodgers – HMO – as where an owner-occupier has more than two lodgers that is an HMO. Licensable as there are 5 occupiers.

So numbers 2, 5, 6 and 7 will need to have an HMO license in place, or at least have applied for one, by 1 October. Otherwise:

The penalties for non-compliance:

• The Local Authority can serve a penalty notice for up to £30,000
• You can be prosecuted in the Magistrates Courts where fines are unlimited
• If you are convicted in the Magistrates Courts, this is a ‘banning order’ offence
• Your tenants can apply to the First Tier Tribunal for a Rent Repayment Order for up to 12 months rent.

Mind you, I think your tenants’ chances of a rent repayment order will be slight if the only reason you are in breach of the new regs is because they increased the numbers in the property in breach of the terms of their tenancy agreement and did not tell you.

Although not if the Local Authority successfully prosecute you – as then the First Tier Tribunal have no discretion.

Flats

What I have said above applies to all houses. What about flats?

Well, the law there is a bit weird. Mandatory licensing will cover all flats in multiple occupation with 5 or more occupiers living in two or more households – unless it is a purpose built flat. Flats in purpose-built blocks are treated differently:

• Licensing WON’T apply to purpose-built flats situated in a block comprising 3 or more self-contained flats
• But licensing WILL apply to purpose-built flats in blocks with up to 2 or more flats in the block, whether or not there are also commercial premises in the block, eg a shop.

Have you checked your property?

Unless you have done a recent inspection of your property, you can’t be REALLY SURE that your property is safe from mandatory licensing. For example

• Your family of four may have taken a lodger without telling you, to help them pay the rent
• One of your four student tenants may have their partner living with them
• The single mother with two children who was allowed to have a lodger may have had another baby

The only way you can know what is going on is to go round and have a look. Because your tenants may conceal things from you, you also need to keep careful records on inspection visits and take photographs.

So if the Council come down on you and want to prosecute you for having an unlicensed HMO in November, you can prove that it was not authorised by you and you knew nothing about it when you did an inspection in late September.

You will still have to either get the numbers down or get a license, but it should help you avoid a criminal conviction.

Take a tape measure with you

You also need to be 100% sure about the size of your bedrooms due to the new minimum room sizes which will also come into force on 1 October.

I am not going to set them out here but you will find details on the government information guide.

Incidentally, the best way to know the size of your rooms (and be able to prove it) is to get professional floor plans done. Use a specialist firm rather than doing it yourself.

What you need to do if you find unauthorised occupiers

Where in the past you might have turned a blind eye to friends and lodgers staying at the property – now you can’t do this as it may make you liable for licensing fees and demands to carry out expensive renovations to your property.

So you have a choice. Do you bite on the bullet and apply for an HMO license? Or do you evict the tenants or get them to reduce the numbers?

If you want to avoid licensing, your best bet is probably to serve a section 21 notice (if you can), explain the situation to the tenants, and say that unless the numbers are brought down to under 5 you will have to evict them.

If the tenancy end is within six months of 1 October you may be able to bridge the gap by applying for a Temporary Exemption Notice. But note that these only last for 3 months and you can only get one extension. So don’t delay.

If you are towards the start of a long fixed term with no break clause, then you may have no option but to apply for a license. And I’m sorry, but it may be expensive.

Unready Local Authorities

This is all a bit of a strain too on Local Authorities, many of whom have had to shed staff over the past few years due to austerity and may not be in a good position to deal with hundreds of extra license applications all coming at the same time.

Some Local Authorities may not have put procedures in place properly by 1 October either.

In which case what you need to do is to be able to prove that you have tried to apply for a license. And keep trying.

There is also the distinct possibility that many Local Authorities will not have the staff to do enforcement work. However don’t count on it – plus even if the Local Authority say they will give you extra time, this will not stop your tenants applying for a Rent Repayment Order.

So best to get your application in on time.

Do a checklist

I would recommend that, if you have not done so already, you sit down and do a list of your properties – for each one (or for your only property if you only have one) put

• Property details – address etc
• Names of tenants
• Names of other authorised occupiers (eg children, other family members, carers, etc)
• The date of your last inspection
• Confirm the numbers living there at that time
• Ideally get tenants to sign a copy of your inspection record which shows the number living in the property at that time
• You should also keep a detailed record of the bedroom sizes and the number and age of the people sleeping in them

If you are going to need a license – make the application NOW. If it has not been processed by 1 October, that’s OK so long as you can prove that the application was submitted by then.

However relax if you already have a license for the property – even if this is a selective license and not specifically an HMO license, it should be passported over.

Forms and help

Make sure the form is completed properly and that you have provided all the necessary information and documentation. If your application is rejected after 1 October you will be in breach and in difficulties.

If anyone needs legal help and advice, our HMO Hotline is available (£105 for non-members, £90 for members) with HMO experts from Anthony Gold Solicitors.

Good luck!

(This article first appeared in the Landlord Law Newsletter).