Government Announces Hmo And Residential Property Licensing Reforms

The government announced in October it is embarking on a consultation to implement secondary legislation to extend the scope of mandatory licensing of HMOs, in England.

This will include bringing in the following measures:

• Extending the scope of mandatory licensing of HMOs

• Introducing mandatory national minimum sizes for bedrooms in licensable HMOs. (The size suggested is 6.52sq-m for single occupancy)

• Remove the 3 storey rule so all houses with 5 or more people forming 2 or more households will be subject to mandatory licensing

• Extend mandatory licensing to flats above and below business premises

• Require landlords of shared homes to provide decent storage and disposal of rubbish

• Tighten up the fit and proper person test for landlords and ensure criminal record checks are carried out to week out criminal landlords

In a government commissioned survey, 52% of landlords broadly supported the extension of mandatory HMO licensing, while 89% of local authorities do.

It is proposed that these new measures will be implemented in 2017, subject to parliamentary approval. It is intended that once the new licensing requirements are introduced, there would be a grace period of six months for landlords and other to familiarise themselves with the new licensing requirements.   No offence of failing to obtain a licence would be committed during this period. However, penalties for not obtaining a licence, including criminal prosecutions, and rent repayments, would apply from the end of the grace period.

It is proposed those landlords who are currently licensed under Nottingham additional licencing scheme will be passported into the mandatory regime, free of charge, for the remainder of the period of their current HMO licence.

So why is the government considering extending mandatory licensing?  Well, the private rented sector has seen rapid growth in recent years and is now the second largest tenure (19% or 4.3 million households) in England, after home ownership.  This scaling up of the PRS has increased demands on the sector and opened it up to exploitation by criminal landlords who let HMOs.  HMOs generally provide accommodation to low income tenants who are mostly unrelated, live separate lives and have different expectations and standards.  These differing demands and expectations can make the management of an HMO much more challenging than a single let property.

The proposals will make around £175,000.00 additional HMOs subject to mandatory licensing in England, at an expected annual cost to private rented sector of £23.7m.  The government’s ambition with this legislation is to use it as a tool to clamp down on criminal landlords cramming tenants into unsafe and overcrowded homes, and in so doing, improving housing for thousands.  The government believes these measures will enable councils to tackle problem homes head-on and bring an end to ruthless landlords who exploit tenants and charge them extortionate rents to live in poor conditions. The government is committed to raising standards in HMOs, so they are a safe place to live in and do not blight the neighbourhoods in which they are found.  The government is determined that good HMO landlords who work hard for their tenants and comply with the law should cease to face unfair competition from criminal landlords or agents, who ignore the law and their obligations.

So, when these proposals are enacted, mandatory licensing will capture more houses and flats in multiple occupation, including properties converted into bedsits occupied by sharers and where residential buildings include commercial or other no-residential premises. It would also apply to buildings or parts of buildings that are used as clusters of letting rooms where the occupants share one or more basic amenity.   The intention would be not to include a flat in a purpose built block made up entirely of self-contained flats, or where a flat is in a block which contains commercial premises, but also comprises three or more purpose built flats.

These measures will also bring in a more robust fit & proper person test, where landlords will be required to submit their Disclosure and Barring Service (DBS) check.  The one application will apply to all the properties they manage, it will take 30 minutes to complete, cost £25.00 and check last for five years.  The check will establish if the landlord or licence holder is insolvent or a discharged bankrupt.  The test will also seek to establish the landlord’s criminal records status. For example, does the landlord have permission to enter or remain in the UK or have they received a conviction for housing an illegal immigrant?

Waste Issues

The government believes there are problems with rubbish accumulation in HMOs, particularly in larger properties and those that are poorly managed.  Therefore, under these proposals landlords will be responsible for providing adequate receptacles for the storage and disposal of normal waste emanated from the property.  The facilities must be suitable for the number of persons or households permitted to occupy under the licence and will need to be stored in a suitable accessible place within the curtilage of the property.  Furthermore, the licence holder will have to comply with all the directions given by the local waste authority in relation to the storage and disposal of waste.

Room Sizes

One sensible development with these proposals is the intention to regulate on the minimum size of a bedroom within an HMO. This means that any room occupied for the purposes of a bedroom that is below 6.52m² for one person and 10.23m² for two persons will be in breach of the licence.  Offenders run the risk of receiving a financial penalty of up to £30,000.00. There will also be a useable space requirement; any floor area that has ceiling clearance of less than 1.5m for instance, under the eaves in an attic bedroom) will not count towards the total floor area. This amendment in bedroom sizes is great news for all of Nottingham’s HMO landlords because the council has set a minimum bedroom size of 8sq.m under their licensing schemes.

Licensing Fees

You would have thought that having given clarity on bedroom sizes, the government would want to apply the same principle to licensing fees.  Unfortunately, this is not the case, the government intends to continue allowing local authority to charge landlords whatever they want for an HMO licence.  So, under these measures we will continue to have a climate of suspicion where landlords believe that the true cost of running a local scheme does not match the extortionate fees being charged.  How can it be that Lincoln City Council charges £463 for an HMO licence, while Nottingham charges £980 for exactly the same licence? Is Nottingham City Council that more inefficiency at running its housing department?

In cases where local authorities already operate additional licensing schemes, they will be obliged to transfer any properties with an additional licence that meet the new threshold for mandatory licencing over to the mandatory scheme. In practice, only a small proportion of properties that fall under an additional licensing scheme will be transferred to mandatory licencing.   This is because the definition of an HMO differs between additional and mandatory schemes. For mandatory it is 5 tenants forming 2 households and for additional it is 3 tenants forming 2 households. In cases where the cost of a mandatory licence is higher than for an additional licence, the local authority may ask landlords to pay the difference.

Example

Here are some example of buildings which will now become subject to mandatory licencing under the new proposals, along with others that will not.

A house occupied by 5 students (2 of whom are living together), who share a kitchen and a bathroom.

Licensable because there are 5 occupiers forming 4 households sharing basic amenities.

Multi-storey house, with a self-contained basement flat occupied by the landlord and partner. Upper floors comprising 3 self-contained studio flats and 1 non self-contained flat (kitchen on landing, but not shared). 

Licensable because there are at least 5 persons occupying the building in found separate households (landlord and family count as 1) if all the flats were self-contained the property would not be licensable.

Multi-stored house converted into self-contained flats owned by spate leaseholders with long leases.

Individual flats may be licensable, but only if they are occupied by 5 or more people forming 2 separate households.

A purpose built fish and chip shop with residential accommodation above, which the owner lets out as 5 bedsits with shared use of kitchen and bathroom.

Licensable because it is occupied by at least 5 people in at least 2 households, who share basis amenities.

Self-contained flat above a fish and chip shop. At least 6 occupiers sharing 3 bedrooms plus living room. All employed in the business and no pay rent. 

Licensable because there are 6 occupiers sharing facilities. The fact that rent is not paid is not relevant.

A 3 storey purpose built block of flats above a parade of shops, comprising 10 self-contained flats.  Five of those flats have been let out by their owners and 3 are in multiple occupation, all with at least 5 persons living in 2 or more households. 

Not licensable because mandatory licensing does not apply to purpose built blocks with 3 or more self-contained flats.

A purpose-built development of 30 units, designed for singles and couples, comprising of a mixture of self-contained studio flats and a number of non-self-contained studio flats which have access to a communal kitchen. 

Licensable because although the development is purpose-built, there is some sharing of facilities between different households. Purpose built blocks are only excluded where all the flats are self-contained and there are 3 or more self-contained flats on the building.

N.B. Some of these properties may be subject to local discretionary licensing schemes.

It would seem 2017 is going to be another busy year for landlords. These proposals will see another 175,000 rented properties fall under HMO mandatory licensing