Adrian Moloney | 15.09.2020
With many moving parts and more complexities than your standard buy to let case, HMOs can present many obstacles for both investors and lenders.
We want to make it easier for you and help you feel confident to take on more HMO cases, so we’ve put together a list of the most common questions we receive from brokers.
From the 2018 licensing changes, to simple case queries – get the answers you need today.
The classification of an HMO changed in October 2018. The new definition is a property that has five or more people occupying a property, who come from two or more separate households.
Since October 2018, the minimum usable floor space to qualify as an acceptable bedroom is 6.51 square metres for single occupancy dwellings, and 10.22 square metres for double occupancy dwellings. Find out more about the HMO room size restrictions.
Kent Reliance values properties on a "best rent" basis – i.e. based on the transactions of other HMOs and private dwellings of a similar size in the local area. This means the valuation produced is on a bricks and mortar basis and not on an investment basis.
Ensuites are acceptable within bedroom spaces. If there’s anything additional like this in a property, please speak to your senior business development manager to discuss further.
There must be a communal living space, in accordance with the RICS guidance. This can be in the form of a separate communal living room or a large kitchen/diner, for example. If you’re unsure, you can speak to your senior business development manager for further guidance.
It depends on the case. For purchases, HMO licences need to have been applied for on completion. For remortgages, HMO licences need to be in place by completion. When remortgaging a converted property into an HMO, or a property in an area where licensing rules have changed, your client needs to have applied for the licence on completion.
No – licences are produced for the property and the landlord, which means your client must apply for a new licence.
If the HMO is to be occupied by three to six unrelated occupiers, then the property will need C4 planning in place. If there are more than seven unrelated occupiers, then sui generis planning must be in place on completion. For groups of people living together as a single household as a principle or secondary residence (such as a family), C3 planning will be required.
Sui generis is Latin for ‘of its own kind’. In terms of HMOs, it’s a type of planning required for properties where seven or more unrelated occupiers will reside – it doesn't fit with the standard C4 planning in place for six or fewer households.
Planning permission is granted when moving from C3 to C4 under permitted development, or when sui generis is required. An Article 4 area is one that’s had some (or all) of the permitted development rights removed; therefore, any amendments to the property will require full planning permission.
Yes, you’re able to capital raise on an HMO.
The complexity – HMO valuations are more detailed and complex in nature than a standard property.
Some local authorities state that all houses rented through the private rental sector need a licence – this is regardless of size. We do accept this, but if you need more information on the matter, you should refer to the local authority websites.
Although your clients should know about the licensing rules, feel free to support them where necessary – especially if they’re remortgaging a property.
If their properties fall within the licensing rules and they don’t follow procedure, landlords could have the local council chasing them, or be forced to quickly renovate properties to make them legally habitable. Plus, there’s an unlimited fine.
We understand the complexities of HMOs, and have the experience and flexibility to help you tackle these cases. Get in touch with your senior business development manager or speak to the broker liaison team for more information on how we can support you.
Sign up and receive the very latest product, criteria and service information from us.
Nowadays, the majority of us could do with some extra time to complete our ever-growing to-do list. So what would you say if we could give you back some time? We’ve put together a few simple tips to help improve your application efficiency for your specialist cases.
This content is best experienced with your device in landscape mode. Please rotate your device for optimal display.
This content is best experienced with your device in portrait mode. Please rotate your device for optimal display.