It’s now well over a year since the introduction of the new HMO regulations and licensing changes which effectively brought an increased number of properties within the scope of the rules, having previously not been.
During the past 12 months we’ve not seen a huge amount of media headlines confirming individual breaches of those regulations and the fall-out for landlords if they are found guilty, but it’s been interesting to see a notable uptick in those in recent weeks.
For instance, just this week I read about a landlord taken to court by South Holland council for not securing the necessary HMO licence and he was ordered to pay in total £1,205. Of that amount £750 was for the fine, £75 for the victim surcharge and costs of £380.
My own view is that councils are not overly-inclined to go down the court route with landlords but, in this particular case, the landlord concerned simply did not respond to the council’s attempts to get him to secure the necessary HMO licence and, having judged his property to be a HMO, they had no other method of redress open to them.
In a very true sense, this landlord got what was coming to him, and it’s likely we’re going to see more cases move through this process if, as David Whittaker at FSE Midlands recently pointed out, the claims management companies (CMC) continue to target the tenants of properties which might possible require a HMO licence, but do not already have one.
David suggested that student properties in particular are likely to be firmly within the CMCs’ sights, because if successfully prosecuted for not having a licence, not only can’t the landlords charge rent during the period when the property isn’t licenced but they are likely to have to pay back any rent paid from the time the licence was needed.
That is likely to be a big incentive for students in terms of clawing back some much-needed cash and given the CMCs are likely to be offering ‘no win/no fee’ arrangements, they might well believe there’s no risk to them in pursuing this.
In a private rental sector environment in which the number of HMO properties has been increased, and where landlords are actively targeting HMO purchases in order to improve rental yields, it’s clearly vital that advisers educate clients about their responsibilities around HMO licencing and the potential pitfalls if they don’t take this seriously.
As an aside, given we are a year on from the new regulations, this could not only be the perfect time to touch base with your HMO landlord clients, but to actively review the current HMO mortgage market and to provide details to landlords on what is available.
Fleet recently launched a new five-year HMO pay-rate fix, and over the past 12 months, the market has certainly moved on in terms of the overall HMO offering and what might now be available to those landlords needing to refinance and/or purchase a higher-yielding HMO.
Professional landlords are much more likely to have HMOs within their portfolios or, at the very least, be looking to add them in and, given the specialist nature of this part of the market, it will pay to have a strong understanding, even down to the local licencing requirements.
Let’s not forget that the new HMO rules brought in minimum rules in areas such as room sizes and standards, but individual councils can go beyond this when it comes to what is required to secure a licence in their area. Therefore, being able to pass on the local HMO licence requirements could also deliver added-value for your landlords.
Overall, we’ve already seen growth in the HMO sector and the finance required, but it’s obvious that this is not standard buy-to-let as you or your clients would know it, and therefore it requires a greater level of knowledge and understanding, especially as meeting the thresholds to secure a licence may be different, depending on the area it is in.
Advisers have the chance here to reconnect with their HMO landlords, and to avail themselves of the greater product choice now available, while providing them with detail on their responsibilities. One year on, there is much to be aware of, but also a number of opportunities to be explored.
Bob Young is chief executive officer of Fleet Mortgages