How to Become an HMO Landlord05-02-2024 | Legal Issues
Becoming an HMO landlord can be rewarding, offering higher rental yields and diversification in the property market. However, stepping into the role of an HMO landlord involves understanding legal requirements, the nuances of property management, and the ability to effectively manage tenant relations.
Here, we outline the key steps and considerations for any landlord looking to become an HMO landlord.
What is an HMO?
Firstly, let’s explain what constitutes becoming an HMO landlord. A House in Multiple Occupation (HMO) is a property rented out to at least three tenants who are not from one household and share facilities like the bathroom, kitchen, and other communal areas.
This type of living arrangement is common among tenants who are unable to commit to a long-term lease such as those who need to travel frequently, young professionals who are only just beginning their careers, or students who live away from home.
How to find an HMO property
Looking to find the right HMO property for you? Below are a few considerations that should be topping your priority list before you begin your search.
Assessing the market
Before investing in an HMO, research the local property market. Think about the demand for shared housing, average rental yields, and the profile of potential tenants in your area. Locations near universities or city centres are often hotspots for HMOs, especially in thriving, bustling cities that are a little more fast-paced.
Location, location, location
Finding the right location to invest in is a crucial part of the process. A property near the right amenities, such as town centres or universities is a great place to start. HMO’s are popular with young, single individuals and professionals so being near to pubs, restaurants or cafes is always a great choice.
Take into consideration the safety of the neighbourhoods that you look into as well as the desirability of these areas for your potential tenants. Your HMO property will be more attractive to potential tenants if they feel that they will be safe and secure in the area.
Finding the right property
Look for properties with multiple rooms or that have the potential to be converted. Consider the layout and the size of the property as HMO tenants typically prefer private bedrooms and communal living spaces.
You may even be able to renovate one of your current properties. If so, think about how many rooms you could create. The more bedrooms you can fit into your property (without impeding too much on space), the more chance you have of a higher monthly income.
Once you have been able to find the right property for your needs as an HMO landlord, you will be well on your way to being able to let it out to various tenants.
As you will be letting out a property to more than one tenant and managing a few communal areas, safety regulations are essential to follow.
Most HMOs require a licence from the local council. Licensing criteria can vary, but typically, a property rented to three or more people forming more than one household needs HMO-licensed. Once the licence has been obtained, it is valid for a maximum of five years. If you are considering owning multiple HMO properties, you will need a separate licence for each one.
Also, there are two main categories for obtaining an HMO license. The first category is for a small HMO, which is where at least three tenants who are not from the same household live on the property. A large HMO licence is for a property that occupies five or more tenants who are not from the same household.
You will need to submit your Gas Safety and Electrical safety certificates when applying for your HMO licence, along with the floor plan of the property. You can apply for your HMO licence on the Gov.UK website.
Depending on the local council’s regulations, you may need planning permission to convert a property into an HMO, especially for large HMOs.
In the UK, whether you need planning permission for your HMO renovation depends on several factors, including the size of the HMO, the nature of the renovations, and your local council’s policies.
Why do you need planning permission?
You would need planning permission for any of the following reasons:
Article 4 Directions
Some local authorities have implemented Article 4 Directions, which remove permitted development rights for changes from C3 (dwelling houses) to C4 (small HMOs). In these areas, you would need planning permission even for smaller HMO conversions.
Major renovations and external changes
If your renovations involve major structural changes, extensions, or significant alterations to the use of the building, you will likely need planning permission. Any changes to the external appearance of the property, such as new windows, doors, or extensions, usually require planning permission.
Considerations before applying
Before applying for planning permission, it is important to take into consideration some of the following things:
- Local policies: Research the local council’s policies on HMOs, as these can vary significantly. Understanding these policies can help you tailor your application to meet specific local criteria, making it more likely to receive planning permission.
- Impact on neighbours: Consider the potential impact of your HMO on the neighbourhood, such as increased noise or parking issues. Addressing these concerns proactively can be beneficial in the planning process.
- Sustainability and safety: Ensure that your renovation plans comply with sustainability standards and safety regulations, including fire safety and adequate facilities for the number of tenants.
Applying for planning permission
Now, let’s take a look at the process that you will need to take when applying for planning permission:
- Consultation: Before applying, it’s often wise to consult with a planning officer from the local council. They can offer preliminary advice on your proposal’s likelihood of success.
- Application process: The application for planning permission is made to the local planning authority. It should include detailed plans of the proposed changes and how they comply with local planning policies.
- Public notice: Often, the planning application process includes a period where neighbours and the public can view the proposals and submit comments. Positive engagement with neighbours can be beneficial.
Once planning permission is granted, ensure that the renovation work complies with the approved plans. Any deviation can lead to enforcement action by the local authority.
Safety and health regulations
The safety and health regulations for HMOs are stringent and designed to ensure the well-being and safety of all tenants. As an HMO landlord, it’s crucial to be aware of and comply with these regulations. Failure to do so can result in legal consequences, including fines and licence revocation.
Here’s an overview of the key safety and health regulations you need to consider:
- Fire risk assessment: Conduct a thorough fire risk assessment to identify potential hazards and implement necessary safety measures.
- Smoke alarms: Install smoke alarms on each floor of the property and ensure they are in working order.
- Fire doors: Fit fire-resistant doors, especially for rooms with cooking facilities.
- Escape routes: Maintain clear and accessible fire escape routes at all times.
- Fire safety equipment: Provide appropriate fire safety equipment like fire extinguishers and fire blankets, especially in kitchen areas.
- Annual gas safety checks: Ensure all gas appliances and installations are checked annually by a Gas Safe registered engineer.
- Gas safety certificate: Obtain and maintain a current Gas Safety Certificate, and provide a copy to your tenants.
- Electrical inspections: Conduct regular inspections of the electrical system and appliances. As of July 1, 2020, private landlords in England must have the electrical installation inspected and tested by a qualified person before the start of a new tenancy.
- Electrical Installation Condition Report (EICR): Obtain an EICR every five years and provide a copy to your tenants.
- Furniture and furnishings: Ensure that all furniture and furnishings comply with the Furniture and Furnishings (Fire) (Safety) Regulations 1988.
- Structural safety: Keep the structure of the property in a safe condition, including windows, staircases, and floors.
- Room sizes: Adhere to minimum room size standards for sleeping accommodation.
- Overcrowding: Avoid overcrowding and ensure there is enough space for the number of occupants.
- Adequate facilities: Provide adequate cooking and washing facilities based on the number of occupants.
- Cleanliness and repair: Keep communal areas clean and in good repair.
- Waste disposal: Provide appropriate waste disposal facilities.
- Heating and ventilation: Ensure adequate heating and ventilation in the property.
Legionella risk assessment
- Legionella testing: Conduct a risk assessment for Legionella bacteria in water systems and take necessary measures to control the risk.
Licensing and local authority compliance
- HMO licence: Apply for and maintain an HMO licence if your property meets the criteria for licensing in your area.
- Compliance with local authority standards: Comply with additional local authority standards and requirements, as these can vary by location.
Record keeping and tenant communication
- Maintain records: Keep records of all safety checks and maintenance work.
- Inform tenants: Provide tenants with necessary safety information and instructions for emergency procedures.
Compliance with these safety and health regulations is not just a legal requirement but also a moral obligation to ensure the safety and well-being of your tenants. Regular reviews and updates of safety measures, along with prompt attention to any issues, are essential practices for a responsible HMO landlord.
Financing your HMO
Consider how you’ll finance your HMO. Options include cash purchases, buy-to-let mortgages, or specialist HMO mortgages. Each has different criteria and implications for ROI and cash flow.
Setting up utility and maintenance services
As an HMO landlord, you’ll typically manage utilities and ongoing maintenance. Establish reliable services for repairs, safety checks, and utility management.
Marketing your HMO
Effective marketing is key to attracting tenants. Use online platforms, local advertising, and agencies to get your property on the market as quickly as possible.
Firstly, start by directly addressing your target market when advertising your HMO property. By understanding who your target market is, you can tailor your messages accordingly.
Next, highlight the property’s features, location, and any unique selling points. This could be the size of the property, the number of rooms it has available or any attractive communal areas. Focus on any nearby amenities such as universities or train stations.
When planning out your advertisement, ensure that you have high-quality images of your property by investing in a photographer who can accurately capture your property in the best way.
You can also offer virtual online tours and of course, organise house viewings for potential tenants so that they can gain a better feel for the property.
Managing tenants involves everything from vetting and leasing to ongoing communication and conflict resolution. Consider using a property management service if you’re not able to dedicate time to these tasks. We have a lot of informative advice on how to properly screen tenants.
Managing your tenants will be one of the most important aspects of being an HMO landlord and you must do so effectively and efficiently.
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