HMO properties continue to be an appealing choice for landlords as they offer lots of advantages.
For one, they are often more profitable than other types of rentals.
However, these benefits come with added demands put in place to protect renters. How can you understand and deal with these requirements as a HMO landlord?
This guide covers everything you need to know.
What is a HMO Property?
Let’s start with the basics. HMO stands for houses in multiple occupation. Put simply, a rented house shared by multiple people or ‘households’ which can consist of a single person, families or cohabiting couples. In order to work out if your property is HMO you will need to know about the different types of HMO housing.
There are several types of HMO properties:
- A house or flat shared by three or more people from at least two households with shared communal areas.
- A home lived in by the landlord as the owner-occupier that has more than two tenants and in which some areas are shared.
- Since The Housing Act 2004, some student accommodation comes under HMO. Privately owned property shared by students, who are each treated as a separate household and have exclusive use of the accommodation is HMO.
- Here’s where it gets really complicated: A building or part of a building made solely of converted self-contained units which do not meet the conversion requirements of the Building Regulations 1991, and in which more than a third of the units are occupied by short tenancies. This is also referred to as Section 257 HMO.
To be considered HMO a property must…
- Be shared by more than two people.
- Be the main residence of the tenants.
- Have rent paid by the tenants.
The key thing to remember is that properties tend to be HMO if the people living there are not related and share toilet, bathroom or kitchen facilities. Separate tenancy agreements are also a good clue.
What are the Legal Responsibilities Involved in HMO Properties?
As the landlord of a multiple occupancy home, you are subject to additional legal responsibilities. It is important to understand these legal obligations as failure to do so can result in some hefty fines of up to £5000.
Here’s a list of the legal requirements as a HMO landlord:
- Display a notice in a prominent position within the property detailing the name, address, and contact number of yourself or the property manager.
- Ensure the property is well maintained and professional health and safety inspections in line with safety rating systems are performed. Remember to keep good records of all inspections and work done.
- Make sure the property is not overcrowded.
- Adhere to fire safety standards by providing working smoke alarms and heat detectors in kitchens as well as keeping fire escapes clear. A fire risk assessment needs to be carried out in accordance with The Regulatory Reform (Fire Safety) Order 2005. If the assessment is not performed to standard and copies are not kept, the landlord is liable to face criminal charges in the case of harm or death to tenants from fire.
- Maintain a clean water supply and proper drainage, which includes protecting pipes from frost.
- Issue inspections of electrical equipment at least once every five years and keep a record of the report.
- Supply a gas/electrical safety record within a week if requested by the council. If you rent bedsits you also need to comply with the Heat Network Regulations.
- Maintain cleanliness and safety in all communal areas
- Ensure the exterior and interior of the property is kept in good order.
- Provide the minimum number and location of shared bathrooms and kitchens. Advice on the local requirements can be found at your local council’s Environmental Health Department.
- Facilitate regular refuse disposal.
- Have an up-to-date legionella risk assessment.
- Ensure you have the correct landlord insurance. A HMO property requires a specific policy. You also need to be wary of tenants who wish to sublet as most insurers won’t cover this.
It’s not just landlords who have to follow the rules. Tenants are also under obligation to:
- Allow the landlord reasonable access and information so you can complete your duties.
- Act in a manner so as not to damage items it is the landlord’s duty to provide.
- Follow refuse and fire-safety guidelines implemented by the landlord.
What is a HMO Licence?
Another thing to consider as an HMO landlord, is whether your HMO property needs a license. Some multiple occupancy HMO’s legally require a license to make sure the property is being managed correctly.
You will need a license if:
- Your property is higher than three stories and has five or more occupants from two or more households. This is called mandatory licencing.
- The council believes a significant number of HMOs are not being managed properly. This is additional licencing and the conditions depend on the local council.
If you’re still not sure if your HMO property needs a licence, you can check with your local authorities. Some councils require all private landlords to apply for a license so it’s worth a check to avoid any unwanted fines.
How to Apply for a HMO Licence
A HMO license application form can be requested from your local council and the application can be made by a landlord or property manager. Unfortunately, there is normally a fee, the amount is set by individual local authorities and it is non-refundable regardless of the success of the application. Once issued, the licence will last up to five years.
You will need to inform several ‘relevant persons’ about your application and provide their details to the council.
Here are some of the things councils look at when making a decision whether to grant a HMO license:
- If the HMO property accommodates for the number of people living there and the shared facilities are suitable.
- If the landlord or managing agent are ‘fit and proper’ to take on the role. This can include looking at criminal convictions and previous unlawful discriminations as a landlord.
- Since 1st October 2018, councils also check that bedrooms meet the minimum size requirements.
HMO License Refusals
If the council decides not to grant you a HMO license, it may be possible to use a different license holder such as the property manager. You will usually be granted a month if you decide to try and persuade the council to change their decision. The council will always give you the reasons behind their ruling.
The council also has the power to revoke a license of they believe the conditions are being violated. You will have two weeks to respond and a month to appeal to a Residential Property Tribunal.
Breaking the terms of the licence also risks fines of up to £5000. If the conditions of your license have been broken and your tenant gets Housing Benefits, the council can apply for a Rent Repayment Order and reclaim rent paid for the time the HMO was unlicensed.
As a landlord, you are also able to revoke your license if you wish to change license holders or cease to run the property as a HMO.
Remember it is a criminal offence to disobey licencing laws and without a required license you are at risk of repaying up to twelve months rent and fines of up to £20,000! Without proper licensing, a Section 21 Notice will not be valid and you may be unable to evict tenants.
Hopefully, with the help of this guide, you now have all the information you need to be a responsible, capable HMO landlord and you won’t get caught out by any hidden legal requirements. That being said, managing a HMO property isn’t always a walk in the park. With so many tenants under one roof, vital tasks like managing inventories can prove an arduous task. Luckily, No Letting Go provides fuss-free inventory services via cutting-edge technology, along with a whole host of assistance plans to avoid disputes and make the process as simple as possible.
If you’re a landlord in a university town or city, you’ve probably seen the potential in student rentals. There are plenty of advantages in renting to students. Having said this, there are some pretty awful issues you could encounter too. Are students really as bad as people make out? Is your investment safe with them? If you’re sat asking yourself ‘should I rent to students?’ we’ve got a little advice and guidance to help you find the right answer.
The Strange World of Students
Students can seem like an entirely different species. Thankfully, they’re actually pretty simple. For most, this will be their first time living in private accommodation. They’ll need a little hand holding but this tends to come from the parents. They’re often told to ask specific questions, they’ll be informed of what to say and they’ll pour plenty of time over their contract. They may take longer in the initial signing process but remain supportive and up-front – they just want to make sure you’re not a cowboy.
Usually students aren’t too fussy – they’ve heard the horror stories and are happy to find your property clean and warm. If you can offer a tidy and furnished house with warm running water, they’ll be content. However, there are some health and safety requirements that can’t be ignored!
Be warned though, not all students are the same. There are some very obvious cues worth noting. First of all, if you’re renting to a group of eight boys, all of which are on the university’s rugby team – expect lots of parties. Use your common sense with this one. You may well want to rent to a group like this, just know what to expect.
Party, Party, Party!
Right, let’s get this out in the open now. It’s very likely your student tenants will throw a party or at least invite friends over for a night of intoxicated fun. We highly recommend banning parties in the tenancy agreement – this is there more as a deterrent than something to enforce. The sooner you accept that parties will take place, the easier it will be letting to students.
Advantages of Renting to Students
There are some serious advantages that come with being a student landlord, here are some of the more notable points:
- Demand – If you own a property in the heart of a town/city’s student area, there will always be a demand for housing irrelevant of any ongoing economic difficulties.
- Duration – Students tend to rent for 12 month periods. No long term contract obligations.
- Predictability – The student rental market is one of the most predictable, always handy for landlords hoping to rest easy at night.
- Imperfections – The beauty of renting to students is that your property doesn’t need to be perfect.
- Furnishings – There’s no point investing in expensive furnishings. Head to Ikea and buy cheap.
- High yields – There’s often more students living in a house than there would be in a regular tenancy.
- Intelligence – Students by nature are intelligent (there are exceptions). This means any issues tend to be resolved relatively simply with open communication.
Disadvantages of Renting to Students
All sounding too good to be true? That’s because it is, there are some very clear drawbacks in renting to students:
- Furnishings – All students expect a fully furnished property which entails the upkeep and maintenance of white goods.
- Wear and tear – All student properties are more prone to wear and tear. Expect phone calls out of the blue about a broken sofa or bed.
- Repaint – We know plenty of student landlords that have to pay for a fresh lick of paint on the walls every year.
- Wannabee lawyer – Some students can get a bee in their bonnet about the contract. They’ll become adamant you’re trying to mess them over. The wannabee lawyer can be a particularly frustrating student to let to.
- Private halls – Private accommodation for second and third year students is on the rise. Usually students prefer the experience of living in a house with friends but private halls are a real threat that’s worth your attention.
- Maintenance bills – Maintenance bills are usually more expensive than those in a regular tenancy.
- Screening – You can’t reference or credit check students, this can be worrying.
- Finance – Students are notoriously poor with money. Their finances can come from student loans, grants, part-time jobs and parents. This instability can be a little frightening to landlords.
- Summer holiday – Depending on the tenancy agreement, you could experience void periods during the summer holiday.
Student Rental Action Points
So you’ve decided to take the dive and let to students? Here are a few action points to set you on your way:
- Go to a shop like Ikea or Argos to buy your furniture. Don’t spend much money on this at all, you want something cheap and cheerful.
- Get students to provide a guarantor, this will usually be their parents. Do this and you’ll get your money even if the student can’t pay up.
- Become a university approved landlord. There’s often a few checks needed but this is worth doing to market your student let.
- Hold your student’s hands. Remember, they’ve probably not done this before – help them. Reassure them throughout the process. Go a step further and include a welcome pack for when they move in. In this, you can feature a few rules and even instruct them on how to use the boiler, heating, washing machine, etc.
- Consider the possibility of dropouts. It’s worth including a clause in the tenancy agreement which states it’s the tenants’ responsibility to find a replacement housemate if one drops out.
- Licence your property as a HMO (house in multiple occupation). Local councils have differing regulations for this but it cannot be ignored.
Student lets are prone to sudden and dramatic damage. The inventory process is imperative with this type of let. Remove the stress and any potential disagreements with No Letting Go’s inventory services. Find out more about how we can help protect your property investment here.