HMO Additional Licence – Potential Housing Crisis?
I have been renting out a 3 bed property to groups of 3 tenants for the last 10 years. It appears that this is classed as an HMO.
Southwark Council have now introduced Additional Licencing which affects any landlord renting out their property with 3 unrelated people living together. You are deemed under the 2004 housing act to be running three households even if it’s a group of people operating under one short hold tenancy agreement.
I applied for the licence and while I am HMO compliant the freeholder and mortgage company have refused to permit the licence. As such I will in future only be able to rent the property out to either a family or two tenants – freeholder holds the cards. This will be the case for many others in the block my property resides in hence displacing many tenants in this block alone.
As London is significantly leasehold I wondered if there will be a big issue here. Letting agents, lawyers, landlords appear unaware of the or the fact that 3 unrelated people is an HMO. Additional licence will expose thousands of rentals that did not perhaps realise they were HMOs.
My view is that if other freeholders choose to reject HMO Licencing where Additional Licencing is required there will be a housing shortage for tenants. Freeholders will rely on the leasehold agreement which states one household. And why not, being licensed HMO means I could run a property as a refuge, student accommodation, with locks on internal doors etc. I don’t blame the freeholder or mortgage company for not permitting the licence. I do blame the law and council as it seems unreasonable that a group of 3 tenants can no longer live as a “family” unit in my property under a short hold agreement. (I get why it is necessary for people moving in and out of shelters).
I am interested whether other landlords are either:
– aware that you may require an Additional Licence if running a rental with three unrelated people. Southwark Council are now enforcing this for the Borough
– experiencing rejections from their mortgage companies or freeholders
I am now unclear whether the property will achieve rentals previously achieved and as such may be forced to sell. Whatever happens my learnings and experience will cost thousands and feels like it needs to be exposed.
I think this will create a housing shortage in Southwark once people realise they are affected. Good story for the Evening Standard I suspect?
Chris
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Member Since April 2014 - Comments: 32
11:03 PM, 2nd May 2016, About 10 years ago
Reply to the comment left by “Ian Narbeth” at “25/04/2016 – 18:26“:
I do not understand why the council would write to the lender – it makes you wonder why a landlord would declare that there is a mortgage on an HMO.
Also I do not understand why HMO lenders are so reluctant to lend and if they are, why do they charge more. If you have 4 people in an HMO paying rent then the chances of all them not paying is a lot less than 1 family where the breadwinner loses his job and cannot afford the rent.
I think this licensing is just a way of councils to raise extra cash.
Member Since August 2013 - Comments: 107 - Articles: 1
9:59 AM, 3rd May 2016, About 10 years ago
Reply to the comment left by “Martin Rdg” at “02/05/2016 – 23:03“:
The councils write to the mortgage lender because they have a duty (either a legal duty or one they have adopted, not sure which) to inform all parties that have an ownership interest in the property.
A ‘reasonable’ mortgage lender might take the view that rent to cover the mortgage is more secure with an HMO, but how many are reasonable these days, especially if an existing mortgage is a BOE tracker with a low margin?
Member Since May 2016 - Comments: 9
6:18 PM, 12th May 2016, About 10 years ago
I am familiar with the development you refer to…interesting that Southwark council seem to contradict themselves re the definition of a HMO.
Their HMO standards guide on the Southwark council website states a HMO is a property occupied by 3 or more unrelated people in 2 or more households.
So 2 siblings (1 household) and 1 other sharer isn’t a HMO (they also told me this on the phone) as it isn’t 3 or more unrelated people (as 2 are related)
However the legislation seems to contradict that, a HMO is a property occupied by more than 2 people (i.e 3 or more) in more than 1 household…
It amazes me the contradictions on Southwark councils website…that and giving incorrect information on the phone (if it is)….the details re fire safety, electrical safety…what rules apply..do the same rules apply to a large HMO as well as an additional licence? and selective licence?
It’s a mess…and will mean good landlords with high quality properties will probably not allow sharers anymore.
In addition 12 sq metres for a couple’s bedroom is smaller than almost every new development property I have seen over the last 5 years…that’s 13.2 ft by 10 ft….that’s a pretty decent sized double room. My 3 bed townhouse is 1200 sq ft, and yet I can’t rent it based on those dimensions to any couples! madness…
Member Since April 2017 - Comments: 163 - Articles: 1
2:52 PM, 8th May 2017, About 9 years ago
I have a property in Southwark, totally refurbished and let to 4 people for 4 years. In Southwark. Applied for an HMO, but they will only allow 3, as no living room, and they deem the kitchen too small for 4 (nonsense) and the bedroom too small for one (nonsense, 8.61m)
So will have to have one room empty, will become a living room, and put up rents for others as they will have living room.
How does fewer rooms and higher rents help London? I am appealing, but realise these people do the rule thing, not the right thing. Help!!
If I fail to be allowed 4, will probably evict everyone and sell
Member Since January 2016 - Comments: 235
6:04 PM, 8th May 2017, About 9 years ago
Reply to the comment left by “Ross Tulloch” at “08/05/2017 – 14:52“:
Ross. You may want to point the jobsworths in the direction of this and ask them to comment. Doubt you’ll get much sense but at least you’ve tried. This from just last week :-
https://www.southwarknews.co.uk/news/council-spend-temporary-housing-now-five-times-20112012/
“We’re seeing a real shortage in supply of affordable temporary accommodation and it is becoming increasingly difficult to find any places in Southwark,” cabinet member for housing said.
Southwark Council spent over £10m on temporary accommodation for people threatened with homelessness last year, Becky Morton writes…
The increasing numbers facing homelessness combined with a shortage of affordable housing means the cost of temporary accommodation has been steadily growing.
Council spending on temporary accommodation is now five times more than it was in 2011/12, figures released through a freedom of information request show.