Terminology questions answered here ... Part One

A HMO is a house in multiple occupation and from the government website, the definition is

• at least 3 tenants live there, forming more than 1 household

From October 2018, the HMO licensing parameters were changed. Since the Housing Act 2004 was established it has been a requirement that large HMOs are licensed under mandatory licensing. A large HMO definition is:

1. Comprise 3 or more storeys;
2. Are occupied by 5 or more people living in two or more single households; and
3. The occupiers share basic amenities such as washing and cooking facilities.

But the law has been altered so that a HMO with 5 or more occupiers living in 2 or more households regardless of the number of storeys needs to be licensed (the storey requirement has been removed). So in October 2018 it is a legal requirement for properties that fit into the above definition to be licensed. The process and fee will differ between councils so please check with your local authority.

The licenses have been established to ensure the council are aware of all operating HMO’s and to eradicate unfit landlords who put tenants safety at risk. The main issue is the staffing levels at the council and would those rogue landlords admit to running a HMO as they know they would not be granted the license or do they operate undetected whilst responsible landlords pay the large fees?

The licence is valid for a maximum of 5 years and the license is held by the owner. Therefore if the property was sold and the new owner wanted to keep the property as a HMO they would have to reapply for the license. You will also need a separate licence for each HMO you run, so make sure you budget accordingly as the license fee where TMG operate is over £1000!

Such conditions that you must satisfy to get the license is:

• the house is suitable for the number of occupants (this depends on its size and facilities)
• the manager of the house – you or an agent – is considered to be ‘fit and proper’, for example they have no criminal record or breach of landlord laws or code of practice

You must also:

• send the council an updated gas safety certificate every year
• install and maintain smoke alarms
• provide safety certificates for all electrical appliances when requested

There are other avenues that tenants can use to secure a property and they do not have to be the usual government approved schemes. A caveat to this is to please check with your rent guarantee provider.

To start, a government approved scheme is referred to as a government-backed tenancy deposit scheme (TDP) and a landlord  must place your rent into a TDP if you have an assured shorthold tenancy. A landlord must place the rent into a TDP 30 days after receiving it. If they do not the landlord can be prosecuted. The TDP is protected for both the landlord and tenant and if you do not damage the property and pay your rent on time and in full, you will get the deposit back at the end of the tenancy. The negative of this scheme is you need to pay 1 months rent to the landlord plus 4-5 weeks worth of rent to the deposit scheme, which can be tough especially if your previous deposit has yet to be released.

https://www.gov.uk/tenancy-deposit-protection

A scheme I have had to use to claim against rent arrears and damage is Reposit. This is an insurance policy with the landlord being the beneficiary. This means the landlord can claim up to 8 week’s worth of rent and landlords get free independent arbiter. The tenant has to place into the policy only one weeks worth of rent so this can make your properties more attractive to tenants and help you stand out from the crowd. The tenant and landlord must still keep to the T&Cs of the AST so both parties remain protected.

The final option is Zero Deposit. This policy offers something very different from traditional deposits as again it only asks for one weeks deposit and is FCA regulated, plus accepted by 79% of estate agents. As with the above scheme you do not have to wait until you have the previous deposit released before you secure your next rented home. A huge benefit for landlords is claims are reviewed by TDS and receive fair payouts within two working days and you have up to 6 weeks rental protection. As with the above it makes your properties let faster and avoid void periods.

As I mentioned at the start please do check with your rent insurance provider and ensure you still comply with the T&C’s such as giving tenants a how to rent guide, valid EPC and valid gas certificate on the signing of an AST.

The most common form of agreement in the UK for a rented property is referred to as an AST and is abbreviated from ‘Assured Shorthold Tenancy’.

As stated on the Landlord Referencing website, an AST applies if

• you’re a private landlord or housing association
• the tenancy started on or after 15 January 1989
• the property is your tenants’ main accommodation
• you don’t live in the property

A tenancy can’t be an AST if:

• it began or was agreed before 15 January 1989
• the rent is more than £100,000 a year
• the rent is less than £250 a year (less than £1,000 in London)
• it’s a business tenancy or tenancy of licensed premises
• it’s a holiday let
• the landlord is a local council