Do I need a licence for my buy-to-let?

23rd October 2019

man looking at laptop

There’s been a spate of cases of landlords being fined for renting out multiple-occupancy properties without a licence. (1)

In October 2019 a landlord was fined nearly £3,000 for operating an unlicensed house of multiple occupation (HMO) in Worcester, and for not installing proper fire safety equipment. (2)

The government introduced licensing and new rules for HMOs to protect tenants last year.

But it seems not everyone knows what the rules are.

The rise of the HMO

An HMO is a property rented by three or more unrelated people who share communal facilities, like the kitchen and bathroom.

They’re proving to be an attractive proposition for landlords.

HMO landlords are achieving the highest average rental yields at 6.3% compared with the market average of 5.5%. (3)

This comes at a time when average rental yields as a whole are at their lowest for nine years, the same research found.

It’s little surprise that more than a fifth of landlords planning to buy over the next year are looking to add HMOs to their portfolios. (3)

What it means for you

You could face an unlimited fine for renting out an unlicensed HMO. (4)

So if you’re a landlord with an HMO it’s vital to understand the new rules and comply with them.

You need a licence if you rent out a ‘large’ HMO in England or Wales.

Your home is a large HMO if both of the following apply:

  • at least five tenants live there, forming more than one household (a household is either a single person or members of the same family who live together)

  • the tenants share toilet, bathroom or kitchen facilities

Confusingly, different local councils may have their own rules covering HMOs. So even if your property is smaller, you might still need a licence.

You’ll need a separate licence for each HMO you rent out, and it lasts for five years.

It’s also important to know that there are certain criteria a property needs to meet in order to qualify for that licence too.

For example, the bedrooms for single adult occupants need to be at least 6.51 square metres, while those for couples must be a minimum of 10.22 square metres (5).

You also need to:

  • send the council an updated gas safety certificate each year

  • install and maintain smoke alarms

  • provide safety certificates for any electrical appliances if asked to

  • comply with the council’s storage and waste disposal scheme

The council sets the size of the licence fee, so the cost of letting your HMO will vary depending on where your property is.

What you should do

Speak to your local council so you’re crystal clear about what their rules are. As we’ve said, even if your property isn’t a large HMO you may still need a licence.

You may also need to make changes to your property to make sure that it meets the minimum room sizes.

Sources:

(1) Property Industry Eye, Nottingham Post, BuyAssociation

(2) Worcester News

(3) Precise Mortgages

(4) GOV.UK

(5) legislation.gov.uk

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