Autumn 2018 saw the implementation of revised standard requirements for Houses in Multiple Occupation (HMOs), with the Licensing of Houses in Multiple Occupation (Mandatory Conditions of Licenses) (England) Regulations, which replaced the 2006 order of the same name, coming into effect on 1 October 2018.
Why is the new HMO legislation needed?
The primary purpose to update the regulations was to give council’s new powers to improve and protect private tenants from rogue landlords that try to exploit them by letting overcrowded properties, often kept in poor condition.
The main changes within the new legislation come in the form of council’s being given the power to set minimum bedroom size standards for HMOs (70 square feet for one person over the age of 10, 50 square feet for one person under the age of 10) and to limit how many people can live in each bedroom. The new regulations have extended the criteria to obtain a HMO licence to include properties that are:
- Occupied by five or more persons
- Occupied by persons living in two or more separate households; and meet:
- The standard test under section 254(2) of the Act
- The self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats, or
- The converted building test under section 254(4) of the Act.
The criteria for a property to be three storeys or more has been removed, which means that any HMO occupied by five or more individuals (not related to each other) now requires a HMO licence.
It is estimated that the new criteria has resulted in an additional 175,000 properties requiring a HMO licence.
Does the new legislation help or hinder the HMO Market?
Whilst most will agree that the new requirements are a positive step towards better protecting tenants from rogue landlords, many view it as a burden for local authorities and add unnecessary administration for the majority of landlords who were already operating responsibly and lawfully under the previous requirements.
The strongest opposition has been to the new minimum room size regulations, with many warning that the private rental sector could lose vital stock as a result of the new requirements. There is growing concern that the new room requirements will reduce the available stock for tenants and the cost of renting existing rooms could increase if smaller rooms within the same properties are no longer lettable.
Whilst the new minimum room regulations have been put in place to protect tenants from being exploited, it takes the choice away from knowledgeable, informed tenants who are happy to rent a small room in order to reduce their outgoings or save for a deposit.
A report from the Residential Landlords Association indicated that in 2017-18, 67% of local authorities took no legal action against private landlords. New evidence suggests that local councils are now taking a much firmer stance since the new regulations were introduced last year. In March 2019, five university students successfully took their landlord to court for unlawfully renting a property without a valid HMO licence. The students, with the legal support of Leeds Council, applied for a Rent Repayment Order and won £15,000 of their rent back. It is important to note that responsible landlords have nothing to fear from councils taking a firmer stance moving forward.
Whilst unscrupulous landlords are considered to be in the minority, there is evidence of a small number of landlords looking to profit by renting out their properties in squalid and dangerous conditions. With councils now seemingly ready to assist tenants who fall foul to rogue landlords, the new regulations may very well provide the protection vulnerable tenants have long been seeking, although the benefit could well be negated by a detrimental knock-on effect within the wider lettings and sales market.
Notes to editor
Dan joined Allsop as a Graduate in 2014 having completed an undergraduate degree in Building Surveying at the University of Reading, followed by a master’s degree in Real Estate at Oxford Brookes University. He gained experience in the Receivership, Residential Auction, West End Leasing & Investment and Commercial Valuation teams before joining the Residential Valuation team in 2016. Dan qualified as a member of the Royal Institution of Chartered Surveyors in 2017.
Dan specialises in undertaking loan security valuations for high value residential properties, mixed-use properties and development sites. His clients include RBS, HSBC Private Bank, Investec, Qatar National Bank and Hackney Council.
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