HMO licences will affect selected rental areas

New licences costing over £1,000 which become mandatory for Houses in Multiple Occupancy (HMO) from 6 April, should only affect selected areas of the rental market, says Landlord Mortgages.

An HMO has five or more unrelated tenants who live over three storeys or more, although a two storey property with an occupied basement will also count, and the cost of each licence, which is approximately £1,100, will be decided by the Local Housing Authorities, but should only bring in enough revenue to fund the licence system.

Lee Grandin, managing director of buy-to-let broker Landlord Mortgages, says although some industry pundits have predicted these new regulations will cause rents across the UK to rocket as landlords struggle to reclaim the cost of HMO’s from their tenants.

He believes the regulation will only affect selected areas of the buy-to-let market, as the majority of investment properties occupy only one storey and have a maximum of three tenants, often related, so these new rules will not affect them.

Grandin adds: “However, landlords who operate in the highly lucrative university lettings market are likely to feel the pinch and will naturally pass on the costs to their tenants, not what most cash strapped students need.”

He also suggests another tenancy group likely to bear the cost of these new licences are occupants in large shared households common in London and other major cities across the UK.

“We fully support any initiative that improves the quality of rental stock but hope this new legislation doesn’t open the door for additional draconian licensing requirements. The property investment sector needs to be supported not stifled,” says Grandin.

Meanwhile, research from Mortgages Express suggests just over half of their landlord clients are up to speed on the new requirements.

Buy-to-Let manager, Andrew Moss, says it asked over 2,000 landlord customers if they are aware of the HMO licensing and encouragingly 59% said they were up to speed.

Moss points out, the reality is only a small proportion of properties within the lettings market need licences, although all landlords should read up about them to make sure they are not affected, as there are large fines for those who fail to comply.

He adds: “We expect the impact of these changes on the buy-to-let mortgage industry to be minimal. Lenders will have already adapted their underwriting criteria to mirror the changes and, as our research demonstrates, landlords are aware of the changes and are reacting accordingly.”

Moss says although the standard of rental accommodation in the UK has increased significantly over the last decade, this new legislation is a welcome move which should further raise the standard of accommodation in larger rental properties and have a positive impact on the reputation of the industry.

He adds: “Passing the responsibility to local authorities to grant HMO licences means any issues will be dealt with at local level by those who understand the local rental market.”

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