Landlords warning: 3 weeks until tough buy-to-let licensing rules kick in
More than 177,000 landlords will need licences for their buy-to-let properties under a new scheme which expands on 1 October. And failure to comply with the tough new rules could result in fines of up to £20,000.
New rules due to take effect in England and Wales in just three weeks will broaden the definition of a House in Multiple Occupation (HMO), bringing thousands of landlords under the scheme, and introduce new minimum requirements for the 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 is shared by unrelated people forming more than one household. Not all of these need to be licensed.
Under the current rules, landlords operating a HMO need a licence if the property is rented to five or more people from more than one household, is at least three storeys high and the tenants share facilities.
But, from 1 October, the definition will be changed to remove the requirement for the building to be three storeys high – meaning any large flat or house share for more than five people will be brought under the rules.
The Residential Landlords Association estimates that 177,000 additional landlords will require licences as a result.
New minimum room sizes
For landlords who fall under the licensing scheme, there’ll be a new challenge from October – the rules also introduce minimum size requirements for each bedroom:
- bedrooms used by one adult must be a minimum of 6.51 square metres – just over twice the size of a king-size bed
- those used by two adults must be 10.22 square metres – just shy of a parking space
- bedrooms occupied by a child aged 10 or younger must be at least 4.64 square metres – around one-and-a-half times the size of a king-size bed
- no room of less than 4.64 square metres to be used as sleeping accommodation.
But you also need 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 the total number of tenants allowed.
If an inspection finds these requirements are breached, the local authority can give you up to 18 months to fix the issue, either by moving out the tenant or making the room larger. However, the rules may be enforced more strictly (and fines applied) if you let the room to the tenant knowing you were in breach.
The rules will apply to all landlords seeking new licences. If you already have a licence and it comes up for renewal, you may be granted 18 months to make the necessary changes.
Other rules with HMOs
Aside from the minimum room sizes, landlords seeking a HMO license will also need to meet other criteria.
One is showing that the house is suitable for the number of occupants. Aside from the size of sleeping areas, the local authority will consider the home’s shared facilities and its current condition. In some cases, councils may impose conditions on your licence, such as improving the standard of the property.
As the landlord, you or your managing agent also need to be a ‘fit and proper’ person to hold a licence, which 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 get a licence even if your property isn’t classified as a HMO.
Hefty fines may apply if you operate without a licence in these areas, so check the rules carefully.
All landlords also need to comply with other regulations, including maintaining the property in a safe condition, putting the deposit in 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 your property with a rating of at least E – properties rated F or G can no longer legally be let out.
Mortgages on HMOs
Getting a mortgage on a HMO is a little different than a regular buy-to-let.
Mortgages tend to be more expensive than those on offer for traditional buy-to-let properties, and fees may also be higher. The lender may also require you to undergo a specialist valuation process.
If you currently own a buy-to-let that will be classified as a HMO under the new rules, you may run into challenges when you come to remortgage.
Rental stress calculations – used to calculate how much you can afford to borrow – will only take into account rooms that meet the minimum size requirements. You may also need to switch to a specialist HMO mortgage.
When investing in a HMO, it can help to speak to an independent mortgage broker.
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