Catch 22 with Additional HMO Lisencing in North London

by Readers Question

9:11 AM, 8th June 2014
About 7 years ago

Catch 22 with Additional HMO Lisencing in North London

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Catch 22 with Additional HMO Lisencing in North London

Additional HMO Lisencing in North LondonI have a portfolio of 15 houses in North London. The local council has just introduced additional HMO licensing whereby small HMOs like mine (i.e 3 or 4 sharers in a 2 storey house) will need to be licensed.

I purchased my properties all using normal BTL mortgages and the problem I have is that if I continue to rent the houses as I am doing to small sharers, I will be in breach of the HMO law and could face a large fine of to £25K. However if I do the work to make it a HMO and apply for a HMO license, this will inform my existing mortgage lender and I will be in a breach of mortgage, due to the council writing to my lender advising them that a license has been applied for. So I am stuck as what to do with my portfolio now…

I understand that most HMO lenders lend only on properties whereby there is a licence in place, but you cannot get a licence until the work is done and applied for through the council, so there seems to always be a point where you are in breach with someone. Catch 22.

I therefore see no option but to continue to rent my properties as is which are now illegal or sell up and buy flats.

Is anyone else in this situation?

Any advice would be very much appreciated as to how to proceed from here..?

Thanks

Alex

Comments

David Mensah

10:06 AM, 14th June 2014
About 7 years ago

Hi Alex,

Mortgage companies often don't like HMO licenses particularly, even if in practice they knew you were renting to groups and so effectively had created an HMO before. One reason the license changes things (I've been told) is that if they repossess the house, then they need someone to be licensed as the manager etc....

You can probably get around the gap between application and them issuing the license by talking to the officers first, and getting works done quickly. For my HMOs they sent out an "intention to grant a license" first, with a few stipulations (which can vary quite a bit depending on which officer or which local area you fall under, very unpredictable). They then grant a license when you've shown you've complied. Also, I have had them come in informally first, tell me what they think they need, gotten it done, and then had them come back to do an official inspection and got the license in one go.

Finally, I have HMO mortgages with Handelsbanken, a small bank who are much more flexible and reasonable than high street lenders. You may qualify to work with them if you have a largish protfolio at not too high a gearing. You might need to sell one or two properties to get to the right LTV.

Neil Robb

17:48 PM, 14th June 2014
About 7 years ago

Hi

I was at a property meet in which Jim Haliburton (The HMO Daddy) was the speaker. He had some interesting things to say about his own dealing with council's to what actually qualifies as an HMO that requires a license etc.

A council will tell you must register and License and this and that must be done. But from what Mr Haliburton said He had a few dealing with them and they were wrong and he did not have to comply as it was not a legal requirement for the type of property he had.

I would if I were you try and get in contact with people like Mr Haliburton on the internet for advice. It might save you thousands or at least put you on the right track and save you a lot of worry.

I know there is a lot of other HMO owners who use this site maybe they can help.

Mark Alexander

9:51 AM, 15th June 2014
About 7 years ago

Reply to the comment left by "Neil Robb" at "14/06/2014 - 17:48":

I'm not sure you have picked a good role model there.

Has anybody heard what happened to his MLAS membership following allegations of conducting an illegal eviction on National TV?
.

Neil Robb

14:06 PM, 15th June 2014
About 7 years ago

Reply to the comment left by "Mark Alexander" at "15/06/2014 - 09:51":

No Mark I did not hear. When it was first shown on TV I did comment on how bad I thought he was then I met a few people who knew him they said he was portrayed very badly in the programme.

I met him this year as he was a guest speaker and listened to what he had to say. I rent out houses for the price he rents out a room. I don't think I would ever go down the HMO route even if the profits are better.

But as I said in my post there must be HMO owners who use this sight who might be able to advise.

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