HMO Compliance Checklist: Inspections for Landlords

The buy-to-let (BTL) industry is booming, despite all the negativity seen in the press. With demand for rental property on the rise, HMOs can be an attractive opportunity. Landlords can benefit from regular income, but also enjoy the capital growth of the property in value. Before we turn to the HMO compliance checklist, let’s have a look at the basic regulations and market insights for HMOs.

HMO Regulations & Other Rules

For England and Wales, an HMO property means 3+ people living together, from 2+ different households. They must share facilities such as bathrooms, living rooms and kitchens and can also be referred to as ‘house shares’ or ‘flat shares’. A home is considered a large HMO if it has at least 5 tenants living in it[1].

What Landlords Should Know  – Reforms & Market Insights

Alongside existing HMO regulations, landlords also need to keep an eye on wider changes shaping the rental sector. The government’s proposed Renters’ Rights Bill is set to overhaul how tenancies operate in England. Among the headline reforms are the abolition of Section 21 ‘no-fault’ evictions, the move to more secure periodic tenancies rather than fixed-term contracts, and stronger rights for tenants to challenge unfair rent increases. While the Bill is still moving through Parliament, it is expected to pass into law soon, meaning landlords will need to prepare for a very different regulatory environment.

The HMO market, however, remains very valuable. Recent valuations peg the total housing stock across England and Wales at over £78 billion, with London HMOs making up a large chunk of that. Average values per HMO vary: around £293,000 nationally, though in London the average is much higher, in excess of £660,000.[2]

There are plenty of HMO regulations landlords must be aware of. These are regularly changing, too. HMO regulations range from minimum room sizes, to energy efficiency standards. Failing to meet these standards will result in heavy fines.

Now let’s have a look at the HMO compliance checklist that landlords should keep in mind when renting out their property to tenants.

1. Gaining a License

The first thing on an HMO compliance checklist should be the license. Do investors need to obtain an HMO license before renting out their property? This can depend on two key factors:

• If they’re looking to rent out a large HMO (a property for 5+ tenants, coming from more than 2 different households), then they will require a license. If they do, they will need to speak with their local council.
• Some councils have their own requirements for landlords. So, it is always worth checking with a local council to see if their requirements are different. Many local councils will require licenses for all HMOs, regardless of size.

Licenses can take time to be granted, so landlords should leave extra time to ensure they receive their license well in advance. Once passed, a HMO license is valid for a maximum of 5 years.

2. Minimum Bedroom Sizes

The second point on an HMO compliance checklist is to ensure that the property meets the minimum bedroom sizes[3].

• A person of the age of 10 or over: 6.51m²
• For a child younger than 10 years old: 4.64m²
• For 2 people of the age of 10 or over: 10.22m²

Local councils can have different understandings of standards of living. That means that the requirements for bedroom sizes can vary dependent on the district.

Property investors need to measure their potential properties carefully, and always check with the local council guidelines before converting. If a room size doesn’t meet the necessary requirements, they will not be permitted to rent out the room.

3. Minimum Energy Efficiency Standard

The minimum rating required on the Energy Performance Certificate (EPC) is rising. Currently, all rental properties must meet a rating of E for new tenancies and renewals[4]. If a property doesn’t meet this minimum, it will be deemed ‘un-rentable’ the landlord involved could be fined up to £5,000.

In case an investor hasn’t received an EPC for their potential or current property, it’s important to do this before letting it out. If the level is below E, they will need to conduct improvement works to increase the property’s energy efficiency level. Over the coming years, the minimum EPC rating will be pushed up to C.

A good EPC level can be a huge selling point for potential tenants. It should therefore be included on any letting advertisements. Also, a landlord must make a valid EPC available to their tenants free of charge[5].

4. Certificates and Safety Requirements

An HMO landlord must ensure that their property has the following:

• 1. An Energy Performance Certificate (EPC)
  2. A gas safety certificate
  3. Electrical installation condition report
  4. One smoke alarm per floor
  5. CO detectors in any room containing a fuel burning appliance

5. Planning Permission for HMO Projects

This is the final thing to inspect on an HMO compliance checklist. Once upon a time, landlords could convert a property into a small HMO without planning permission.

In today’s world, those interested in converting a property into an HMO must research the planning rules and regulations beforehand, by checking with their local council.

Whilst it may be the case that investors don’t need planning permission when converting a dwelling house or flat to an HMO property, they should contact their local council as different authorities can have different regulations.

Bridging Loans for HMO Projects

Demand for HMOs shows few signs of slowing down, with these properties proving popular with both investors and tenants alike[6].

Our bridging loans can be used for a range of HMO investments. From purchasing the actual property, through to refurbishing an asset to get it primed for tenants. Also, our BTL mortgages bring bridging-like speed and flexibility to the rental market, providing expanding landlords with funding that can be issued in mere days where everything lines up.

Also, should borrowers plan to convert a property into an HMO, using a bridging loan can be a great way to ensure that all elements are covered. As funds can be released in days, works can start almost instantly, decreasing the time that a property stays empty, or is off the market entirely. We regularly work with landlords to arrange bridging loans for these projects.

Get in touch today for more information on our HMO bridging loans or HMO mortgages.