Latest / The Property Unleashed Podcast / HMO Licensing And Planning Explained

Transcript

HMO Licensing And Planning Explained · The Property Unleashed Podcast

• 0:00
  SPEAKER_00: Do you understand the rules and regulations surrounding HMOs in the UK property market at the moment?
• 0:06
  SPEAKER_00: Do you know the difference between the licenses, the rules, and the planning considerations?
• 0:10
  SPEAKER_00: Well, you will after you've listened to it.
• 0:21
  SPEAKER_00: Hello and welcome to the Property Unleashed with me, your host, Mark Fitzgerald.
• 0:25
  SPEAKER_00: It's great to have you joining me here today.
• 0:27
  SPEAKER_00: So, today's topic is going to be about HMOs, houses in multiple occupation.
• 0:34
  SPEAKER_00: These are properties where they are rented out on a room-by-room basis.
• 0:40
  SPEAKER_00: Fundamentally, it means you can get more tenants into a property and you can earn more money.
• 0:45
  SPEAKER_00: Now, you've probably heard me talk about HMOs before.
• 0:48
  SPEAKER_00: It's a great, great property strategy to use alongside rent-to-rents, which is again another great strategy for building up that cash flow.
• 0:57
  SPEAKER_00: But what a lot of people still don't quite understand or quite get is the different needs of a HMO over a traditional buy-tellet.
• 1:08
  SPEAKER_00: You see, with an HMO, you have to have an HMO license.
• 1:12
  SPEAKER_00: You might have additional licensing, you might have mandatory licensing.
• 1:16
  SPEAKER_00: And also, if you have a property, an HMO that is over seven rooms or seven different occupants, you may very well need to go and get it sui generis, which is along the commercial side, which means that you can potentially then get a commercial mortgage on it, and that could also help you recycle your funds.
• 1:37
  SPEAKER_00: But let's start at the beginning here.
• 1:39
  SPEAKER_00: What is an HMO?
• 1:40
  SPEAKER_00: As I said before, this is a house of multiple occupation.
• 1:43
  SPEAKER_00: It is a property that's rented out by at least three people who are not from the same household, but they have shared facilities like kitchens and bathrooms in the property.
• 1:56
  SPEAKER_00: So when do you need an HMO license on a property?
• 2:01
  SPEAKER_00: You have to look at the council's HMO pack to really understand the rules and regulations of your area.
• 2:09
  SPEAKER_00: So mandatory HMO licensing applies if an HMO has three or more tenants from two or more households in shared facilities.
• 2:19
  SPEAKER_00: So fundamentally, in most areas, it's three people who are from separate families, if you like, taking on a property, you would need to have an HMO license.
• 2:30
  SPEAKER_00: It used to be four, but now it's three in most areas.
• 2:33
  SPEAKER_00: It still might be four.
• 2:34
  SPEAKER_00: So that's why you need to get the HMO pack from your local council and check for that.
• 2:39
  SPEAKER_00: What you have to do when setting up an HMO is you have to abide by the HMO guidelines, which will mean that you will have to have more fire safety standards to the property in the sense of fire doors.
• 2:55
  SPEAKER_00: You might have to have an integrated fire alarm.
• 2:58
  SPEAKER_00: You will need to make sure that the property is a bit more robust.
• 3:01
  SPEAKER_00: You'll probably have locks on all the doors and everything like that.
• 3:04
  SPEAKER_00: But what you will have is some mandatory stuff for it to be an HMO.
• 3:09
  SPEAKER_00: You need to check your councils guidelines to make sure that whatever you do is along those guidelines because certain things can be different.
• 3:16
  SPEAKER_00: Okay.
• 3:17
  SPEAKER_00: Now, you get an HMO license or you apply for it, it can be turned down.
• 3:23
  SPEAKER_00: What you may or may not have heard of is something that a lot of councils have brought in, which is called article four.
• 3:29
  SPEAKER_00: Now, what you'll find with an article four, if it's brought into your area, it is to stop people converting residential properties into HMOs.
• 3:38
  SPEAKER_00: If you've got an article four area and you've bought a house and you want to convert it to a licensed HMO, you will have to go through planning to get this sanctioned.
• 3:48
  SPEAKER_00: And of course, if it is in an article four area, the chances of getting it through planning, whilst not impossible, are going to be very, very difficult to do.
• 3:56
  SPEAKER_00: Now it's normally a case-by-case basis, but don't go out there, buy a property or do a deal and want to convert a house, whether it's whether it's uh doing a rent to rent on a buy to let or something.
• 4:06
  SPEAKER_00: You need to make sure you know whether or not it's article four.
• 4:09
  SPEAKER_00: Very easy again, go on your local council website and you should be able to get a little map that shows you where Article 4 is if they have it, and if they don't, then you can just apply straight for an HMO license.
• 4:22
  SPEAKER_00: Now, on top of that, in your area, you might have an additional licensing because some councils require additional licenses for smaller HMOs, typically those with three or more tenants going in there.
• 4:36
  SPEAKER_00: So you might have additional licensing in your area, but you also might have something called selective licensing as well, because in certain areas, councils may implement selective licensing, which requires all not just HMO, all rental properties to be licensed regardless of what they're used for or their size.
• 4:58
  SPEAKER_00: Now, all of a sudden you might be saying, Well, there's a lot to this, Mark, at the end of the day.
• 5:02
  SPEAKER_00: I wasn't expecting all of this.
• 5:03
  SPEAKER_00: Again, just be update with your local council requirements.
• 5:08
  SPEAKER_00: Selective licensing, if it is in your area, will probably be in specific boroughs.
• 5:13
  SPEAKER_00: And why do I say that?
• 5:15
  SPEAKER_00: Well, because there's a lot of landlords out there that don't do a very good job, unfortunately.
• 5:19
  SPEAKER_00: Not all of us are doing a good job.
• 5:21
  SPEAKER_00: And what the councils are starting to do is bring in selective licensing, checking on these buy-to-lets, these HMO properties, checking that they're up to standards.
• 5:31
  SPEAKER_00: Because, of course, if they've got plenty of damp, if they're run-down properties, if they're just not fit for purpose, then it's not fair.
• 5:37
  SPEAKER_00: A on the tenants, although the tenants have got a part to play in this, they do need to look after the property.
• 5:43
  SPEAKER_00: But equally to that, it's another way for the council to earn some more money.
• 5:46
  SPEAKER_00: So they brought in selective licensing as well.
• 5:48
  SPEAKER_00: So do make sure that you know whether or not the area that you're investing in that you're doing this HMO in has selective licensing as well.
• 5:58
  SPEAKER_00: So if you are getting an HMO, you're gonna do work on it, you're gonna convert it into a normal house, or you're just converting a property that you already own, you go through the licensing process, and that is very, very simple.
• 6:10
  SPEAKER_00: It can take time, so it's not gonna happen overnight, but it is a simple procedure of basically you get a form off of a council, you fill that in, you pay a fee, which varies from council to council.
• 6:21
  SPEAKER_00: It can be 500, it can be a thousand, it can be 1500 quid, depending on it.
• 6:25
  SPEAKER_00: Mainly or or most of the time, most HMO licenses will run for five years.
• 6:31
  SPEAKER_00: What you will do is provide details about the property and the proposed management arrangement of that property, ensure the property meets the health and safety standards for the HMOs in those areas, and then you will go through the processing system.
• 6:46
  SPEAKER_00: But what you have to also make sure is that your property will be safely and well maintained and managed, provide adequate fire safety measures, including, as I've said, smoke alarms, emergency lighting, depending on the size of the property.
• 7:03
  SPEAKER_00: You want to have fire blankets in the kitchens, you want to make sure the EPC is up to standard, that you've got your gas certificates, you've got your electric certificates, everything like that in place.
• 7:13
  SPEAKER_00: And you also, even if you're gonna give this to somebody else to manage, make sure that there's gonna be regular inspections because maintenance will be higher on an HMO than a normal property.
• 7:25
  SPEAKER_00: Now, when you have to go through planning, because maybe the property is gonna be a seven-bed plus.
• 7:31
  SPEAKER_00: When I say seven-bed plus, it could be seven-bed, eight-bed, nine-bed property.
• 7:35
  SPEAKER_00: You will have to go through planning no matter what, even if it's not in an article four area.
• 7:39
  SPEAKER_00: And if it is, of course, in an article four area, you will have to go through planning them.
• 7:44
  SPEAKER_00: But I like to say check your local council's planning policies, as some areas have restrictions on the number of HMOs, and as I say, that will mean it's got an article four area that you need to make sure whether am I inside this area or am I outside this area.
• 8:01
  SPEAKER_00: Don't be put off if you're inside the area, just reach out to your local council, ask to speak to the HMO officer and have a good chat with them.
• 8:10
  SPEAKER_00: If you're telling them and they're in demand of properties in the area that you're gonna put this property together, it's gonna be well maintained, well managed, it's gonna be a nice safe place for people to live.
• 8:19
  SPEAKER_00: You can see what the layer of the land is.
• 8:21
  SPEAKER_00: Will they let you or or give you a license?
• 8:25
  SPEAKER_00: Or our license is just being turned down left, right, and center at the moment before you start spending any money.
• 8:31
  SPEAKER_00: Obviously, as I say, if you go Sue Generous, which is gonna be a seven-bed HMO plus, you can then look to have your property valued on the income on a commercial mortgage, it's not valued on the bricks and mortar.
• 8:47
  SPEAKER_00: So let's say you buy a property for 300,000 pounds, you make it into an HMO, it's worth 400,000 pounds because you've given it an uplift and you've added value to the property.
• 8:58
  SPEAKER_00: Great stuff.
• 8:59
  SPEAKER_00: On a commercial side of things, the commercial valuation is based on the rental income.
• 9:03
  SPEAKER_00: So if you're in an area with high rental income, that GDV of 400,000 pounds could be 600,000 pounds on a commercial valuation, in which case it's easier for you to pull your money back out of or get most or if not all of your money back out.
• 9:18
  SPEAKER_00: So that's another thing to consider and to look at.
• 9:21
  SPEAKER_00: Factors obviously do influence the valuation, including the number of tenants, the rental yields, the local demand for the properties in the area as well.
• 9:30
  SPEAKER_00: Is it a market that is saturated there?
• 9:33
  SPEAKER_00: It's very, very important that you do your due diligence and you work out whether or not it's going to work for you in your area.
• 9:41
  SPEAKER_00: HMOs in the UK can seem overwhelming, but understanding the licensing regulations, the managements, and also all the different planning processes and procedures is essential.
• 9:53
  SPEAKER_00: Always check with your local council.
• 9:55
  SPEAKER_00: I cannot say that enough for any specific regulations or requirements in your area.
• 10:02
  SPEAKER_00: If you need any help with HMOs, with converting properties, with looking at buying them, how to negotiate them, how to set HMOs up, we have a detailed HMO training in my community that you can gain access to.
• 10:19
  SPEAKER_00: This is an in-depth mastering the HMO strategy for financial freedom training that is on offer to all of our community members.
• 10:28
  SPEAKER_00: If you're interested in having a look at that and plus all of our other trainings and support, then do check out the propertyunleash.com or education to action.
• 10:39
  SPEAKER_00: And you can come and join us there and you can navigate and work your way through all of the different complexities, learning it all so that you are the property professional of the time of right now.
• 10:51
  SPEAKER_00: And that's what I like to say in 2026.
• 10:54
  SPEAKER_00: You want to be a property professional, building a property business, not just a hobby.
• 11:00
  SPEAKER_00: No point in going out there and building a hobby.
• 11:02
  SPEAKER_00: Now it's about doing the right things at the right time in the right way.
• 11:08
  SPEAKER_00: So I look forward to you joining me in the next episode very soon.
• 11:11
  SPEAKER_00: You take care and bye for now.