Many landlords who have been renting out a property with possibly 3 – 4 bedrooms to sharers without the requirement for a HMO licence are not aware of the new legislation which came into force on the 1st October 2018.
This was highlighted to me last Thursday when I carried out a viewing at a 3 bedroom property we have in Dunstable. The viewer turned out to be an investor looking to turn the house into shared accommodation using a ‘Rent to Rent’ strategy. This could include couples sharing the double bedrooms.
What is ‘Rent to Rent’ ?
This is an investment strategy which has increased in popularity in the last 5 years as the investor does not have to buy a property to be able to rent it to tenants. Usually a 3 bedroom house with a separate dining room and lounge is required as the investor is paying to rent a 3 bedroom house, but can have 4 bedrooms by using the dining room as the 4th bedroom.
How does this work ?
- The investor takes on a property from a landlord on a long term agreement with a guaranteed rent to the landlord even if the property is empty.
- The investor then rents out the 3 bedrooms individually and also uses the separate dining room as a 4th bedroom.
- The rental income could be up to double.
From 1st October 2018 Tenants living in shared houses in England could face eviction or increases in rent because of changes to government rules covering shared accommodation which have requires more HMO’s to require a licence.
Under the old licensing scheme HMOs that were three or more storeys and occupied by five or more people forming at least two separate households were required to be licensed. The new mandatory licensing of HMOs has been extended so that smaller properties (i.e. any storey height) that house five or more people in two or more separate households will also require a licence.
What the HMO changes will mean for landlord
If you let a property to five or more tenants from two or more households, you will need to apply to your local authority for an HMO licence, irrespective of building size.
All bedrooms in any such property will be subject to a minimum room size. For a single room, this is 6.51 square metres and for a double, 10.22 square metres. Landlords have up to 18 months to comply with this.
As a requirement of the HMO licence, landlords will have to provide suitable facilities for rubbish storage and disposal as stipulated by their local authority.
A licence is valid for five years and each HMO property requires a separate licence.
Any landlord who hasn’t applied for a new licence by 1 October 2018 will be in breach of the law.
Landlords who suddenly find that they now have a licensable HMO which has extra costs associated with it are likely to look to pass on that additional cost in the price, meaning tenants will pay more in rent.