Commercial Trust is predicting that there could be a spike in financing enquiries over the coming weeks, as landlords rush to meet the 1 October 1 deadline for new licensing laws, covering Houses of Multiple Occupancy (HMOs).
The new rules, announced in March 2018, come under the Licensing of Houses in Multiple Occupation (Prescribed Description) (England) Order 2018 (2018/221) (LHMO 2018) and according to the Residential Landlord’s Association (RLA), an additional 177,000 buy-to-let properties could require a mandatory HMO licence.
Penalties for running an unlicensed HMO or for failing to meet the required licencing standards, set by the relevant local authority, could see landlords face unlimited fines.
The implications of failing to meet local authority licensing standards on an HMO property, could impact future funding, Andrew Turner, chief executive at Commercial Trust, has warned.
He said: “More landlords will be required to bring their HMO properties up to local authority licensing standards.
“In scenarios where perhaps one bedroom in the property fails to meet minimum licencing standards, there could be future implications, if the landlord wants to remortgage the property.
“Investors looking to remortgage may find that a lender will only base rental stress calculations on rental income from the bedrooms that do meet local licensing rules. That could make obtaining the required level of financing a lot tougher.
“At present, we are not clear from the lenders on what their future approach might be, however, there are ways we can help landlords should they face this issue.”