Residential  

Landlords need to be aware of property market rule changes

  • To come up to speed with the changes to licensing rules relating to houses in multiple occupation
  • To understand which properties now fall under this category
  • To appreciate what landlords need to do in the next few months
CPD
Approx.30min
Landlords need to be aware of property market rule changes

The residential property market occupies a special place in the consciousness of the British public. 

Bricks and mortar, and by extension home ownership, have long been seen as an aspiration for all.

However, with systemic problems on the supply side and no sign of demand falling, prices have become unattainable for many, even with a slight softening in some parts of the country in the past year. This has culminated in a growing private rented sector – an increasingly professional sector – with the move for many from ‘dinner party’ landlords to the establishment of limited companies. 

Landlords are business people, and businesses will naturally gravitate towards higher profits. Standard buy-to-let properties may have lost a little of their shine following the government’s reforms to the sector, but savvy landlords with the right expertise will spot the societal trends.

The recent tax and regulatory changes have forced these professional landlords to review their portfolios and consider other ways of boosting rental income. Consequently, houses in multiple occupation (HMO) is an option many are considering, given the greater profit potential, in what is an increasingly competitive market.

Broadly speaking, you might expect to see a yield of less than 2 per cent in London or perhaps up to 5 per cent outside of the capital. However, a landlord will expect to see an HMO deliver high single-digit growth and even double figures in some regions.

Equally, many tenants, unable to afford self-contained one-bedroom flats, are looking for multi-share rental options as a way to cut costs while they save for a place of their own.

The English Housing Survey 2015-2016 reported that 46 per cent of 25 to 34-year-olds are renting, almost double that of 10 years ago. Over the same period there was a corresponding decrease in the proportion of people in this age group in the owner-occupied sector.

HMO changes

Following significant changes to tax and in the sector referenced above, the government has announced further changes to the HMO space to broaden the licensing requirement, which address smaller HMOs and bedroom sizes, as it attempts to improve standards in the private rented sector and ‘rebalance’ the relationship between landlords and tenants.

The previous definition of an HMO was set out in the Housing Act 2004 and came into force in mid-2006, which is the first time there was any specific definition of an HMO in planning legislation.

Under the old legislation, a property was considered an HMO if an entire house or flat is let to three or more tenants who form two or more households, and share a kitchen, bathroom or toilet, comprising three or more storeys.

From October, properties will be subject to mandatory licensing if they meet the following criteria:

  • It is occupied by five or more persons;
  • It is occupied by persons living in two or more separate households; and meets 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.

Futhermore, and perhaps most critically, the three-storey rule no longer applies, so HMOs meeting the above criteria will be licensable for one, two, three or more storeys.

CPD
Approx.30min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. According to Harry Landy, why have houses in multiple occupation (HMO) become more popular in recent years?

  2. According to Harry Landy how many people need to be tenants in a property for it to need a licence?

  3. According to Harry Landy, how many storeys must the property have to be licensed?

  4. What will happen if local authorities delay in awarding certificates?

  5. Tenant churn is much higher with HMOs. True or false?

  6. When is the deadline for submitting all applications for a licence?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • To come up to speed with the changes to licensing rules relating to houses in multiple occupation
  • To understand which properties now fall under this category
  • To appreciate what landlords need to do in the next few months

I completed this CPD in

To bank your CPD please complete the form below.

Were the stated learning objectives met?

Why weren't they met?

What did you learn from undertaking this CPD exercise?

Why did you undertake this piece of learning?

Banked!

Congratulations, you have successfully completed and banked this piece of CPD

Already Banked!

You have already banked for this article.

To bank your CPD you must or

Register

One or more questions have been incorrectly answered,
 please review your answers and try again.

Please complete all the above text fields to bank your CPD.

More Investments CPDSee my completed CPDSee all CPD