Landlords who rent real estate to several tenants are faced with strict new licensing rules designed to protect tenants from next month.
HMO licensing – which stands for houses in multiple functions – already applies to landlords who rent out their home to five or more tenants of two or more different households where the property has three or more floors.
However, from 1 October every property that is rented to five or more tenants from two or more households will be intercepted by the rules, regardless of the number of floors.
It means that 177,000 large landowners in the UK will have to comply with new minimum standards for the size and security of space or fines up to £ 30,000 and even criminal prosecution.
Each house with five or more people from two or more households is considered a switzerland
The move is part of a broader government effort to tackle poor living conditions, overcrowding and slum dwellers who get away by cramming tenants in small flats.
But it also means that thousands of landlords who do their job well and offer high-quality accommodations to their tenants must also comply with the rules, which could involve expensive repairs.
What is an HMO?
An HMO stands for a house with multiple functions. It is any property that is rented to five or more tenants that come from two or more different households and currently only applies if the building has three or more floors.
Think of typical student residences and properties that are leased to young professionals in city centers.
HMOs are increasingly being used as a buy-to-let investment for a few reasons.
Because the home is rented to a number of different tenants, a landlord, if a tenant lags behind their rent, can usually still cover their mortgage payments with the rental income of the other tenants.
Renting to multiple tenants on different lease agreements also means that landlords can generate higher rental income.
For example, if a house with three beds is rented out to a family, it can provide £ 2500 rent per month.
By renting the same property to three separate tenants, you can charge each property £ 1,000 per month, raising the total income to £ 3,000.
After some changes in mortgage rules and tax treatment in recent years, buy-to-let has become less profitable. Because this type of real estate yields a higher return, many lessors have sold less profitable properties and have invested in HMOs again.
Why are HMO licenses extended?
The government claims that people who live in non-built buildings, but who are used for several professions, are at risk of overcrowding and fire.
It is claimed that some properties have been used by "opportunistic dishonest landlords & # 39; who exploit vulnerable tenants and & # 39; submissive, overcrowded and dangerous accommodation & # 39; rent.
As with violating the license, failure to obtain a license can result in fines and a criminal record
Do you need an HMO license after 1 October?
Although the existing HMO rules apply to around 60,000 landlords in the UK, the scope of licenses is extended to 177,000 landlords starting next month.
For every home that is rented to five or more tenants of two or more different households, a permit is required after 1 October.
Depending on the local government, some licenses may be required for both landlords and tenants, especially in areas where antisocial behavior is more common.
After this date, minimum bedroom formulas are also introduced for all tenants to limit the overpopulation.
And landlords must offer a sufficient number of storage locations for each HMO or risk penalties.
If a landlord already has a selective or additional license, as is the case in certain municipalities, these can also fall under the scope of mandatory HMO licenses from 1 October.
Having an existing license does not mean that the new rules do not apply and you may have to request another type of license if yours expires.
Contact your municipality to see what is expected of you.
What happens if a lessor does not comply?
Your local government may decide to provide details about the room size used for sleeping accommodation as part of the application process – and they may also choose to inspect properties at its discretion.
If a landlord violates these rules and is convicted, they are subject to an unlimited fine, or the local housing authority can impose a financial penalty of up to £ 30,000 as an alternative to prosecution.
The local housing authority must allow a "reasonable period" of up to 18 months to resolve any overpopulation problems once they have been identified.
How do you apply for an HMO permit?
If it appears that you need a compulsory HMO license, you should contact your local councilor.
They probably want to see a map and you have to pay an application fee. These fees vary per municipality, but are usually around £ 500 and last for five years.
After you have submitted your application, you must first be checked by the municipality before you receive your license. Consult your city council to see what their specific rules are.
As with violating the license, failure to obtain a license can result in prosecution, fines and criminal records – and you must register before October 1st.