Government prepares to change rules on houses in multiple occupation

Overview: proposed licensing reforms for houses in multiple occupation and residential property

On Tuesday 18th October, the Government launched a consultation on extending the types of rented property that require licensing as a House in Multiple Occupation (HMO).

The proposed legislation will only affect properties in England.

There are two main planks to the proposed legislation:

1. Extending the scope of HMO licences to include all properties housing five or more tenants from two or more households, regardless of the number of floors in the property
2. Make a standard minimum room size of 6.52 square metres a requisite of granting the licence

Following a successful consultation, the government estimates that the proposal will enter the law books sometime in 2017, subject to parliamentary approval.

The government’s reasons for making this change to HMO licenses is for the much vaunted reason of protecting those at the lower end of the social scale from exploitation.

This new law could have a significant impact on private rentals to students.

What is the proposed legislation?

The proposed change would remove the storey rule, which means that single and two storey houses occupied as HMOs would fall within mandatory licensing requirements. The new legislation would mean that any rental properties that housed five or more people from two or more households would require an HMO licence. Currently licences are only mandatory for properties of three storeys or higher, unless local council regulations specify otherwise.

In order for HMOs to be granted a licence, the proposed legislation suggests that each bedroom within the property would need to be a minimum size of 6.52 square metrres.

This has been included in the legislation to put room sizes in line with the existing overcrowding standard, as stated in the 1985 Housing Act and to close a loophole in the law, which has enabled some landlords to let rooms that are far too small for an adult to legally occupy.

What happens when the proposal becomes law?

The consultation document says that once the law is on the books, landlords of properties that newly require an HMO licence would have six months to apply for a licence. No prosecutions would be levied during this time.

However, following the six months’ grace period landlords would face a fine of up to £30,000.

Landlords of houses that newly fall within the mandatory HMO licensing rules, but who currently hold licences for additional licensing schemes, would be able move their licence to the new mandatory one free of charge, through a process of passporting. However, new applications must be made through the mandatory national scheme.

The standard minimum room size would apply to all properties applying for an HMO licence, including those already covered by the current national mandatory rules.

Bedroom size

The consultation document states that it will:

“Amend schedule 4 of the Housing Act 2004…By inserting a new compulsory condition in every licence granted in England that local housing authorities are to disregard rooms of less than a prescribed size from being included as a room suitable for sleeping accommodation.”

The room sizes are described as a national minimum, not an optimal size and allows for local authorities to set higher guidance standards.
Minimum room sizes are described as:

• 6.52 sq. m for one person
• 10.23 sq. m for two persons

The size of the room would be calculated based on the floor space where the distance between floor and ceiling should be 1.5 metres. So for instance, a sloping area that accommodated a staircase would not be counted within the square footage and would be disregarded when deciding whether the room meets the prescribed size.

These proposals will only apply to rooms which are let to persons or occupied under a licence or a joint tenancy agreement, for example in a shared house.

Costs

The consultation document has suggested a cost to landlords of approximately £500 for the licence, which would cover the property for five years. Additional costs are forecast to occur in the first and sixth years (when landlords need to reapply for their licences).

When does the consultation close?

This consultation will last for 8 weeks from 18 October 2016, so it will close on midday 13 December 2016.

The survey covers the impact of the proposed legislation for populations that will be affected by the change, but does NOT cover the commercial interests of landlords.

You can read the full document here:
www.gov.uk/government/consultations/houses-in-multiple-occupation-and-residential-property-licensing-reforms

You may respond by completing an online survey at: www.surveymonkey.co.uk/r/LicensingHMOs

Purple Frog will keep its investors posted as we find out more about the new legislation.

Postscript

Local councils including Birmingham City Council are also in the process of completing their own licencing consultations and have powers to extend licensing as has already happened in large areas of Nottingham.