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and to add my two=penneth worth;
Mortgage issues for HMO landlords following the recent changes in rules ……… and how to manage certain licencing requirements
Firstly, what are the new HMO rules which were implemented on 1st Octiober 2018?
The new HMO rules - “The Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018” - can be read in full here and came into effect across England on the 1st of October, 2018.
The main thing this Order changes is the definition of an HMO under the Housing Act 2004.
The new definition of an HMO for licensing purposes will be any property occupied by five or more people, forming two or more separate households.
If you already have a license for your HMO under the current “Licensing of Houses in Multiple Occupation (Prescribed Descriptions) (England) Order 2006” definition, then your license will continue to be valid until the license expiration date (usually 5 years from date of issue).
After the expiration you will need to apply for a new license as usual.
If you currently rent an HMO which didn’t previously require licensing but does now, then you will need to apply for a license through your local council.
AND HERE IS THE POINT WHICH IS BEING OVERLOOKED AT THE LICENCING AND MORTGAGE APPLICATION STAGES - You will also need to ensure you comply with your local council’s HMO licensing standards, which may involve making changes to your property to comply with minimum room sizes, amenity standards (kitchen facilities, number of bathrooms etc).
The minimum room sizes are by way of conditions in a mandatory or additional HMO licence and as such only apply to licensable HMOs. The minimum room size doesn’t apply to selective licensing.
THE IMPORTANT DETAILS;
For all mandatory or additional HMO licences granted on or after 1 October 2018, mandatory conditions must be attached to the licence by the local authority requiring the licence holder –
Landlords who are unaware of these new more restrictive rules could incur expensive and unexpected bills, especially at the late mortgage valuation stage.
HMO landlords who are buying or refinancing their property might have already paid legal, arrangement and valuation fees, only to find out at that late stage that the ‘HMO’ property is unsuitable for licencing due to the room sizes not meeting the minimum requirements, and that could scupper the whole mortgage application
POSSIBLE SOLUTION – Before the HMO mortgage is applied for, the property would then need to be re-structured to meet the minimum room size requirements and that work could be carried out with cash reserves, or alternatively we have access to a fabulous ‘bridge-to-let product which could help the property owner to bridge and pay for the remedial works, which allows the reconfiguration and then repay the bridge with a switch to an HMO product, all in one upfront combined application.
It pays to get it right – lenders and councils are working together to ensure all licenceable HMO’s are properly recorded and approved. Fines and punitive measures being imposed are far greater than the underlying bridge and HMO mortgage costs.
For details of the financing options available for HMO landlords, contact the Team at https://www.PropertyTribesFinancialServices.com anytime.
FOR INDEPENDENT MORTGAGE AND INSURANCE ADVICE
PROPERTY TRIBES FINANCIAL SERVICES
CONTACT US FOR LIFE INSURANCE QUOTES AND STRATEGIES. PORTFOLIO MORTGAGES (VARYING TERMS) COVERED
Im currently in the process of a student HMO deal. Local HMO officer has been fantastic in her help and advice but in the area Im struggling to find a complete list of regulations and inspection points, instead being refered to overall standards. Where I live in Shrewsbury (Not interested in HMO there) they have a pdf guide online as to the HMO inspection points.Is there a definitive guide anywhere for HMO in general I can walk around the house pre purchase?Best