How the Article 4 Direction could benefit student property landlords

by Property Hotspots

12:23 PM, 30th April 2014
About 6 years ago

How the Article 4 Direction could benefit student property landlords

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How the Article 4 Direction could benefit student property landlords

The Article 4 Direction is a ruling passed by government which effectively requires special planning permission to be granted on the conversion of a single family home into a rental property of three or more unrelated tenants.100xarticle4

In cities like Nottingham, Leicester and Newcastle family homes were rapidly being converted to student property, because they were generating higher rental returns than renting to families.

These City Councils have adopted the Article 4 Direction in order to protect the number of single family homes by requiring that planning permission is obtained before converting a single family home into a rental property of three or more unrelated tenants. The impact could see a drop in supply of houses rented as student property and while demand continues to grow it will lead to increases in rental income and low vacancy rates.

The Residential Landlord Association (RLA) Members have vehemently opposed the implementation of the Article 4 Direction in Nottingham, Leeds and Leicester.

RLA members stance is that landlords have been making intensive use of the existing stock in place where it might otherwise be under-utilised and poorly maintained and that councils have enough legislative power to protect housing stock.

Whatever landlords may feel, this ruling is being adopted in a number of cities across the country. Some investors are seeing it as an opportunity to take advantage of the situation. In cities, like Leicester, there are over 38000 students and two top ranked Universities. The limitation of supply of houses means that landlords are opening their eyes to the potential of city centre studio apartments.

One developer is building a development of luxury studios located only 160 metres from the university campus. The investment summary is:

• 5% Interest on deposit – paid monthlyStudent property
• 8% NET rental income
• Assured for 5 years
• Exclusive New Development
• Fully-furnished apartments
• Hands-off investment managed
• Highly experienced student management company
• In the heart of Leicester City Centre
• Leicester has 38,000 students
• Located 160m from De Montfort University Campus
• Priced from £65000
• Self-contained studios
• University of Leicester only 800m

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The above is a sponsored article.



Comments

Nigel Parry

15:13 PM, 30th April 2014
About 6 years ago

Owning an agency in Nottingham, this article has, again, highlighted the lengths that some District Councils are going to in order to protect so called family households. We do need to just correct a couple of points in the Article, and this is more to highlight the peculiar situations this creates in some areas rather than belittle a good article.
Article 4 is a new tool in the local policies of Councils that they can invoke under the Localism Act that allows them to change a particular piece of overall legislation as long as they can prove a need for it (another article in itself) and they allow consultation before invoking it OR run the risk of claims against them for losses from disaffected parties.
In this case, the Article 4 has been implemented to REMOVE the AUTOMATIC entitlement to move within some planning classes. Again, in this case moving from Class C3 to C4. It is important to note that in many cases there is NO PHYSICAL change to the building as a whole, and is only concerned with the tenure of the occupants residing within. Herein lies the problems that can occur. HMO and Class C4 takes into account any PERSON in the property and is not specifically related to the actual tenancy in situ. Hence a 6 month old baby is a person in this definition, although they are not over 18 and not a tenant.
So, a landlord letting to two tenants has no need for planning permission. But if one of the tenants brings a baby into the mix this creates an HMO and the landlord is officially in breach of planning laws, through no fault of their own. This is an extreme case to illustrate the point, but I hope you get the picture. There are easier ways of controlling occupancy without burdening landlords with more things to think and worry about. Try using existing statutory tools.

Mark Alexander

16:19 PM, 30th April 2014
About 6 years ago

Reply to the comment left by "Nigel Parry" at "30/04/2014 - 15:13":

That's a really interesting point Nigel, it had never occurred to me that a tenant having a baby could actually affect a landlords requirement to have a property licensed as an HMO.
.

Kevin Thomson

21:38 PM, 30th April 2014
About 6 years ago

My understanding was that a family, eg a couple, counts as one person, as far as HMO regulations are concerned.

Therefore, in Scotland at least, fine to have two couples in your house, ie 'two people', but anymore than that and you are into an HMO situation. For some reason 3 unrelated people and over comes into HMO territory in Scotland, whereas 5 in England. Also, there is none of this '3 floors or more in your house' criteria. Perhaps because HMOs tend to be in tenement flats here, whilst terraced brick houses in England.

Ian Narbeth

11:29 AM, 1st May 2014
About 6 years ago

Nigel
I think you have jumped the gun. Your interpretation cannot be correct because it would make every letting to a family of 3 or more people come within the HMO rules. Te HMO rules apply if the people are "unrelated" and two unmarried people living together are "related" for this purpose as are the children of either or both of them.

NewYorkie

17:31 PM, 17th June 2014
About 6 years ago

Reply to the comment left by "Kevin Thomson" at "30/04/2014 - 21:38":

I'm looking at buying in Bath, where the council has reacted against the dominant student population in HMOs in certain areas by imposing an 'Additional Licence' for '3 or more' unrelated persons. The chances of obtaining such a license are highly unlikely, which means there are 4 bed properties which cannot be let to students, and are unaffordable to families. I am querying whether a 4 bed house can be split into 2 flats (there is a rear entrance), but it would mean losing a bedroom.


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