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What landlords need to know about confusing letting rules

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Sat 19 Oct 2019

What landlords need to know about confusing letting rules

andlords are risking hefty fines for breaking complex laws on house shares, with more than 100,000 homes in London alone not having the right licence.

Up to three-quarters of the 138,500 properties in London are lacking the house in multiple occupation (HMO) licence that they should have, according to figures from local councils. HMOs are subject to stricter letting rules than other rental properties and some require a licence if they are let to three or more people.

HMO licences cost from £600 for five years, but can be as high as £1,250, in places like Newham, east London.

Rules on HMOs “have become so complicated that many people, unintentially, have found themselves in breach and potentially face significant penalties”, says Richard Tacagni of London Property Licensing, a consultancy which collated the figures for Safe Agent, a lettings accreditation scheme.

“There are lots of problems with compliance around the country,” says David Smith, a housing lawyer and developer of policy at the Residential Landlords Association (RLA).

“A lot of people haven’t realised that rules have changed relatively recently. Local authorities haven’t done a lot to flag it. Some are accidental landlords who haven’t realised there is such a thing as an HMO.”

Landlords who break HMO rules face fines of up to £30,000, having to repay their tenants’ rent for up to a year and criminal prosecution. Smith says he sees cases every day of the week where landlords fall foul of HMO rules because their tenants have illegally sublet a property. “Local authorities are quite unsympathetic,” he says.

Opportunists are also taking advantage of landlords’ ignorance. So-called rent-to-rent scammers promise landlords guaranteed long-termrent if they allow them to sublet rooms to young professionals — often after dividing a property’s living room into bedrooms. “They don’t tell people what they are going to do with the property, or they tell them ,‘Don’t worry about a licence,’ or they tell them they’re going to get a licence, but they don’t,” Smith says.

He recently acted for a landlord who was fined by Westminster City Council after letting a property to eight sharers through a rent-to-rent company that did not get the necessary licence. A Times investigation last month found that hundreds of illegal home-share conversions were being advertised for rent online, apparently without a licence.

Tacagni says that landlords often wrongly believe that if they have passed the property on to an agency they are no longer legally responsible for it. In two other cases, Smith acted for elderly homeowners who were fined after taking in three or more lodgers, inadvertently turning their homes into HMOs. “These were not bad landlords. They just wanted some company,” Smith says. The fines were waived but they had to pay legal fees.

“It’s not helped by the fact that many local authorities are finding the rules hard to understand,” Smith adds.

The government introduced HMO licensing to England in 2004 to crack down on criminal landlords exploiting vulnerable tenants. Since October 2018 you need what is known as a mandatory HMO licence to rent almost any home to five or more people who are not from one family. HMOs, of which there are an estimated 220,000 across England, must also meet standards on room sizes and safety. Previously these rules applied only to houses of at least three storeys.

It is becoming more common for councils to require an “additional HMO licence” to let to three people from more than one household. Up to 55 councils have such schemes, up from 46 last year, according to the RLA. “That could be a three-bedroom flat let to three students, or a two-bedroom flat with a couple and their friend living there,” Tacagni says.

Tacagni’s consultancy asked all 33 London boroughs for the estimated number of properties that should have a mandatory or additional licence, based on data including council tax and voter registration. It compared this with the number of properties on each council’s register of HMOs.

Separate freedom of information requests by the RLA to councils across England show long delays to the processing of licence applications in some areas. In Bristol it takes two years, in Gedling, Nottinghamshire it’s one year, and in Eastleigh, Hampshire, it’s 270 days. While an application is being processed there is “no way to check” whether a landlord or their agent has applied, Smith says.

“Tenants are being put at risk,” says Isobel Thomson, the chief executive of Safe Agent. “The system isn’t fit for purpose and councils are drowning in paperwork. If the compliance rate for HMO licensing schemes is only 25 per cent, how can they be effective?”

The rules
Any home in England let to five or more people who are not from one household must have: an electrical safety check every five years; a mains-wired fire and heat alarm (depending on the property’s size and layout, it may also need internal fire doors and emergency lighting); and a notice somewhere in the property showing the landlord’s name and address.

Flats in purpose-built blocks are exempt. In about 50 council areas, homes rented to three or four unrelated people must also meet these standards.

Rules vary, so check with your council’s compliance officer for houses in multiple occupation. The London Property Licensing lists rules for all London boroughs.