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HMOs typically therefore apply to flat and house shares but would also equally apply, for example, to live-in landlords with more than two paying, unrelated, lodgers.
Currently, larger HMOs must be licensed where the following criteria apply:
The rationale behind HMO licensing schemes is to tackle poor housing conditions in the private rented sector; licences stipulate strict safety standards with which landlords must comply.
Some local authorities require smaller properties rented to fewer people still to be licensed and therefore the requirements of the specific local authority in which the property is situated should be checked for certainty.
New legislation has recently been passed which will come into force on 1 October 2018 to extend the scope of mandatory licensing, effectively removing the three storey requirement with the effect that all properties with five or more unrelated occupiers will be caught, regardless of the size of the property or how many storeys it comprises. Single and two storey flats and houses, including flats above shops on high streets, which were not previously caught by the legislation, will therefore now be required to be licensed if the other criteria referred to above apply.
An exception to the new requirement is purpose-built apartment blocks comprising three or more self-contained flats.
It had been suggested during previous consultation responses that purpose-built student accommodation would be exempt from the new requirements, however this has not been included in the legislation or the self-contained flats exemption. As matters stand, it is therefore likely that purpose-built student accommodation will be subject to the new licensing requirements.
A licence must be obtained for the individual HMO as opposed to the building in which it is situated. If, for example, a building contains two flats, both of which are occupied by at least five unrelated people, each flat will require its own separate licence even if they are owned by the same landlord. It is estimated that three times as many properties will now be caught by the new mandatory licensing requirements so the effect on landlords will be significant.
Anyone renting out applicable premises without a necessary licence commits a criminal offence and a fine up to £20,000 is payable; additional fines can be imposed for breaches of any other relevant duties under HMO legislation. Non-compliance could also result in landlords’ breaching the terms of their own leases (where their interest in the relevant property is leasehold) and funding arrangements, given that leasehold and mortgage obligations typically require compliance with all applicable legislation.
Draft Regulations have also been published stipulating proposed changes to mandatory conditions which will be included with HMO licences, including
These regulations are also proposed to come into force on 1 October 2018 however they are currently in draft form and have yet to be passed. If they are passed, the above requirements could prove to be costly if ignored, for example if a minimum room size requirement is not met, this would constitute a licensing breach which can attract unlimited fines and civil penalties of up to £30,000. Similarly the changes could prove costly to implement if physical alterations to properties are required for compliance purposes.
Finally, HMO licensing is operated by local authorities. Different local authorities will likely interpret the legislation in their own way and therefore requirements may vary between jurisdictions. Landlords with applicable HMOs situated in different local authority districts should therefore ensure that the requirements of each local authority are carefully checked.
For more information contact our Commercial Property team.