HMO Confusion Could Costs Landlords Fines of £50,000

Planning and licensing rules for shared houses could be an expensive trap for landlords as some councils take on new powers.

Property investors can face fines of up to £50,000 for making mistakes – and the rules vary depending on where the letting property is located.

Three sets of rules apply to small houses in multiple occupation (HMOs), which are homes shared by between three and five tenants.

The problem is not all the rules apply nationwide – and in some cities, they only apply to certain streets or neighbourhoods.

The three rules are:

Article 4 – This refers to Article 4 of the Town & Country Planning Act. Around 30 councils in England have given notice that they intend to implement this rule that requires the owners of small HMOs to apply for planning permission before take in tenants.

Any home with three sharers is a small HMO and will need planning consent.

Landlords could be caught out by a couple of sharers subletting without permission, which changes a buy to let in to a small HMO.

The rule can apply across the entire council district or selected neighbourhoods.

Selective licensing –  This is a special power under the Housing Act applied to a council district or neighbourhood that can require all private letting properties to register with the council.

This rule applies to buy to lets as well as HMOs.

Additional licensing – Another Housing Act power that generally affects HMOs

Councils take on these powers in a bid to improve housing standards and control the number of shared houses in particular areas.

Around 30 councils have already started article 4 consultation, while another dozen or so have selective and additional licensing in place.

Ian Potter, of the Association of Residential Letting Agents (ARLA), said: “HMO licensing and planning applications are not a new issue for landlords, but now there is the added complication of Article 4. There is no room for complacency – failure to comply could result in a hefty fine.

“It is important for any landlord considering changing the use of a property to fully research the regulations in their area. For landlords with portfolios spanning more than one council area, this may mean different rules apply for each property. Factoring in the possible additional costs of buying a licence is also vital.”

The cost of an HMO licences starts at around £400, but some councils can charge considerably more.

Existing HMOs do not require planning permission – only new shared houses in certain council areas.

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