COVID-19 is posing many challenges for UK property. The number of mainstream products available is limited. For those potential new homeowners that can get a mortgage, 43% said they had encountered delays or complications with their bank. As a result, property chains are at risk of collapsing. Our recent survey shows that 45% of potential new home owners have been gazumped over recent months. Property investors want to act with confidence. To do that, they’ll need readily available finance.
With that in mind, the buy-to-let (BTL) industry is booming. With demand for rental property on the rise, HMOs are becoming an attractive opportunity. Landlords can benefit from regular income, bu also enjoy the capital growth of the property in value.
HMO: rules and regulations
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. They can also be referred to as ‘house shares’ or ‘flat shares’.
There are plenty of HMO regulations landlords must be aware of, these are regularly changing. They range from minimum room sizes, to energy efficiency standards. Failing to meet these new standards will result in heavy fines.
We have decided to provide a beginners checklist for landlords, including all the key processes to follow in order, before taking on HMO project of their own.
Gaining a License
First and foremost, you need to check whether you’ll need to obtain an HMO license before your HMO property. This can be dependent on two key factors.
- If you looking to rent out a large HMO (a property for 5+ tenants, coming from more than 2 different households), then will require a license. If you do, you will need to speak with your local council.
- Some councils have their own requirements for landlords, so it is always worth checking with your local council to see if their requirements are different.
Licenses can take time to be granted, so leave extra time to ensure you receive your license well in advance. Once passed, a HMO license is valid for a maximum of 5 years.
Minimum Bedroom Sizes
HMO landlords must ensure their property meets the minimum bedroom sizes. These are listed below:
Different councils aim for different standards of living, meaning the sizes can vary dependent on district.
Be sure to measure potential properties carefully, and always check with the local council guidelines before converting. If the size isn’t met, then you will not be permitted to rent the room.
Minimum Energy Efficiency Standard
The minimum rating required on the Energy Performance Certificate (EPC) is rising. In April 2018, HMO landlords had to meet a rating of E for new tenancies and renewals. Now, all rented properties must meet this minimum standard. If not, their property is deemed ‘un-rentable’ and the landlords can be fined up to £5,000 per property.
If you haven’t received a EPC for your potential or current property, it’s important to do this before letting it out, as if the level if below E, you will conduct works to increase the properties energy efficient level.
A good EPC level can be a huge selling point for potential tenants and should therefore be included on any letting advertisements. It is no legal obligation to present the properties EPC, but it must be made available (and free of charge) for those seriously looking to rent the property.
Some properties are except, such as grade listed buildings, due to their nature and inability to change structure and add insulation.
Certificates and Safety Requirements
HMO landlords must ensure the property has the following:
- An EPC
- A gas safety certificate
- Electrical installation condition report
- One smoke alarm per floor
- CO detectors in any room containing a fuel burning appliance
Planning Permission for HMO Projects
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 you generally don’t need planning permission when converting from a dwelling house or flat to an HMO property, you need to contact your local council as different councils can have different regulations.
Bridging loans for HMO projects
As the age of first-time buyers rises, landlords are looking o welcome a whole new bracket of tenants. The “middle-aged renters”. Which is why we’re ready for the surge in demand of tenants. Our conversion bridging loans are here to support your HMO projects when you need it most.
When it comes to construction projects, timing is everything. Homeowners must ensure deadlines are met. Failing this, the project is at risk of being delayed. Or worst, left abandoned. When refurbishing HMO properties, it is often much easier for works to be completed in one go, and usually in a gap between tenants. 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 the property stays empty. We regularly work with landlords to arrange bridging loans for these projects.
Get in touch today for more information on our HMO bridging loans by visiting us here.
Looking for more information? Try our last blog piece Taking advantage of HMOs with bridging loans.