HMO Subletting – Who applies for Licence?

by Readers Question

13:30 PM, 29th November 2017
About A year ago

HMO Subletting – Who applies for Licence?

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HMO Subletting – Who applies for Licence?

Hi there,
We are managing and subletting a property to sharers.

Consider that – All tenants are people who are claiming housing benefit. Us – the agent is paying an agreed monthly rent to the homeowner regardless the property is occupied or not.

Q.no.1: In this case who needs to apply for HMO licence, the agent or the homeowner?

Q. no.2: What is the correct contract we should use between the homeowner and the agent? ‘Rent to Rent’ or ‘HMO management contract’ or any other?

Many thanks for any advice on our situation.

Jiri



Comments

Chris Daniel

8:56 AM, 30th November 2017
About A year ago

Jiri,
You haven't given much information - such to answer your question, for example you ask about R2R - what type of arrangement / contract do you have with the owner / landlord ?
Who, exactly is the landlord ( I don't mean name ) and what is their relationship with you ?

Robert Mellors

11:37 AM, 30th November 2017
About A year ago

Are you an "agent" letting the property on behalf of the landlord, or are you leasing the property from the landlord and then renting it out (in which case you would be the owner's tenant, and you would be the landlord to the sub-tenants)?

If you are an "agent" then you are simply acting on behalf of the landlord, and all responsibility lies with the landlord.

If you are leasing the property from the landlord, e.g. on a rent2rent basis, then you have taken on the burden of getting the HMO licence and complying with the plethora of stringent HMO regulations.

In relation to question 2, you have already stated that you are renting and sub-letting, so that sounds like you already have some sort of lease arrangement. If you are already doing this you should already have the proper lease contract in place to ensure that both you and the property owner have legal protections and are clear on what exactly the arrangement is.

Jiri Smid

12:06 PM, 30th November 2017
About A year ago

Reply to the comment left by Chris Daniel at 30/11/2017 - 08:56
Thanks Chris for reply, until now we have had a commercial lease between private home owner and myself limited company. (At the moment we are actually the owners tenant) Relationship - friends.

Jiri Smid

12:14 PM, 30th November 2017
About A year ago

Reply to the comment left by Robert Mellors at 30/11/2017 - 11:37
Thanks Robert for reply. Yes, we are home owners tenant and yes, at the moment we have a commercial lease arrangement. From your comment I understand, as we Sublet to individuals, it is best suited for us to go for a rent to rent agreement and to register for the HMO licence. Is that right? Thanks Robert again for your time. Jiri

Jiri Smid

12:32 PM, 30th November 2017
About A year ago

Reply to the comment left by Robert Mellors at 30/11/2017 - 11:37
Robert, one more thing,
If I enter into the rent2rent arrangement and register for the HMO licence, then does the council tax liability fall under the subtenants responsibility?

Robert Mellors

13:00 PM, 30th November 2017
About A year ago

Reply to the comment left by Jiri Smid at 30/11/2017 - 12:32Hi Jiri
I'm not sure why you are differentiating between your lease and a rent2rent agreement, as a rent2rent agreement is simply a lease that allows you to sub-let (so it is still a lease).
As the person (company) with the management responsibility for the property (as you have taken on this responsibility by leasing the property), it is you that is ultimately responsible for obtaining the HMO licence and complying with all the HMO regulations (and I strongly suggest that you study these in detail as they are very onerous and will add loads to your running costs). As it is a HMO (licensable or not), it is the landlord that is responsible for paying the Council Tax, and as you lease the property you are now the landlord and you are the person responsible for paying the council tax. You cannot pass this responsibility on to the sub-tenants.

Mark Alexander

13:07 PM, 30th November 2017
About A year ago

Hi Robert

Why does the Council Tax and the HMO licensing have to be the legal owners responsibility? Surely this can be dealt with in the lease as it would be in any other commercial lease?

For example, if I am the legal owner of a hotel and I decide to rent it to a chain the lease may well pass all licensing responsibility (and insurance and repairs) to the new hotel operator who takes on the lease. If the hotel operator then serves alcohol without a license (for example), or fails to observe health & safety regs (as another example) that is then the hotel operators responsibility and not the responsibility of the property owner.

Mike

13:47 PM, 30th November 2017
About A year ago

Of course what Mark Alexander has said makes all the sense, take for instance if an HMO has been licensed to rent to two or more different unrelated couples, then one has to obtain an Additional HMO license, which then restricts that person to put in maximum of 7 individuals or 5 Household, and by individuals according to Newham Council means even a baby born 1 minute ago can be considered as an individual! which to me sounds pathetic, children under a certain age say 7 years or so should not be part of the count of total number of persons allowed to occupy in a licensed HMO.
Now as far as I can tell, there are very strict regulations and one who applies for a license must be a proper and a fit person, that means if an owner wishing to rent is not fit or a proper person then he has to let his property through a lettings agent who must obtain a license in his company's name and manage it as per strict regulations, so all the responsibility falls on that agent.

Robert Mellors

13:47 PM, 30th November 2017
About A year ago

Reply to the comment left by Mark Alexander at 30/11/2017 - 13:07It is the law. In the Council Tax legislation, and also in the HMO Regulations, there is a hierarchy of how the Council should determine who is responsible/liable to pay. The legislation overrides anything that is put into the contracts between the owners and tenants (or sub-tenants etc). By all means you can put in a clause that says that the HMO tenants should pay the Council Tax, but this will only work if the house is let on a single AST to joint tenants, it will not work if each room is let individually. The Council will still bill the person who is legally liable under the legislation, not under the contract terms. If you had a clause making the HMO sub-tenants (on separate tenancies) responsible, then if they fail to pay it then you could sue them for that amount under contract law, but this is a civil dispute between you and you tenants, and it does not affect who the Council will hold as liable.

Mike

13:54 PM, 30th November 2017
About A year ago

Further to my above post I gave an example, where number of individuals allowed or number of Households allowed can vary from one HMO to another depending on the size of rooms and other facilities, such as size of kitchen, number of bathrooms etc.

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