Whether you’re an estate agent, lettings agent, property investor, property manager, mortgage lender, mortgage broker, or building manager, you will be wondering why Southwark Council has introduced this legislation and how it will affect your business.
The schemes will include a borough-wide Additional Licensing scheme for 254 HMOs (257 HMOs excluded) and Selective Licensing, affecting most privately rented property, even properties let to families, in 5 wards through two designations.
What is a HMO?
To determine what an HMO is, we need to start with what ‘HMO’ stands for ie. House in Multiple Occupancy or House of Multiple Occupation. The standard definition of a section 254 HMO is: 3 or more tenants from more than 1 household that, generally speaking, share facilities (kitchen, bathroom etc) though legally should meet the standard test, self-contained flat test or converted building test HMO definition.
For Section 257 HMOs, the standard definition refers to buildings that: have been converted into self-contained flats; the conversion did not comply with the relevant Building Regulations in force at that time and still does not comply, and less than two-thirds of the flats are owner-occupied.
If the conversion was completed before 1 June 1992, it should comply with Building Regulations in force as of 1 June 1992. If the building was converted after 1 June 1992, it should comply with the Building Regulations in force at the time of the conversion.
Why is there a new scheme?
The council has introduced the HMO licensing scheme because of an increase in housing problems in the private rented sector. 43,000 homes in Southwark are privately rented and the council found that rising rents impacted affordability, led to overcrowding, increased homelessness and a deterioration in housing conditions.
These problems only became more apparent during the pandemic, with the housing situation leading to increased virus transmission. While the council found that the vast majority of properties are well-maintained, action was still necessary to protect the rights of renters in the area.
The London borough also found that even the most well-meaning landlords may not be aware of legislation and so the council have decided to use all the tools at their disposal to improve conditions and enforce licensing to ensure compliance.
The consultation finished in June this year and the final report found that 42% of those surveyed were in favour of Southwark Council’s proposals to introduce an additional licensing scheme for houses let in multiple occupation (HMOs) with only 17% being opposed.
45% were in favour of the borough’s selective licensing proposals for properties let in the private rented sector occupied by couples, individuals or a family. Only 20% disagreed.
67% of survey participants said that they would be more likely to move into a property let by a landlord who had signed up to the council’s Gold Standard Charter.
What does this mean for my business?
Unfortunately, persons managing the property or persons in control, under the Housing Act 2004, can get up to a £30,000 fine per offence. This is even the case for let only as the legislation under part 263 states collection of Rack Rent (more than 2/3rds of the rent) and ‘other payments’ means agents and property professionals are on the same hook as landlords.
To top it off, tenants can claim back up to 12 months rent under the Rent Repayment Order, making for some very unhappy landlords.
The key here is to ensure that you have always been given the right advice. If you are looking for support for yourself or your landlords, it is best to trust the experts such as Environmental Health Officers, accredited by CIEH, experienced in local councils.
What is Property Licensing?
Property licensing is the Local Authority’s process of improving living standards in rental accommodation and proving that landlords are ‘fit and proper’ persons to operate these properties. The type of property/HMO licence a property requires varies depending on a number of different factors, including the number of tenants and the council your property is located in.
Why is Property Licensing important?
It is important that you are aware of both the national and local authority regulations. The licensing rules are not consistent across every borough, with each individual borough creating its own set of licensing rules. A professional licensing company should be instructed to guide you through the process. In short, the type of HMO licence required will depend on the property itself, how it is tenanted and the borough that it is located in.
What next steps do I have to take?
When a council introduces tricky property legislation, it can drive you mad trying to understand how it affects your property portfolio. So what can you do to stop going a little crazy?
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