Considerations For Landlords - Part 2 Your Licencing Requirements?
As stated in the first article in this series, the buy to let scene has grown substantially over recent years with many individuals as well as property developers buying a second or third property to rent out. Often the property is split into bed sits or flats so as to maximise the rental and make the development as profitable as possible.
However, recent changes to the housing legislation may mean that, in doing so, the property could now be classified as a House of Multiple Occupation and as a result, you could be faced with additional financial and management burdens, which if you are not careful, will eat into any potential profits.
The purpose of the review and amendment to the housing legislation was to raise the standard of accommodation for people living in houses of multiple accommodation. Prior to the implementation of the Housing Act 2004, many properties let in similar circumstances fell outside of the discretionary regime contained within Part X1 of the Housing Act 1985 and standards were allowed to slip. In accordance with (as amended) a property was defined as a House of Multiple Occupation (“HMO”) as “a house which is occupied by persons who do not form a single household”. This simple definition allowed many legal arguments to be raised and inconsistencies to arise throughout the countries many Local Authorities over the years meaning that many properties avoided classification.
However, as a result of the amendments made to the legislation at the end of last year and the repeal of Part X1 of the 1985 Act, properties which may have once escaped classification will now be caught.
As a consequence stringent quality standards are being monitored with the introduction of the compulsory licensing scheme on the 6th April 2006.
Section 254 of the 2004 Act now defines a HMO with the use of a three tier test. This states that “a building or a part of a building is a HMO if it is:
- A block of flats within the meaning of Section 257 (relating to converted blocks of self contained flats on which building works was completed before the 1st June 1992 or which work did not comply with and do not comply with Regulation 20 of the Building Regulations 1991).
- Subject to a HMO Declaration;
or - Meets one of three tests set out in Section 254 being the standard, self-contained flat or converted building tests.”
The HMO tests:
- The standard test requires unrelated occupiers of the building to share basic amenities in living accommodation which is not self-contained flats.
- The self-contained flat test provides that a self contained flat can be an HMO if unrelated occupiers share basic amenities or the flat lacks one or more of those amenities.
- The converted building test applies to privately rented buildings converted into one or more units of living accommodation that do not consist of self-contained flats whether or not there are also self contained flats.
If your property fell within the definition of a HMO under Section 345 of the Housing Act 1985, this will no longer apply. If your property meets one of the three tests set out above, the standards and licensing requirements under Parts 1 and 2 of the Act, will apply. If steps have not been taken already, they must be taken immediately to ensure that your property is fully licensed and compliant.
Failing to apply for a licence is a criminal offence the maximum penalty for which is a fine, upon conviction of up to £20,000.00. In addition to this, your tenants can apply to claim their rent back, local authorities can claim their housing benefit back, and could impose an Interim Management Order taking management of your property out of your hands.
Applying for licenses now, rather than waiting for notices to be served upon you, may also provide a significant saving both on costs and time.
If you have any doubts as to whether your property requires licensing or not, you should seek legal advice.
The above considerations are a general overview and should not be relied upon in any particular case. They are by no means exhaustive. The need for legal advice must always be considered. For further advice of information contact Marianne Johns on 01793 527141 or by email at mj@lemon-co.co.uk
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<p><strong><a href="http://www.lemon-co.co.uk/article_landlord-part2.php">Considerations For Landlords - Part 2 Your Licencing Requirements?</a></strong><br />
As stated in the first article in this series, the buy to let scene has grown substantially over recent years with many individuals as well as property developers buying a second or third property to rent out. Often the property is split into bed sits or flats so as to maximise the rental and make the development as profitable as possible. ...</p>