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Licenced To Fill Bedsit Properties

Sep 4, 2008
Since July 2006 landlords in England and Wales who own larger houses in multiple occupation - basically three storey properties let out to groups of unrelated people - have had to apply for licences from their local councils. If they do not do so they could find themselves fined up to 20,000 pounds and unable to collect their rents.

In Scotland landlords already have to licence HMOs. And from April all Scottish landlords will require a licence, no matter what type of rental properties they own.

In both Scotland and England and Wales, licensing of HMOs has been introduced primarily, say the legislators, as a safety measure particularly aimed at reducing the fire hazard in student digs. It is just the type of larger three storey properties typically rented as student bedsits that pose the biggest risks, they say.

However, the licensing of all landlords in Scotland has been introduced in the context of curbing anti-social behaviour by tenants. And there are some elements of this in the licensing of HMOs in England and Wales as well.

It was the Housing Act 2004 which brought in the requirement for HMO licensing in England and Wales. Other Housing Act measures included the introduction of the controversial Home Information Packs that from 2007 will be needed before properties can be sold, and the requirement that landlords participate in deposit protection schemes - as from next October.

Houses in multiple occupation are already subject to special rules and in some areas registration schemes, while many local authorities and universities already run voluntary landlord accreditation schemes. Local authority environmental health departments have always had powers to require work to be carried out to make sure that HMO properties are adequate and safe. However, the Housing Act provisions which come into effect next month will require all those properties within the statutory definition to be licensed.

Licensing will be in the hands of local authorities, which appear to be in various stages of preparedness. Some have yet to set their level of fees. Brighton & Hove, for example, has said it will set its licensing fees on 30 March and that it 'hopes' to have application forms ready very shortly after that date.

It is clear there will certainly be variations from local authority to local authority, especially on the level of fees, but also the promptness of inspections and other assessments.

All authorities will licence HMOs that fall within the statutory definition, some will also be using 'additional' licensing powers to licence other HMO properties. Most, it seems, have enough on their licensing plates for now and will defer any decision on additional licensing until later.

Leeds, for example, has said it intends to consider whether to apply additional licensing in a year's time when it has dealt with all 8,000 HMOs in its area that its estimates will be subject to mandatory licensing. Meanwhile, Southampton has agreed to introduce additional HMO licensing, but when mandatory licensing is up and running.

Rushmoor Borough Council said it is planning to consult landlords, tenants and other interested parties on whether to license other types of HMO. 'We would prefer to license all properties that currently have to be registered, including two storey properties', it said.

Although the licences local authorities will issue are for properties rather than landlords, there will be three prongs to the licensing process, two involving landlords themselves. First local authorities will assess whether applicants are 'fit and property' to be HMO landlords and will have to be satisfied about the management standards they will apply. Later, or in some cases more immediately, will come inspections to ratify landlord statements that the properties themselves are fit for purpose. As licences will state the maximum number of people each property may house, this will include an assessment of the suitability of amenities for the intended number of tenants.

When it comes to management standards, licensed landlords will have a duty to take reasonable steps to ensure that tenants are not causing problems within the boundaries of the property through anti-social behaviour. Local authorities may in some instances put conditions on licences concerned with anti-social behaviour.

The Government has specified minimum amenity standards, setting out the requirements for kitchens, bathrooms and toilets in HMOs. Local housing authorities may use their own amenity standards if they are equal to or higher than the minimum standards. This means landlords will have to contact their local authorities to confirm the standards to be applied in their own areas.

In the case of properties with insufficient amenities for the number of tenants the landlord wishes to house, local authorities will include conditions within licences stipulating that the required extra amenities are provided within a specific time. Alternatively they could grant licence for lower maximum numbers of occupants. In some instances they may even conclude that a licence cannot be granted until the condition and amenities within a property are improved.

The new Housing Health and Safety Rating System, which applies to all residential property, also comes into effect next month. When licensing HMOs, local authorities will have to satisfy themselves that there no 'category one' hazards within properties. They may carry out HHSRS inspections to verify this prior to granting licences or at a later date.

HHSRS covers 29 different areas of risk, considerably extending the current nine point housing Fitness Standard. Assessment of these risks will culminate in a 'hazard rating' applicable to each property. Within each area of risk possible harm or adverse health consequences are categorised according to the perceived severity, and scored accordingly. There are four classes of harm, of which 'category one' are the most severe. These are risks that could lead to death, permanent paralysis below the neck, regular severe pneumonia, or 80 per cent burns or worse.

Landlords who already belong to local authority accreditation schemes are likely to find the licensing process a little easier since in many instances they will find themselves 'passported' into the licensing scheme and in some cases will receive discounts on councils' fees.

Properties caught by the mandatory licensing requirement are those of three or more storeys with five or more occupants who form two or more households - households being partners and relatives living together - using shared facilities such as kitchens and bathrooms.

They do not have to be houses but can be part of buildings let to five or more unrelated people even if the tenants have signed a joint tenancy agreement. Attics and basements are included in the storey count if they are used as living accommodation.

Although the intention of legislators was to cover older properties, the statutory definition of HMO properties requiring a licence will also catch some newer properties, such three storey town houses if rented to five or more people.

As well as expecting to have to prompt some landlords to apply for licences, some local authorities are expecting to receive applications from landlords whose properties are not covered by the licensing requirement. This is in part because there are two definitions that apply to HMOs - the wider one that applies to all HMOs covers:

* entire houses or flats let to three or more tenants from two or more households who share a kitchen, bathroom or toilet;

* houses converted entirely into bedsits or other accommodation that is not self contained, let to three or more tenants who form two or more households and who share kitchen, bathroom or toilet facilities;

* converted houses containing one or more flats which are not wholly self contained, occupied by three or more tenants who form two or more households and who share facilities; and

* buildings which have been converted entirely into self contained flats but the conversion did not meet the standards of the 1991 Building Regulations and more than one third of the flats are let on short term tenancies.

In each case the property must be used as the tenants' only or main residence and it should be used solely or mainly to house tenants. Properties let to students and migrant workers will be treated as such tenants' only or main residence, and the same will apply to properties which are used as domestic refuges.

All of these properties could be subject to mandatory or additional licensing requirements, but not all are. It is only those that are of three or more storeys with five or more occupants that in fact require a licence.

Recent comment appears just to have woken up to the idea that licensing fees will at some point have to be passed on to tenants by way of increased rents.

Fees are supposed to do no more cover the costs of licensing and the hope was they would be standardised. However, those fees set so far vary in structure and amount, and in many cases they will total 1,000 pounds or more over a five year licensing period. In some cases, but not all, there will be refunds or reductions where properties fall out of the HMO mandatory licensing definition during the course of the licence. However, licences will not be transferable and where properties are sold as HMO going concerns, the new owners will require new licences of their own.

As examples of different approaches, Derby City Council said it hasn't yet set its fees, while Westminster City Council has said the 60 pounds per letting room or 60 pounds per flat it currently charges for HMO registration will be increased when licensing is implemented in April.

Bedford Borough Council is to charge 150 pounds per letting (so 750 pounds for an HMO containing five tenants), while Liverpool City Council has indicated that it will charge 945 pounds for a five bedroom property. Runnymede is to charge 560 pounds per property with a discount of 65 pounds for additional properties; Plymouth will charge 695 pounds per property with 105 pounds discount for additional properties; Wandsworth 1,100 pounds for a five bedroom property with up to 400 pounds discount for early application and previously accredited properties; Eastbourne 833 pounds per property; and Worcester 600 pounds plus 60 pounds for processing applications (and penalties of up to 100 pounds for incomplete applications). Oxford will charge 800 pounds per property, and Salford 473 pounds with a 47 pound discount for accredited landlords.

Private landlords in Scotland now have until the end of April to register with their local authority under the Antisocial Behaviour etc. (Scotland) Act 2004. They would have had to have done so by 31 March had not the date had to be put back because of IT problems with the registration website. After 30 April unregistered landlords will face having their rental income withheld or a 5,000 pounds fine.

Registration will cost 55 pounds per landlord and 11 pounds per property.

To place landlords on their registers, local authorities will have to be satisfied that they are fit and proper to let property. Authorities can take into account any relevant information including: any relevant convictions, particularly in relation to fraud, violence or drugs; any evidence that the applicant has failed to take adequate steps to deal with antisocial behaviour in his or her properties; any evidence that the applicant has failed to comply with the law relating to housing or letting, including management, money and physical issues; and any evidence that the applicant has practised illegal discrimination in any business activity.
About the Author
This and much more landlord information is freely available at Residential Landlord, the complete online resource for all UK property investors. For information on investment property overseas visit Fly2Let another free online resource for UK property investors.

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