HMO Internal locks ‘deal breaker’?

by Readers Question

12:17 PM, 7th November 2013
About 6 years ago

HMO Internal locks ‘deal breaker’?

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HMO Internal locks ‘deal breaker’?

I’m at the point of exchange on an HMO licensed 5 bed house, currently let to students. I received a letter from the mortgage lender Birmingham Midshires (BM Solutions) saying one of their conditions is that there are ‘no internal door locks’. I checked and there are thumb locks on all the bedrooms. The letting agent who manages the house asked the students about removing them, they refused. BM Solutions logo

I’ve heard stories about BM Solutions withdrawing the offer after exchange, and apparently there will be 5 days between exchange and completion. I can’t risk losing 20% of my deposit if they discover there are still internal locks. What should I do? Is this really a deal breaker?

Apparently it’s only 1 of the students that has a problem with the locks being removed, but as I don’t yet own the house I can’t speak to her directly and can’t change the contract, everything is dealt with by the letting agent.

Has anyone else come up against this one? Should I risk it and tell the mortgage lender that I did request the locks to be removed (if they ask)? Or should I actually pull out now before it’s too late?

Any advice much appreciated.

Regards

Duncan



Comments

Yvette Newbury

14:28 PM, 7th November 2013
About 6 years ago

Presumably you divulged when you applied for the mortgage that you would be renting as an HMO, and you specifically told them this was a licensed HMO? If so, they should expect locks on internal bedroom doors and this just might be a general term that is in their normal mortgage application, and does not apply to you, having a mortgage on an HMO licensed property? If however it was just a general buy-to-let property then this term is included, in my experience.

Jamie M

14:30 PM, 7th November 2013
About 6 years ago

Tell them there are no internal locks.

Brian Phillips

14:54 PM, 7th November 2013
About 6 years ago

I carry out a huge number of Fire Risk Assessments, as well as H&S surveys, and I strongly believe that BM's question relates to "mortice locks" which should never be permitted either in a tenant's door or in any final exit from a property (or indeed on any Fire Door). Thumb turns on the inside of a door would be fully compliant. Hope this helps

Duncan Kane

15:26 PM, 7th November 2013
About 6 years ago

Thanks for your replies.

Brian, the condition on the mortgage offer simply says 'no internal door locks' and doesn't specify what kind, if any, are acceptable, presumably they mean none at all. At the moment each bedroom has thumb turn locks which the tenants are reluctant to remove.

Jamie, I know this seems the simplest solution but I'm worried they may send another surveyor round before completion to check the locks situation. When they did the valuation survey he knocked on the door a few days earlier than booked and the students just let him in! So could easily do that again.

Yvette, the BM mortgage was applied for through a broker, the house was already an HMO licensed student house so they knew from the beginning. It does seem though that this is a general BM buy-to-let mortgage and not an HMO specific one, so as you say, the locks thing is a standard term in that contract.

Do you think they're offering the wrong type of mortgage then? The broker said this was the only option available for me so don't think it can be changed. Or am I worrying too much about this and should just go ahead with exchange and tell them there are no internal locks like Jamie says? The valuation surveyor didn't seem to notice there were any locks there anyway. I just don't want to lose that deposit.

Any more advice most welcome!

Mark Alexander

15:47 PM, 7th November 2013
About 6 years ago

Hi Duncan

How could you possibly be expected to remove the internal locks from the doors of of a property which you do not own yet? Surely your first opportunity to take such action would be post completion, at which point there is little if anything that can be done anyway.

Even if you were to remove the locks on the day of completion you wouldn't be able to check whether the students have replaced them anyway would you?

Get my point? 😉

I think you're in the clear, especially if you can prove that BM Solutions knew they were lending on a licensed HMO.
.

Roy B

15:50 PM, 7th November 2013
About 6 years ago

Speak to BM before and explain what has happened and what type of locks they are. As an HMO mortgage they cannot expect the room to stay unlocked. Has the broker told them it is HMO or has he fudged a little? If they still say no internal locks I would suggest another lender or walk away - it's cheaper than loosing the deposit.

Jeremy Smith

16:08 PM, 7th November 2013
About 6 years ago

It sounds like BM doesn't know it's lending on an HMO,.... IMHO !
....Just thinks it's a BTL perhaps.

You should get them to clarify and specify EXACTLY what 'door catches/latches' are, and are not, acceptable.
The doors have to have some sort of latch on them to keep them closed!

Howard Reuben CeMap CeRER

17:04 PM, 7th November 2013
About 6 years ago

A couple of points for clarification;

1) BM Solutions is a Broker only lender.

2) BM Solutions state in their lending criteria

"The maximum number of bedrooms allowed for a Buy to Let property is 5."
"HMO properties are not acceptable."

For clarification, see http://www.bmsolutions.co.uk/criteria/buytolet/

So, if you told your Broker you had an HMO property, he would (should!) not have supplied an application to BM.

There are plenty of HMO lenders out there that will allow you to arrange a legitimate mortgage and sleep well at night.

Howard

Mark Alexander

17:55 PM, 7th November 2013
About 6 years ago

Reply to the comment left by "Howard Reuben" at "07/11/2013 - 17:04":

Thanks for the clarification Howard.

It would appear their may be ground for a complaint and possibly even a claim against the brokers PI insurance here. The loss at this stage is the fees paid to date, however, it could have been so much worse!

Sorry Duncan, but if you lose the property as a result of your brokers incompetence then you can't claim loss of rental profits and capital appreciation for the rest of your life as damages I'm afraid. Many have tried, none have ever succeeded to my knowledge.
.

Adam Hosker

18:06 PM, 7th November 2013
About 6 years ago

Hi Duncan,

Unfortunately the mortgage broker has indeed incorrectly sourced the mortgage with BM Solutions.

You stated the property is a Licensed HMO and BM Solutions do not finance Licensed HMO's - end of story.

The broker has misunderstood their rules as BM Solutions will consider student / let shares and such like - however the property will be valued on a single family occupancy basis and IIRC must not have more than 3 non related persons sharing and they must be all on the same tenancy.

They also do not allow any internal locks as you have seen from the finance offer, which leads me onto the next point - I am suprised they have even offered on this property and can only assume the valuer was blind or BM, been so busy - have simply missed it.

I don't think there is any good news im afraid, as even though the mortgage has been offered, it is very unlikely to actually complete because the lender will pick up on the fact the property is a licensed HMO on final checks between their completions department and your solicitors.

I can only assume the reason BM Solutions were selected in the first place was because of their no minimum income rule and usually low evidence requirements.
Such a shame as a ten minute chat with their Business Development Manager would have cleared this up and saved you a lot of time, money and dissapointment.

Mortgages can be easily sourced for HMO's and we do so regularly however as a rule of thumb - If you are unable to evidence £25,000 per annum or are a relatively inexperienced landlord I think you are going to struggle.

I would complain to the broker.

Sorry its not better news.

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