Profile incomplete
9:23 AM, 13th December 2022, About A year ago 34
Text Size
For mitigation against the worst implications of the (expected) Renters’ Reform Bill for my Student HMOs, I am mulling a business model change to…. Leasing individual rooms on a fixed-term basis to the PARENTS rather than the occupying students….Will this work?
Here’s my thinking so far…
Lease terms would allow the room to be licenced for residential use by one member of the same household who is enrolled at the Uni with the main purpose being their term-time accommodation (only). The occupying student would need to provide an affidavit stating that the parental home will remain their main residence which they will return to at the end of the fixed term.
The occupying student would have an agreement, on a licence basis, only with their parent, the leaseholder, not directly with (me) the freeholder. It would be basically a Rent-to-Rent arrangement with someone whose interests are wholly aligned with the student occupant and who would otherwise be acting as guarantor in an AST scenario.
On Planning: Use remains “Residential”, and with multiple occupation in the building as a whole; so this is an HMO as defined in Town & Country Planning Act, and the existing C4 Use Class is still the most appropriate, there’s no change required.
On Housing Act (HA): the multiple occupants of the property will all have their main residence elsewhere, i.e., their parental homes (and that’s in writing), and the contracts are not between freeholder and occupants, so: (a) ASTs as defined in HA are NOT required or naturally created, and (b) this is not an HMO as defined in HA either as there are not 3+ persons for whom it is their main residence. If any AST is inadvertently created, that would be between the parent (leaseholder) and the student; the freeholder is not on the hook.
On Council Tax vs. Business Rates: My initial research shows that so long as the Planning Use remains Residential, the Council would not have a good case at all to call in VOA and force the freeholder onto Business Rates and there is Case Law to support that position – but a fair chance the Council might try that if the matter came to their attention.
On general management and maintenance: Logical and prudent to stick to all the normal HMO standards with gas safety, EICRs, smoke alarm test records, maintain and manage to all the normal HMO standards.
Mortgage: Mortgage conditions always state properties must be let on an AST basis, so this will only work on mortgage-free properties.
Deposit: There’s no AST, it’s more of a Rent-to-Rent contract, so any Deposit paid to freeholder by the parent does not need protecting. If an AST is inadvertently created then that is between the lease-holder parent and student, not the freeholder
Collecting Rent: Should not be any harder to collect than with current student fixed term ASTs where the parents act as guarantor.
On HMO Licencing: An HMO Licence would not strictly be required, but likely best to keep paying the licence fee, (a) allows for quick switch back to ASTs and a standard business model if problems arise, and (b) not to draw the Council’s attention by having an unlicenced C4 property.
On Marketing: Would be more limited as some advertising sites do specify that offers being on AST basis is a condition of business.
Please help fill in the gaps, what have I missed?
Anyone else with mortgage-free Student HMOs thinks this might be a workable idea?
Thank you,
Simon
Richard D.
10:36 AM, 17th December 2022, About A year ago
Reply to the comment left by Chris Bradley at 17/12/2022 - 07:18If you have a joint and several contract with guarantors then anybody staying will make the whole group liable to continue paying, or if you want you can go after the one individual who has stayed for the full rent. The threat of this will stop it happening. Although staying on is a concern I don't see it happening, in reality we have always had this worry because if they stayed past the end of the contract you would need a court order to evict, which would be months. The real issue for us is leaving early and large voids.
Richard D.
10:44 AM, 17th December 2022, About A year ago
Reply to the comment left by Christopher Lee at 17/12/2022 - 08:16
https://england.shelter.org.uk/professional_resources/legal/renting/introduction_to_security_of_tenure/joint_tenancies
I don't like to quote shelter, but yes one can.!
NigelH
15:30 PM, 18th December 2022, About A year ago
Maybe all student landlords need to offer 12 month tenancies, but with the last month being 'free'. This way, those that want to leave early can do so, and if they do all leave, we are not liable for the Council Tax in what would have been a void period.
Grumpy Doug
10:38 AM, 19th December 2022, About A year ago
Reply to the comment left by at 18/12/2022 - 15:30
I do something similar and and been doing so for some time. In my case I offer August as a "flexible" month at start of tenancy and then finish as normal at end July. The issue at hand, however, is that this is still a fixed term tenancy which is due to be banned by Gove's proposal.
NigelH
11:53 AM, 19th December 2022, About A year ago
Reply to the comment left by Grumpy Doug at 19/12/2022 - 10:38
Yes, it needs more thought as to how it can be offered, but the principle of a higher weekly rent but a 'free' month of August could be some mitigation of our costs.
If you do this already, how do you overcome the apparent higher cost when you advertise?
Grumpy Doug
12:31 PM, 19th December 2022, About A year ago
Reply to the comment left by at 19/12/2022 - 11:53I've always been 11 months anyway, with August available for cleaning, repairs, maintenance etc. As a house gets really up to scratch, relatively little needs doing - typically a deep clean and a day of sorting out bits so where feasible, I offer a flexible August whereby rooms can be taken on a pro-rata basis. Contract starts 1st August so the added benefit is nil council tax. I typically end up with about 30 - 50% occupancy but it helps with the bills
student landlord
13:51 PM, 19th December 2022, About A year ago
These latest readers comments about offering a free month are anecdotal but don’t address or mitigate the governments proposal to end fixed term tenancies. Unless any workable solutions are proposed the only potential solution (despite all the obvious and previously discussed shortfalls) is to require tenants to give 12 months notice when signing the tenancy agreement. Again, please don’t reply with criticisms of my suggestion, I know it has many implications and faults. Instead try to come up with anything better to help our community!
Yvonne Francis
17:11 PM, 19th December 2022, About A year ago
Before anyone else posts any more fruitless suggestions, from fixed tenancies to twelve months notice, please could I suggest you read the Renters Reform bill. It will mean for the PRS Periodic Tenancies ONLY with two months notice to leave, and all existing tenancies twelve months after the implementation of the bill will be invalid and revert to a periodic tenancy overriding any tenancy you have.
Simon: What worries me about your suggestion is even if a parent does not reside in the property how could you make a fixed term with them?. You can't make a fixed term with anyone or have I missed something?. Have you consulted a solicitor? Any schemes to get around this bill unless watertight would result in £20,000 fine from my council
I have in an earlier post suggested the possibility of Universities running these houses in a rent to rent situation. Brookes University, Oxford have confirmed to me that this would work. I still have my doubts if Brookes are right, and it would be less money but may be worth it for the future. I would be very reluctant but you could turn to professionals. OR, put up the rent and expect a void period, but the whole tenancy would be uncertain. Perhaps less money and more certainty may be best?
Write to all the relevant MP's is the only advice I can give.
I'm afraid the glory days of student lets, unless something radical will happen, is well and truly over. From all I have read it's also a way to get us 'off the streets' as it is delicately put, but with no notion of how much the accommodation is needed or how much students like the independence of these houses.
Simon F
19:08 PM, 19th December 2022, About A year ago
Reply to the comment left by Yvonne Francis at 19/12/2022 - 17:11
Renter's Reform Bill does not have all leases in scope, only those for people using a property as their main residence. My suggested scenario is very much the same as your one with the Uni on that point. Ideally, the parents would offer the room to their offspring on a licence basis without an AST, but even if they did inadvertently create a tenancy with the occupier it's them as the leaseholder, not me the freeholder, who would need to comply with Housing Act, Renters Reform Bill, etc. So they, the leaseholder parent, won't be allowed to demand rent for a fixed term from the occupying student, but can be liable to pay it for a fixed term to the freeholder.
I rather like your idea of rent-to-rent with the Uni (ours doesn't do that at present) - we can't possibly know if Brooke's are right until the Renter's Reform Bill is finalised and passed. But if they are, it would be best if that would be in conjunction with a landlords' cooperative as the Uni's partner for management (esp with any Uni that doesn't currently have anything setup). I will be putting that idea forward to our local landlords association to (a) build a proposal, and (b) approach Uni of Portsmouth with it, as an organised group of landlords. It doesn't have to be a lot less in rent if it doesn't cost the Uni much to administer, so key is to get organised locally, and make it very easy for the Uni.
Yvonne Francis
10:48 AM, 20th December 2022, About A year ago
Reply to the comment left by Simon F at 19/12/2022 - 19:08
Hi Simon
The difference I see from my 'rent to rent' with Uni's, unlike parents in your idea, is the possibility that our houses would be considered University accommodation who abide by regulated codes simular to the PBSA. Both are consequently excempt from the bill.
Thank you for posting this issue. It needs discussion as its the most pressing problem I, for one, face.