The importance of HMO and other types of licensing
By Keystone Property Finance
The buy to let market is now subject to much stricter rules. Landlords can no longer purchase a property and immediately rent it out. In most cases, they must secure the appropriate licences, permissions, and safety checks before any tenants can move in.
As a broker, it’s not your job to check that a landlord has these in place, but guiding clients through licensing requirements can save them a serious headache long-term.
However, with various licensing schemes in existence, it can be difficult for brokers to keep up with all the requirements their clients need.
Licensing schemes were introduced under the Housing Act 2004 and essentially help councils ensure rental properties meet safety standards and are managed responsibly.
While schemes vary by local authority, there are three that you need to know about. The first is Mandatory Licensing.
These licences are required when someone is renting to five or more unrelated tenants forming at least two households and sharing facilities like kitchens or bathrooms. A classic example is a townhouse rented to five university students.
If a landlord fails to obtain a mandatory licence, they risk fines, Rent Repayment Orders (forcing them to return up to 12 months’ rent) and even prosecution.
On top of that, HMOs with 7 or more individuals fall under the Sui Generis planning category, which requires a separate planning application in addition to the licence.
Where this is a licensing area, the client must align both licensing and planning permission requirements.
While you might think that the Licensing Department within a Council will liaise with their colleagues in the Planning Department, they rarely do. So, landlords must be proactive and ensure they have applied for and obtained everything they need for the subject property.
What category of planning permission is required? Residential properties are categorised as C3 usage. HMOs with fewer than seven occupants may apply to move to C4 from C3 usage under Permitted Development Rights. However, the challenge comes when the Council has applied an Article 4 direction over the area where the property is situated.
This would mean Landlords need to provide evidence that the property had been used as an HMO prior to the inception of Article 4 direction to obtain a Certificate of Lawfulness, or for the local council to grant C4 usage.
It is always important when it comes to HMO properties not only to check for the correct licensing but also the correct planning permissions.
After Mandatory Licensing, you have Additional Licences, which apply to smaller HMOs that do not meet Mandatory Licensing criteria but still require oversight. For example, a 3
bedroom semi rented to three working professionals may require an Additional Licence, even though it doesn’t meet the Mandatory Licensing threshold.
Then there is Selective Licensing. Councils can introduce Selective Licensing in any area where they feel they need to intervene to improve standards in the private rented sector, with the approval of the Secretary of State. They can also apply this type of licensing on any property, from a 1 bed flat to a 20 bed HMO this is normally granted for a period of up to 3 years.
Landlords must apply for a licence before they let to tenants, allowing the council to check they are a “fit and proper person” to manage rental properties. Councils can also enforce specific management conditions and safety measures.
As you can see, staying on top of the various licensing schemes is not easy. And while licensing is a landlord’s responsibility, brokers can play a key role in guiding clients through the process.
Licensing rules constantly evolve and brokers who stay ahead of these changes can provide invaluable support to landlords, helping them to remain compliant, avoid penalties and maintain high standards.
If you have any HMO cases and are unsure what licence is required, contact Keystone’s sales team today.
Contact details – Sales team
Phone: 0345 148 9086 option 1
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