My HMO (House in Multiple Occupation) Dilemma

by Mark Alexander

18:10 PM, 21st January 2012
About 9 years ago

My HMO (House in Multiple Occupation) Dilemma

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My HMO (House in Multiple Occupation) Dilemma

Norwich City Council are now charging £1,800 for an HMO licence, a 650% increase! Extortionate I think but so far as I knew, it didn’t affect me as none of my properties are licenceable HMO’s, until…

Before I go on with my story, just in case you don’t know what an HMO is it’s a property with three or more stories let to 5 or more tenants, and HMO stands for House in Multiple occupation.

This week my brother and I have spent hours sorting out a problem we didn’t know we had.

I have one of those super trendy 4 bed properties at Riverside, Norwich, where many of the local Premiership footballers are also owners. I’ve owned it from new and my tenants have been there for nearly seven years. It is a four bed three story town house but as I only had four tenants in it I didn’t need an HMO licence.

Unbeknown to me until this week though, two tenants moved out in April last year and an unmarried couple moved into one room and another single chap into the other. They sorted it all between themselves and didn’t see the need to tell us at the time. Therefore, there are now 5 people living in the property.

The original tenancy was pre-deposit protection rules and they had sorted the deposit between them so that’s one less worry to deal with but as you can see I now have a problem, and to make it worse Norwich City Council are aware of it too.

The only reason I found out about this is because one of the occupiers of my property (not one of the people I thought was living there) recently lost his job and has claimed benefits. The Council have asked him for a copy of his tenancy agreement and of course he doesn’t have one. In fairness to my tenants, bless em, were not aware they had done anything wrong. I can easily see how any tenant could inadvertently create this problem, foreign or not. Tenancy law and HMO rules are not something the average person has any awareness of are they?

WHAT A MESS!

If I allow them to stay I need to create a new tenancy, protect the deposit and get an HMO licence as it would become a licenceable HMO. The scary thing about that isn’t just the cost though. I wouldn’t put it past Norwich City Council to bring in Article 4 HMO planning. If that was the case I might not be able to convert the property back into a family home and its value could plummet as as result. That’s another story though!

What choice did I have other than to serve a section 8 notice to give the tenants two weeks to vacate the property on the grounds of breach of tenancy? Well between my brother and I, we’ve been in email communication with them and with Andy Fretwell from the Eastern Landlords Association all week. Andy has been brilliant by the way, if you live in East Anglia I strongly recommend you to become an ELA member.

The email communications started to get unpleasant so we decided that a face to face meeting was the way forward. They all wanted to stay. They have been model tenants in terms of paying the rent, looking after the property, reporting minor issues before they become big problems etc. and the last thing I really wanted to do was to go to war with them in Court to get them out on the grounds of section 8 and breach of tenancy.

Fortunately, there is a happy ending to the story. It’s amazing what can be achieved over a cup of tea around a kitchen table isn’t it?

Once I had met with them and got them to understand that it’s the law that’s an ass, not me, we began to have a civilised and sensible conversation. The outcome is that one of the tenants has agreed to move on so that the others can stay and we will sort a new AST and protect the deposit for the remaining four so it will not become a licenceable HMO.

Will the 5th actually go though I wonder or will he become a “permanent guest” of the remaining four and register elsewhere on the voters roll?  Only time will tell I guess but as far as I’m concerned, I think, or at least hope, I’ve done my bit to protect my position.

PHEW !!!


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Property Solutions UK

6:54 AM, 24th January 2012
About 9 years ago

Of course in Scotland anything more than 2 tenants is HMO Licencable regardless of number of floors.

Question: How long can a guest stay before being considered a tenant. 

Gilly

9:50 AM, 24th January 2012
About 9 years ago

Hi Mark,

What bothers me is that your tenants all love the place they live in (and who wouldn't, by the sound of it) and yet somehow or other you find yourself in a position where you are not quite complying with the law.  I had the same problem when the law changed from 6 people to 5 people in 3 storey houses, so that after 25 happy years it suddenly was deemed to be an HMO with mandatory licensing,, even though it had had several successful inspections and I had documents stating that it was a single household (considered as such because of the cohesive way they lived, - environmental officers seemed to have more discretion in those days).

In my area, you would find that even with four tenants, you would probably still have to put in fire doors, smoke alarms etc.  I have a lovely shared house, under-occupied with only four unrelated tenants and so deemed to be in bedsits - even with a food kitty, one television in the lounge, eating together etc. 

When this happened previously I ended up converting the house into flats, mainly because fire doors do reduce the price and damage it being sold as a family home.  In your property, there may not be a lock in sight and when they are all on one AST then it may escape the category - but just a cautionary tale, before you are too relieved.

Don't get me wrong, as I am all for fire safety and there is a full mains alarm system in place, four fire exits and further equipment, but apparently I am even supposed to go there every week to test it.  (The tenants are not deemed to be the best people for this job? ) Don't let me start....there is a whole post on this subject.....I am just about to fight this in court, so if anyone can give me examples of low risk, 2 storey houses which have locks, (as required by most Insurance companies these days)  but which do not require fire doors, please let me know.  

p.s. the government needs shared houses to combate the housing shortage, particularly with the new LHA rules and yet the legislation against shared houses is getting worse by the year. 

£1800 - what????

matchmade

10:16 AM, 24th January 2012
About 9 years ago

Aren't you going to lose out on rent though? Generally couples sharing a room expect to pay substantially less than two single people with their own rooms, and you will now have an empty bedroom because the 5th tenant is leaving (or is meant to be).

If the 5th tenant does stay as a "guest", or the tenants quietly move in a replacement person into the spare bedroom without telling you (they have form in this area), I would have thought you'd still be vulnerable to being classed as an HMO, even if you claim you didn't know the 5th person was living there. Norwich Council are going to be pretty miffed if they think you are deliberately evading HMO registration and they could prosecute you. From their point of view (and the 2004 Housing Act's) you have allowed the tenants to create a health and safety hazard. As a "fit and proper person", landlords are meant to know who is occupying their properties, and if by neglect or omission your property becomes a licensable HMO, that's your problem not the council's or the tenants'.

Mark Alexander

11:03 AM, 24th January 2012
About 9 years ago

In response to Tony & Gilly

In Norfolk, any property with three or more tenants is an HMO. Licence fees are payable if there are three or more floors or 5 or more tenants.

My property already has fire doors, fully wired smoke alarms etc. That was imposed on the developers by the planners.

I'm not losing out financially by losing a letting room. The decision to renew the contract with four tenants at the same rate was their decision. They know I could easily rent the property to a family at the same rent. I'm not into managing shared houses or HMO's. The only reason I let to these tenants is that they are such a cohesive little group, the closest thing you could ever get to a family. Arguably they are better to have than a family as they all earn decent money and are all mature professionals so no teenage parties to worry about.

The point about a long term guest does slightly me but how would I ever know. I suppose that if a 5th person were to move in and was on the voters roll elsewhere I would never know about it. How I'd know about it if they did register on the voters roll is questionable too as I can't realistically see myself doing the checks that Paul has suggested. For me the bottom line is that I have done everything reasonably possible now. If a 5th person does move in and this get's picked up I would like to think my reasonable actions would stand me in good stead.

13:35 PM, 24th January 2012
About 9 years ago

With these problems on HMO's and the looming need for more rooms to be available as these claimants will probably not be able to afford the 1 bed flats etc they presently are occupying;  can you see many LL buying up big houses and converting to HMO with ALL the attendant costs when the LHA room rate is something pathetic like £67.00 per week.
I worked out the figures for renting a room for viability as lodger.
I would charge £150.00 pw
This is £7800.00 per year
Now subtract the loss of Single Persons Discount; which in my case is £325.00
This means the net rental income would be £7475.00
Divide this by 52 weeks
£143.75
Divided by 7 days
=£20.53
Divided by 24 hrs = £0.85 per hr!!
Now factor into the equation increased usage of utilities, domestic consumables.
Also loss of privacy.
Having their mates sometimes in the property.
All this is on £150 pw.
Now they only receive £67.00 per week LHA allowance
That works out at £60.75 per week
£8.67 per day
£0.36 per hr
No one in their right mind is going to take these claimants on.
A 4 bed hose would only bring in just over £1000..
I am sure a 4 bed house would rent out to a family without any HMO conversion.
Anyone who has a B & B will make a killing as that is the only accommodation that will be available to them.

Paul Haines

22:15 PM, 24th January 2012
About 9 years ago

I had a similar problem in Liverpool which turned into a bit of a saga.....so, are you sitting comfortably?

I normally let my 3 bed terraces to 3 sharers, but on this occassion I rented to 5 friends, so had 5 people living in a 3 bedroom house (2 couples and 1 single) who all moved in as a group under a single AST and agreed to pay the council tax for the property, as it was my expectation that they were liable.
 
Unknown to me, when they went to register for council tax they were told by the council that they were not liable for council tax at all, it was the landlord (i.e. me) because they were living in a HMO. Without my knowledge, an inspector was sent to my property to meet tenants and confirmed that the house was an HMO and submitted a report to that effect. I was informed that I needed to register my property for in Liverpool as an HMO.
 
Don't know about other city councils, but they seemed to employ 'muppets' on the front line in Liverpool. Incredibly these people claim to know it all, but actually know very little. 
 
So duly I tried to speak to the council, and as usual soon come to the conclusion that they are totally clueless. I spoke to the council to discuss registering the property as an HMO. I was informed of an exhorbitant fee to register, and was told that I was incredibly lucky not to have received a whacking fine as a result of being an illegal unregistered HMO landlord. They duly sent me an invoice and a huge war and peace style application form.....fortunately, as I can actually read and comprehend .....I did not need to get as far as page 147, as clearly it stated on page 1 that you only need to register your property if it is 3 storeys or more.....
And my house is only 2 storeys!!

So what about the council tax liability.....ah but they have a report from their inspector saying that my house is an HMO and the report stated:
It had 5 occupied bedrooms - 'strange' I said 'as it only has 3 bedrooms'
All the bedrooms had locks on them - 'strange' I said 'as they do not'
The tenants pay rent for exclusive use of their rooms - 'strange' I said 'as the whole house is let to the whole group under a single AST'  

At this point I had to question if they had visited the right house!

As a Landlord, I needed to understand issues of liability when renting a property. I quizzed various people as to what constituted an HMO at the council office I visited and got some very amusing replies - at one point the manager was called to give me a 'definitive' definition after I tied the first person up in knots (my experiences of the managers is that they also know diddly squat, but they just try to say it with more authority).

So I asked 'how do Liverpool city council define an HMO?'
Answer 1. Any house with more than one person in it.....
'OK, so if I rent a house to 2 people is an HMO'
Answer 2. Yes
'So every 2 bedroomed apartment rented in Liverpool with 2 people in it is an HMO'
Answer 3: 'Errr....No, it must be 3 people'
'So if I rent a house to 3 people it is a HMO?'
Answer 4: Yes
'So if I rent a house to a family of 3 people is it a HMO'
Answer 5: Err...No. Well it depends if they are related or not
'So I need to ask if they are related? What constitutes a relation?'
Answer 6: Husband, Wife, Brother and Sister
'So what about co-habiting couples'?
Answer 7: They are treated like a married couple.
'OK, so if I let a house to 3 friends - I need to ask if any of them are sleeping with each other in order to assess their liability for council tax'
Answer 8: I will just get my manager
'I was trying to find out what Liverpool City Councils definition of an HMO is.
Answer 9 (Manager): Its very simple, if the tenants share any facilities it is an HMO
'Facilities, such as....?'
Answer 10: Kitchen, toilet etc
'So if I rent a 3 bedroom terraced house to 5 people, it needs to have 5 kitchens, 5 bathrooms, 5 living rooms and 5 dining rooms in order for it not to be an HMO?'
Answer 11: Errr....yes

At this point I lost the will to carry on and left.

Anyway, I appealed against their decision to classify my property as an HMO. Unfortunately an independent body that deals with appeals wrote to say it would be 5 months before it was looked at becaue they were so busy....now there's a surprise!!

So I had tenants who would not pay council tax because the were told they were not liable. LCC telling me my house was an HMO - despite the inspector's report clearly showing she had either gone to the wrong house or had been half-cut when there, and the people at LCC being totally incapable of telling me a definitive definition of council tax liability and what constitutes an HMO.

I was therefore constantly sent demands for overdue council tax.
I entered into much correspondence with the council for which I did a bit of research. Now after looking at Manchester and Sheffield city council websites and other sites all became clear (obviously the Liverpool CC website was useless).

The definition of an HMO for registration purposes, and the definition of an HMO for council tax liability purposes are 2 totally different definitions!! Unfortunately no-one I could find at Liverpool CC knew that. Also there was a point of law that any group occupying a whole property under a single AST were deemed to be a single unit for council tax liability purposes.

So it was all very simple in the end, the house was not an HMO for council tax or any other purposes, and it did not matter if the tenants were married or even just sleeping together, if they were brothers, or second cousins twice removed or whatever. It didn't matter if the house didn't have 3 kitchens or 5 toilets, and it didn't matter if there were 1,2,3,4 or 5 people in the house. IT WAS NOT A HMO!!

So I sent all the details, and references to other council websites and the points of law to Liverpool CC and the decision was reversed.

So how many hours do these people waste by not having basic knowledge. How many people do they frustrate?

The silly thing was, by the time Liverpool CC had sorted it all out the tenants had moved out and back to Spain, so the chances of getting the council tax for that property was close to zero. So how much money do they waste as a result of their incompetence?

I believe that LCC had decided that they were not happy with the level of housing benefit they were dishing out, and so privately had a campaign to shift liability away from tenants to landlords where possible. This resulted in untrained and ill informed staff making stupid decisions as the above illustrates...

Ben Reeve-Lewis

9:37 AM, 25th January 2012
About 9 years ago

Well PV, I have to say I sat here laughing tears at your reply. Not at your expense but a laugh of recognition at the ridiculousness of it all.

I work for a local authority in London and am also a trainer of housing law for the Chartered Institute of Housing. Some months ago I read a similar query on Property 118 and told Mark I intended to write the 'definitive defintion'...like that manager you spoke to. I began by finding the definition set down in the legislation itself and then looked on government websites. All was going ok until I started to google around different council websites and began feeling like I had seriously misunderstood the basics.

So I made a list of questions and decided on the Monday to call my own council's HMO Licensing team, who I work closely with and get the 'Definitve definition' from guys I have known for years and go for a pint with. What I was told made me email Mark back and tell him I couldnt write the article as nobody seemed to agree on even some of the basic points.
@Definitve:disqus 
My own understanding, for what its worth (and I admit I dont stand confidently behind any of this these days) is that once there are 3 persons occupying a property who are unrelated then it is offically an HMO but it only becomes eligible for mandatory licensing once there are 5 or more people and 3 floors and further to that, the landlord is only elgibile to pay council tax on an HMO if each occpaunt has a seperate tenancy agreement. If it's a joint tenancy then the tenants should pay.

One difference of opinion that I encountered when I was researching for my article was that some council's, but not all, counted a married couple as effectively a single person when sharing with others, so a property would only be considered to be occupied by 3 people if there was a married couple and 2 unrelated others.

I also seem to recall that the legislation states that an annex can count as a floor of the building if it is connected to the main building by stairs but my team told me that was rubbish, it was only if the dweller in the annex had to enter the main building to use facilities.

Anyway, I finally solved it all. I made an appointment with my Doctor and got some tranquilisers and a picture book with some Bunnies in it to look at whenever it occurs to me to ask about HMOs

16:29 PM, 25th January 2012
About 9 years ago

Very funny both of you; but what an appalling situation that is going to be visited on LL and TRO's when the shared room rate age kicks in ; in April.
I think hymn book ; all singing from springs to mind.
Perhaps Mr Shapps would bring some actual definition to what the hell is going on.
This as it seems there are a lot of confused housing professionals out there.
If they are confused what chance does the poor old little landlord stand to know what to do regarding his business.

Ben Reeve-Lewis

16:55 PM, 25th January 2012
About 9 years ago

Yeah absolutely Paul. All joking aside I think it is a major but largely hidden issue that has dreadful consequences for landlords caught by the misinformation and tenants who may be being wrongly charged counicl tax.

For once I dont think it is Shapps's issue but should be laid more at the feet of the Minsitry of Justice, Communites and Local Government and maybe even the HCA.

Maybe Mark P118 should mount a campaign.

Shared room rate is already in by the way, January 1st

matchmade

17:30 PM, 25th January 2012
About 9 years ago

I feel fortunate that my local authority agrees with the definition that a licensable HMO is three storeys and five tenants, and that the general definition of an HMO as three or more unrelated people isn't really of interest to anyone.

However I'd missed the subtlety that if you have individual tenancy agreements then the landlord is liable for the council tax. I pay the council tax anyway on my shared houses, just because I've lost count of the times someone has moved out and failed to transfer the bill to their replacement, which means the bill gets left unpaid and the house receives a court summons. It's just simpler to conclude that tenants are useless as regards bills, handle it oneself and get them to pay a fixed amount every month on top of the rent to cover the bills. I always over-estimate the bills to cover myself in case someone starts running the central heating all day, and I settle up and reimburse any overpayment when someone moves out.

It's all yet more hassle but worth putting up with because often a houseshare is the only way to make a large Victorian house viable. Also, if you lose one non-paying tenant in a houseshare, at least the other four or five are paying, whereas if you take a single family in a large house, all it needs is for the main wage-earner to lose his or her job and as landlord you are stuffed. Voids also tend to be higher on single ASTs, whereas rent income is more reliable with a rolling-occupancy houseshare.

I learnt to avoid licensable HMOs like the plague about ten years ago when I tangled with the nightmare that is Oxford City Council: they wanted to destroy my lovely old Victorian rented houseshare on a single AST with fire doors, a virtually-rebuilt staircase, fire escape signs and the whole paraphenalia of bedsits; they even started talking about compulsory handbasins in every room which I thought died out in the 1980s. To my mind licensible HMOs are just not worth the effort: either stick to two storeys or go the whole hog and convert the house into bedsits, if you think there is a market for it.

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