Things to consider in a HMO conversion

Getting planning consent

In 2010, as more and more properties were being converted, planning regulations were put in place. For those who do not want to live close to students, the Government came up with a planning restriction entitled the ‘Article 4 Direction’. This direction was to be used by local councils who felt that certain areas under their control required intervention in the form of slowing down development. Essentially, Article 4 removes the automatic right to convert a standard property into a HMO or shared house.  Instead an owner with a property that falls within an Article 4 area must apply for planning permission first. Such permission is very likely to be be withheld. If you are thinking of converting a property be sure to first speak with your local council to check if it falls within an designated Article 4 area.

Larger properties

For larger properties (7 bedrooms or more) full planning permission will always be required. This is to allow a local council to calculate the impact of a larger development on the immediate area. Things taken into consideration include the affect on the local highways. Your council will want to know if a larger property will put a materially greater strain on local people and amenities. They will also want to know of any impact on local parking. This could mean you having to convince councilors on a number of issues.

Legal constraints for a HMO conversion

HMO’s carry a greater level of legislation when it comes to both conversions and the management of them. This is primarily down to the number of people living in them. A top concern is ensuring tenant safety. With single let properties you can assume the single-family unit are all looking out for each other. Whereas in an HMO, it must be considered that each individual may not cooperate in the same way. This points to the need to eliminate such a risk particularly in the event of a fire. You can read all about the Government’s standards your HMO conversion must meet here.

The real cost of converting to a HMO

Make no mistake – HMO conversion is considerable. For a professional job, expect to invest something along the lines of £10,000 per room as an average cost across the entire property. This will then take into account the cost of a new kitchen, all new en-suites, floor coverings, fire safety equipment etc.

For larger developments that require a form of extension and or a loft conversion we use £13k as a general rule of thumb per room.

If you keep these two figures in mind when looking at potential purchases you should not go far wrong.

So how can a landlord carry out an HMO conversion and ensure they stay within the law?

1. Become well informed about the process

Invest in a course, preferably one run by a well-known expert in the industry. Be careful to ensure that any trainer or mentor has real knowledge of the HMO Management Regulations. You can find these here.

A good trainer will be able to teach you everything you need to know about HMO conversion. If you are well educated, you will have a better grasp on the practicalities and legislation behind a HMO conversion.

Best still, try to shadow a landlord who has been through the process several times. There can be no greater teacher than one who has been there and done it – professionally of course.

2. Get in touch with experienced agents

Having theoretical knowledge is all well and good but learned experience is best. Speak to a local agent you know has genuine experience in managing HMO properties. This way you can develop a better understanding of whether converting property is really the path you want to take. You are likely to find some things out about HMO conversions you wouldn’t have discovered just through reading alone.

3. Do not underestimate the time consumption of managing an HMO:

One of the main advantages of a HMO property is the potential for increased yield. However, just like most investments it is important to know that with greater return comes greater effort.

HMO conversion can be extremely rewarding on a number of levels. Beware of the possible difficulties and plan ahead. Don’t underestimate the workload, and be prepared for a more time-consuming process.

If you would prefer a more hands-off approach to HMO management then consider one of the Guaranteed Rent schemes.

We hope you have enjoyed reading this post.

Got a question? Please feel free to post these below and we will do our best to reply as soon as possible.

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First – what is an HMO property?

Regulations determine when a rental property stops being a standard rental unit and instead becomes classed as an HMO. Any property with three or more unrelated tenants, forming two or more households, will be classed as an HMO. The same tenants will also share amenities such as a toilet, bathroom or kitchen.

Why are landlords attracted to HMO property investment?

Renting out HMO’s can be attractive due to the potential for increased profits when done correctly. Unlike traditional rental properties, HMO’s have a higher rental income on average. Properties are let out on a ‘room by room’ basis. This has the effect of capitalising on the asset. However, with this increased potential for greater profits comes greater regulations that surround HMO property. And these regulations can end up costing both time and money. Landlords should research how such costs can mount up as HMO property is not for the faint hearted.

Legal responsibilities for HMO landlords

There are legal standards which HMO landlords face. For example, for all properties with five bedrooms or move and three storeys this may require both planning permission and an HMO licence. HMO properties typically require more time and effort than usual rental properties. If you are considering investing in a HMO property, make sure you have the ability and resources to meet the demands. Also consider seeking expert advice of an HMO letting agent. You may want to consider either their full management or Guaranteed Rent services.

The responsibilities for HMO landlords come under two important pieces of legislation:

• The Management of Houses in Multiple Occupation (England) Regulations 2006.
• Licensing and Management of Houses in Multiple Occupation (Additional Provisions) (England) Regulations 2007.

Regardless of whether your property requires a licence or not, you must conform to the management regulations. A breach of any of the regulatory terms is likely to be approached as a criminal offence. The landlord can expect to face prosecution by the local authority. Convictions are usually dealt with at the Magistrates court and hold fines of up to £5,000 or more in extreme cases.

Who to ask about regulations

Your local council will be responsible for regulating and enforcing the correct management for HMO property. The authorities have the power to introduce individual requirements for licensing. As an HMO landlord, your local authorities should be your first contact point for any queries you may have.

For information on any of the above or advice on anything relating to investing in HMO property within Nottingham, please do not hesitate to call us on 0115 740 1800.

Alternatively, get in touch by emailing us at hello@capitum.co.uk

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Houses in Multiple Occupation (properties with three or more unrelated tenants) are falling under greater scrutiny. To ensure a property meets particular fire safety standards landlords must now ensure they hold a professional fire risk assessment. What’s more, once the fire risk assessment is complete, all high-priority suggestions for improvements must then be carried out in a timely manner. Failure to comply can lead to significant penalties and indeed prosecution.

Fire Risk Assessment – Legislation and Regulations

The idea behind a fire risk assessment is to establish the safety aspects of a property for fire purposes. A trained and  ‘competent person’ is tasked with identifying potential hazards. This will involve deciding if there is any significant risk of danger to life in the event of a real fire. Examples would include establishing if occupants are able to quickly leave the building without having to find their keys. To combat this problem HMO landlords should always provide a safe ‘means of escape’. This will often involve ensuring both windows have fire hinges and all exit doors have ‘thumb turn’ locks.

The best place to start for information on fire safety is the LACoRS Fire Safety Guidance. This can be found here.

The HMO definition

A new definition of a HMO was introduced in 2004 and should be read and understood thoroughly by all landlords. Under the Housing Act (2004), HMO properties have additional responsibilities when compared to individually let properties.  Consequently, it is vital to know whether a property is classed as a HMO or not.

Neglecting fire safety regulations can lead to a serious fine. You can read more online to figure out whether a property qualifies as a HMO or not. If you are unsure at any point, your local housing authority will have all the answers. Your first port of call would be your local planning department.

Properties within the HMO definition may include:

• Shared houses
• Bed sits
• Self-contained flats

Properties that do not fit into the description of a HMO property include:

• Buildings occupied by a maximum of two households with a single individual each, e.g. a two person flat share.
• Student halls of residence
• Religious establishments and care homes
• Properties owned or managed by a public body, e.g. the NHS

What am I responsible for in a Fire Risk Assessment?

In order to fulfill the requirements of the Regulatory Reform (Fire Safety) Order landlords are responsible for a wide range of regulations. These include:

• Establishing a satisfactory means of escape
• Ensuring that qualified engineer carry out either a six monthly or annual test on the fire detection system
• Carrying out monthly fire tests and logging the results of these within a fire log book
• Ensuring that an annual Portable Appliance Test is carried out by a qualified person
• Properties built after June 1992 must be fitted with mains operated smoke alarms on each floor
• Properties built before June 1992 should be fitted with battery-operated smoke alarms on each floor
• Ensuring all furnishings meet fire resistance regulations
• Any dangerous appliances are removed from the property

This list is by no means exhaustive. Being a HMO landlord takes dedication to get it right. Fire safety should be a top priority for anybody investing in HMO property.

If you are finding it difficult to keep up with all of the latest regulations we can help. Today we work with man landlords to take the strain away from day to day management of HMO property. Take a look at our Guaranteed Rent service to discover how we work with landlords by visiting us here.

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