Tag: HMO

Conversions

Converting a House into a House of Multiple Occupation (HMO)

8th September 20230

Converting a residential property into a House of Multiple Occupation (HMO) can be a lucrative investment opportunity for property owners. HMOs cater to a growing demand for affordable housing options, especially in urban areas with a high student population or young professionals seeking shared accommodations. However, the process of converting a house into an HMO involves several legal, regulatory, and practical considerations. In this guide, we’ll walk you through the key steps and considerations when undertaking such a conversion.

Understanding HMOs:

A House of Multiple Occupation (HMO) is a property in which three or more unrelated individuals (or separate households) share common amenities, such as bathrooms, kitchens, or living spaces. The definition and regulations surrounding HMOs can vary depending on the location, as local authorities often have their own rules and guidelines.

Step-by-Step Guide to Converting:

  1. Research Local Regulations: Before beginning any conversion work, thoroughly research the local regulations and licensing requirements for HMOs in your area. Some jurisdictions might require planning permission or specific licenses to operate an HMO legally.
  2. Property Suitability: Assess whether your property is suitable for conversion into an HMO. Factors to consider include the property’s size, layout, and location. The number of bedrooms, available common spaces, and access to amenities are all crucial considerations.
  3. Space Planning: Plan the layout of your HMO to maximize the use of available space while adhering to regulations. Each tenant should have a reasonable amount of private living space, and communal areas need to be functional and safe.
  4. Health and Safety: HMOs are subject to stringent health and safety regulations. You will likely need to conduct a fire risk assessment, install appropriate fire safety measures (such as fire doors, alarms, and extinguishers), and ensure that gas and electrical systems are up to code.
  5. Building Regulations: Any structural changes or renovations you make during the conversion must comply with building regulations. This includes matters like insulation, ventilation, soundproofing, and accessibility.
  6. Planning Permission: Depending on the scale of the conversion, you may need to apply for planning permission. Consult your local planning department to determine whether your project requires approval.
  7. Licensing: In many areas, HMOs require mandatory licensing. Licensing requirements typically depend on the number of occupants and the property’s layout. Failure to obtain the necessary license could result in significant fines.
  8. Utilities and Amenities: Ensure that the property has adequate utilities and amenities to support the number of tenants you plan to accommodate. This includes bathroom and kitchen facilities, as well as heating and water systems.
  9. Management and Maintenance: Consider how you will manage and maintain the property once it’s operational. This includes handling tenant inquiries, conducting repairs, and addressing any issues promptly.
  10. Tenant Screening: When your HMO is ready for occupancy, conduct thorough tenant screening processes to select responsible and suitable occupants. This can help maintain a peaceful and harmonious living environment.

Benefits and Challenges:

Benefits:

  1. Higher Rental Income: HMOs often generate higher rental income compared to traditional single-family rentals.
  2. Diversified Tenant Base: With multiple tenants, you’re less reliant on a single source of income, reducing financial risk.
  3. Responsive Market: In areas with high demand for affordable housing, HMOs can be quickly filled, reducing vacancies.
  4. Economies of Scale: Maintenance and utility costs can be spread among multiple tenants, potentially lowering your expenses.

Challenges:

  1. Regulatory Complexity: HMO regulations can be intricate and location-specific, requiring careful attention to detail.
  2. Intensive Management: Managing an HMO demands more effort than a single-family rental due to the number of tenants and shared spaces.
  3. Higher Upfront Costs: Converting a property into an HMO might involve significant upfront costs for renovations and compliance.

Conclusion:

Converting a house into a House of Multiple Occupation can be a rewarding endeavor, offering attractive rental income and catering to the housing needs of a diverse population. However, it’s crucial to approach the conversion process with careful planning, a thorough understanding of local regulations, and a commitment to meeting health and safety standards. By taking the time to navigate these challenges, you can successfully transform your property into a profitable and well-managed HMO. Always consult with professionals, including legal and real estate experts, to ensure that you’re making informed decisions throughout the conversion process.

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Common reasons why HMO’s get refused 

12th April 20230

Although, HMO’s can be a great investment there are a range of factors you need to keep in mind. An HMO refusal can be inconvenient and expensive. Councils can refuse to licence HMO’s if the property doesn’t meet certain conditions. Or, if the licence applicant is not a fit and proper person to hold the licence.  

Here is a list of common reasons why HMO’s may get refused –  

The bedroom sizes are too small –  

To avoid refusal, the bedroom sizes in your home must be at least:  

  • 4.64 square meters for a child under 10 years old  
  • 6.51 square meters for a person 10 years old or over  
  • 10.22 square meters for 2 people aged 10 or over  

All rooms that are being used as sleeping accommodation must have a ceiling height of at least 2.14 meters over a minimum, of 75% of the room area. If any floor area has a ceiling height less than 1.53 meters, it will be disregarded when calculating room size. The council will also consider the shape of the room and useable living space, to determine whether its suitable.  

Too many rooms/changes of use –  

When converting your house into an HMO it is important that you use the correct change of use. This is often one of the main reasons they get refused.  

Standard houses and flats belong to the use class C3. These are usually occupied by a single household.  

Whereas, depending on the number of occupants, an HMO is either use class C4 or sui generis. If the HMO is occupied by 3-6 people is C4. Furthermore, if the HMO has 7 or more occupants, its sui generis.  

The area of the HMO –  

Before you make any big decisions, you should speak to your local council and planning department and seek advice. You might find out that there are policies restricting HMO’s. If many properties have been converted into HMO’s, you might have a harder time getting permission.  

Here are some basic rules to follow –  

  • Inner bedrooms are not acceptable (This is a bedroom which can only be accessed by passing through another room, such as a lounge, kitchen or bedroom.) 
  • No common areas are to be used for sleeping purposes  
  • No one is allowed to sleep in a room without any access to natural light, heating, and ventilation.  
  • So, children, 11 years or older should not share a bedroom with their parents.  

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House in multiple occupation
Advice Center, Conversions

All that you should know about becoming an HMO landlord.

14th December 20210

Some landlords choose to convert their properties into HMOs (house in multiple occupation). This is because landlords find this an efficient way to run a rental home. An HMO is a term that refers to residential properties that are rented out by at least 3 people who are not from the same household. However, they share facilities like the bathroom, kitchen, and living rooms.  

HMO licence –  

Becoming an HMO landlord might require you to apply for a house with multiple occupation licences. You must have a licence if you’re renting out a large HMO. Your property is defined as a large HMO if the following apply:  

  • It is rented to 5 or more people who form more than 1 household.  
  • Some or all tenants share toilet, bathroom, or kitchen facilities. 
  • At least 1 tenant pays rent.  

The licence is valid for a maximum of 5 years. However, you would also need a separate licence for every HMO property that you own. 

Conditions a landlord must follow – 

  • The house is suitable for the number of occupants. – It is often advised to have 5 tenants or more in each house. This is so the tenants can successfully spread the costs of electricity, gas, water, and council tax sufficiently to create a healthy profit. Although the number of tenants you have depends on the size and number of bedrooms of the property.  
  • The landlord or manager of the house must be considered fit and proper. For example, having a criminal record or breach of landlord laws.  

Landlord responsibility- 

The council has to carry out a housing health and safety rating system risk assessment within 5 years for getting a licence.  

You need to:  

  • Send the council an updated gas safety certificate every year. 
  • Install and maintain smoke alarms and carbon monoxide alarms 
  • Provide safety certificates for all electrical appliances.  

If the inspector finds any unacceptable risks during the assessment, you must carry out work to eliminate them.  

You will have to pay income tax on your rental income, minus your day-to-day running expenses. And also, class 2 national insurance if the work you do renting out a property counts as running a business.  

Reporting changes –  

It is important to let the council know if there are any changes. These changes might include:  

  • Your tenants make changes 
  • You make any changes to the HMO 
  • Your tenants’ circumstances change. For example, if they have a child.  

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The Ultimate Guide To An HMO Property

19th October 20210

What is an HMO? 

A house in multiple occupations (HMO), is a property rented out by at least three people who are not from one household, for example, a family. However, they share facilities like the bathroom and kitchen. They’re known as house shares.  

However, many types of accommodation could be an HMO. These may include:  

  • Hostels 
  • Lodgings 
  • Shared houses 
  • Refuges 
  • Private halls of residence 
  • Blocks of converted flats 
  • Employee accommodation 
  • Building containing numerous bedsits with shared facilities 
  • Buildings containing flats with their own facilities, but are not self-contained 

Design –  

In HMOs, the bathrooms, kitchen, stairs, gardens and landings are designated as common areas shared by all tenants. In addition, the house may be divided up into self-contained flats, bed-sitting rooms or simple lodgings. 

What determines whether the property is an HMO or not? 

Properties must have these four common features before being classified as an HMO: 

  • Occupants are not forming a single household 
  • Occupants must be using the property as their main residence 
  • Used for residential purposes 
  • One of the occupants must be paying rent  

Households are regarded as family members living together or single people living alone.  

HMO Licences – 

HMOs require a licence from the local council in the area the property is located, which is valid for five years. For instance, the general rule is that any property with five or more people from two or more separate households that share facilities requires a licence. Although this depends on the council, some smaller properties with fewer tenants can also require a licence.  

The standard HMO licence fee is £1,100, split into two payments. For larger HMOs with more than ten units of accommodation, the fee increases by an extra £50 for each additional unit of accommodation.  

The pros and cons of renting an HMO by room  

Pros  

  • Usually more profitable as you can charge a higher rent per room 
  • Can let the room on a licence (this makes things easier if you need to evict a tenant) 
  • You cannot be excluded from the common parts. Only individual rooms 
  • If one tenant leaves, you are losing less rent than if a whole group moves out 

Cons  

  • So, you will be responsible for paying and managing bills  
  • Tenants do not know each other which may result in mismatch of personalities and potentially cause issues 
  • A tenant is only responsible for their room, not the common parts. In addition, this means if there is any damage it may be difficult to prove who caused it  

Are HMOs profitable? 

HMOs can be very profitable because you can charge rent per room that totals more than if you let the property to one household. For example, you could rent a 3-bed property for £1000 per month to a family, or 3 rooms for £400 each giving a total of £1200.  

Are you aware of the HMO Changes for Landlords coming into effect in October?

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