HMO Internal locks ‘deal breaker’?

by Readers Question

12:17 PM, 7th November 2013
About 7 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

Simone Gilks (Mortgage Adviser)

18:45 PM, 7th November 2013
About 7 years ago

Between us all we have quite clearly picked up on some of the most obvious points to the problem -

Firstly, I do feel that it is apparent BM Solutions are not aware that this a HMO and as such confirm this by stating there should be no internal locks. Had you broker chosen a lender which specialised in HMO's it would almost have been expected to see internal door locks given the room types. Instead this application has clearly been seen as a shared house, which would normally meet their Buy To Let criteria of 5 bedrooms.

http://www.bmsolutions.co.uk/criteria/buytolet/

As an HMO it will need to have a licence in place and certain insurance policies as well has health and safety precautions. The surveyor should have picked up on all of this when inspecting the property, but for some strange reason didn't, so that a question for the them!

Living in Cambridge (Student Capital) I work with these types of mortgage contracts every day and have experience in the underwriting criteria, which is why I would recommend that you do not withhold vital information that could prove detrimental to your character or be construed as mortgage fraud.

Instead seek professional advice from a broker who knows what they are talking about and obtain the correct mortgage contract for the job, that way not only do you ensure the deal will be suitable, your tenants will feel safe and happy and more importantly your insurances will NOT be null or void.

Given that you have now incurred costs and that you were ill advised, you may wish to take the matter up with the broker and their PI Insurers.

On the plus side - If it’s still a great purchase try not to be too put off, I'm sure you can still salvage the deal another way.

All the best

Mark Alexander

19:10 PM, 7th November 2013
About 7 years ago

Superb response from the broker community and welcome to Property118 Simone, it's a pleasure to have another broker of your experience on board.
.

19:16 PM, 7th November 2013
About 7 years ago

Very useful thread. Thank you to all who have contributed to it.

I think it highlights the importance of working with a good broker who has specialist understanding of BTL and who can help you find the correct product for your needs.

On a positive note for Duncan, at least this problem was rooted out BEFORE exchange and has potentially saved him a lot of money, heartache, and worry.

As Kevin Kelly said, "None of us are as smart as all of us". A great example of the "hive mind" in action!

Duncan Kane

19:36 PM, 7th November 2013
About 7 years ago

Ok, again thanks for all the recent comments on this.

I will indeed speak to the broker who found this mortgage before going ahead. I understand your reservations about it being a buy to let (and not an HMO) product, and yes this particular mortgage was recommended to me because of the no minimum income and low evidence requirements, I believe BM offers the only mortgage like that.

However, the broker DID initially ask me for proof that the house is an HMO, I sent him the sales details which clearly states it at the top, I also referred him to the Rightmove ad which says 'HMO licensed property' in the title! so there was never any doubt about it. He also spoke directly to BM solutions to clarify we could have 5 unrelated students living there - this was after a mix up in their offer saying no students, this has now been accepted by BM in writing.

So I'm not sure this is as black and white as it appears, the broker seemed very thorough and consulted BM solutions throughout the process. The mortgage offer itself does mention 'House with multiple ocuupiers' in one of the clauses, and the conveyancing itself is being done through BM conveyancing, wouldn't they have flagged up a problem like this by now?

Anyway as suggested I need to clarify this first with the broker tomorrow.

I really appreciate all your advice on this, it's a big help.

Simone Gilks (Mortgage Adviser)

11:59 AM, 18th November 2013
About 7 years ago

Now would you believe it, I have just spoken with their BDM and they have told me this -BM Solutions will allow a property to be occupied under a multiple occupancy, with LOCKS ON INTERNAL DOORS but only if the valuer is happy with the property itself.

It can be occupied by students up to a maximum of 5 and they must all be on one lease! The property must not be Licensed as a HMO with the local authority.

As for the offer, you need to get clarity from the lender as the wording now goes against what I have just been told.

Hope this helps!

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