HMOs have been well-known as a strong investment type for some time, but what we know about HMOs has now changed.
From October 1st 2018, the UK government has instated new HMO regulations and requirements that change the way we consider investments of this type. An altered definition of an HMO under the Housing Act 2004 means how you manage your investment could change, so it’s time to sit up and take notice.
No one is going to make you compliant, it’s up to you to make sure you follow these new regulations or you could incur fines.
Understand them correctly, though, and the changes to HMO regulations should not cause you any worry. Here’s all the information you need if you’re looking to get involved with an HMO…
What We Already Know About HMOs
Although there have been changes in legislation in recent times, that doesn’t dismiss what we already knew about HMOs, so let’s get into the key aspects of an HMO and what hasn’t changed.
An HMO will still offer the benefits and opportunities investors in the UK have become so used to. The financial investment benefits and the way in which you receive rental income from multiple tenants haven't changed. It’s still the good old HMO that’s been offering consistent yields all these years.
As we've covered in a previous article, investing in an HMO has many benefits, from higher financial reward to reduced risk.
So, now we know the consistencies of the regulations around HMOs, what has changed?
A New Definition
The first major change in HMO regulations comes in the alteration of the definition.
HMOs might act the same when it comes to the bottom line of your investment but they have a brand spanking new identity to boast. The new definition is as follows:
“An HMO will be any property occupied by five or more people, forming two or more separate households.”
You might be asking, where is the change here? Wasn’t that the classification for an HMO all along? Well, not quite. Here’s the original definition:
“An HMO is a property occupied by 5 or more people, forming two or more separate households and comprising three or more storeys.”
So, the key difference in these definitions is the exclusion of the number of storeys necessary to classify as an HMO. Under the new definition, HMO licences are applied to properties of any kind, regardless of the number of storeys.
How Does This Affect Landlords?
You might now be asking me “what’s the big deal about the number of stories?”. I’d answer, “quite a lot”. With this seemingly small change in the HMO definition comes significant ramifications for current HMO landlords.
This change in the structural DNA of what makes a rental property an HMO means a couple of things. Let's look at who it affects and who it doesn’t affect:
Firstly, current HMO landlords (those who operate a property with a licence already in place) don’t have to do anything just yet - not until their current licence expires. Your next application process for an HMO licence won’t have changed.
Second, those operating a property that, in the past, didn’t require an HMO licence will now have to apply for an HMO licence through your local council. This should have been done before 1st October 2018, so if you’re operating one of these properties without a licence, you can incur fines for not being compliant.
So, now we know how the ‘three-story rule’ affects your HMO investments, what else do these kinds of landlords need to keep in mind?
New Compulsory Room Standards
It’s not just the structural stipulations of HMOs that have changed as of 1st October. The regulations concerning the inner workings of the property have also seen an update, so, landlords take note…
According to the latest rules, landlords will have to stop letting rooms that are considered to be below standard. Let’s get into these room standards:
First, rooms under 4.64sqm now cannot be used for sleeping by any person over the age of 10. Rooms that have previously been found suitable for occupation, but now fall below the prescribed standard, will no longer be capable of being let separately as sleeping accommodation.
If these standards are breached in a property that carries a valid HMO licence, the landlord could be prosecuted by the local authority or receive a civil penalty under the new Housing and Planning Act 2016 provisions.
It’s worth noting that landlords also need to comply with their local council’s HMO licencing standards, on top of the nationally prescribed HMO regulations. These local authority requirements might include compliance with minimum room sizes and amenity standards such as kitchen appliances, etc, as well as conditions related to other factors, such as refuse disposal and bin storage.
So, What Can You Do to Adapt?
As an HMO landlord, or even an aspiring one, you need to keep yourself up to date with the latest regulations to adapt your practices to fit the current legislation.
These changes have been talked about for a while now so you have no excuse for not being compliant. However, if you're struggling to understand the new rules or you just aren't quite sure how they might apply to you, contact us. We, at The Heaton Group, always keep our finger on the pulse of industry changes and we'd be happy to let you know how investing with us can help you stay compliant with any changes in regulation.
Knowledge isn't all we provide, though. When you invest in an HMO with The Heaton Group, you have access to our 360 property management which takes care of the ‘landlording’ for you, leaving you to relax and reap the rewards of your investment.
Along with 360 property management, the quality of our HMOs means that, when you invest with The Heaton Group, you don’t need to worry about keeping up with the latest regulations on property standards.
If you’re unsure about how these changes in HMO regulation apply to your mortgage and insurance, it’s a good idea to contact your providers to discuss with them.
There’s no need to be hesitant about these changes. If you read up on the subject and make sure you’re compliant with the new HMO regulations, this kind of property can still be a great investment opportunity that delivers high rental returns.
If you want to learn more about how becoming an HMO landlord with The Heaton Group is one of the best investments you’ll make, or if you have any questions about the new changes in HMO regulations, get in touch with us.
If you’re considering an HMO for your next investment opportunity, download our free eBook, How to Invest in Property the Easy Way: Strategies for Success and What to Avoid.