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HMO query

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UnclePhilip
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HMO query

#22436

Postby UnclePhilip » January 12th, 2017, 11:52 am

I've been looking at 2254 Housing Act 2004, due to an issue raised for a relative renting a flat.

He and his girlfriend rent a flat, and want to have a friend join them on the tenancy. Naturally they'll need the landlord's agreement, but the issue arises as to whether this would trigger HMO status, with the licensing and insurance implications involved.

The primary legislation suggests to me that as this is a self-contained flat HMO status would not be triggered but (i) I could be mis-reading and (ii) I don't know local authority regulations and if there are LA differences? and (iii) Don't know if the other accommodation in the building is relevant (I think 6 units in total)

HMOs have been puzzling unknowns to me. Advice greatly welcomed!

Uncle

modellingman
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Re: HMO query

#22493

Postby modellingman » January 12th, 2017, 2:14 pm

CLG has published a guide to HMOs which is quite readable.

From what you have said, it seems that adding a third tenant will turn the flat into an HMO. There will be two households: relative and girlfriend who are presumably living together as married (though not necessarily married) count as one household and, assuming they are not a relative, the friend would count as a second household. So unless the flat does not require the two households to share amenities (kitchen, bathroom and toilet), which I suspect is unlikely, all 4 tests of an HMO set out in the CLG guide would seem to be satisfied.

Although the flat would become an HMO, it would not fall into the category of mandatory licensing (5 or more people in more than 1 household across 3 or more storeys) but it may fall into the category of additional licensing. This is dependent on the local authority, and the LA's website should tell you whether the flat falls within an area where an additional licensing regime operates. If additional licensing is applicable I suspect the landlord would not agree to the additional tenant since the landlord would need to obtain a licence (typically at a cost of several hundred pounds) and would be subject to the conditions of the license and licensing scheme (including inspections by the LA).

Another consideration from the landlord's perspective could be the planning system. A dwelling with a single household falls within "use class" C3, whereas one with 3-6 people who are not all in the same household falls within use class C4. Change of use between C3 and C4 is a permitted development right in much the same way that replacing the doors or windows in a house is a permitted development right, ie a change which does not require planning permission. Local authorities can, however, restrict specific permitted development rights through an "Article 4" direction, in which case, planning permission from the LA will be required to make the change. In some university towns/cities Article 4 directions have been used to prevent studentification of specified areas by restricting the C3 to C4 permitted development right. Again, the LA's website should be able to tell you whether this is applicable to your relative's case and, if it is, what planning policies guide the granting of planning permission.

As the dwelling is a flat there are further considerations. The flat will likely be held by your relative's landlord under a lease and that lease may well specify conditions on occupancy (for example, it may specify that the flat can be occupied only by a single household or may specify a maximum number of occupants). The landlord will need to consult the lease to determine if there any restrictions which rule out adding a third tenant.

In practical terms, I suspect insurance is less likely to be a problem. Typically the lease will specify that buildings insurance should be taken out by the lessor who is then entitled to recharge lessees for this through the service charge. If the insurance is more restrictive than the lease in terms of number or type of occupants then the lessor would be failing to provide adequate insurance and so would become liable for any losses incurred as a result.

UnclePhilip
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Re: HMO query

#22528

Postby UnclePhilip » January 12th, 2017, 3:45 pm

Hugely helpful reply and link, thank you Modellingman!

tjh290633
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Re: HMO query

#22971

Postby tjh290633 » January 13th, 2017, 10:37 pm

Just a thought. What is the situation if the couple already renting the property take in the third person as a lodger?

When my daughter first got on the property ladder she had another girl as lodger to help pay the mortgage.

Is the third person really another household? Somehow I doubt it.

TJH

modellingman
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Re: HMO query

#22998

Postby modellingman » January 14th, 2017, 9:53 am

tjh290633 wrote:Just a thought. What is the situation if the couple already renting the property take in the third person as a lodger?

When my daughter first got on the property ladder she had another girl as lodger to help pay the mortgage.

Is the third person really another household? Somehow I doubt it.

TJH


Nice thinking but, unfortunately, the definition of "household" for the purposes of determining whether a property is an HMO is quite different from the everyday definition.

The former is set out in Section 258 of the Housing Act 2004. The Act makes no distinction between tenants and lodgers, instead the wording used refers to being "occupied by persons who do not form a single household" (section 254). So treating the relative's friend as a lodger rather than as a tenant doesn't help with the potential issue that the landlord may be required to obtain a licence from the local authority because an additional HMO scheme is operating.

Of the other potential hurdles faced by UnclePhilip's relative (agreement of landlord; requirement for C3 to C4 change of use permission; and, compliance with landlord's lease)
- most tenancy agreement's will prohibit sub-letting, adding additional occupants, etc without the landlord's consent, so acquiring a lodger will almost certainly require the landlord's agreement
- the use class definitions are determined by numbers of occupants and households (with again the definition of household being different from everyday usage)
- any restrictive conditions under the landlord's lease will also tend to be based on number of occupants.
Therefore, treating the relative's friend as a lodger rather than an additional tenant does not help with any of these hurdles either.

Your daughter with her mortgage was presumably an owner occupier. She and her lodger would not have been caught by the HMO regulations because there is a general exemption for dwellings occupied by their owners. Additionally, unless she was also part of a larger household, she and her lodger would have amounted to just two occupants and there is a further general HMO exemption covering occupancy by just two persons forming two households.

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Re: HMO query

#23442

Postby Amaryllis » January 16th, 2017, 11:02 am

UnclePhilip wrote:I've been looking at 2254 Housing Act 2004, due to an issue raised for a relative renting a flat....
Uncle


Can they ask the landlord whether he would consider issuing a new tenancy agreement, with the three as joint and severally liable tenants?

Assuming that this friend would pass any credit and other checks that this landlord requires, this might be most acceptable to both your relative and the landlord.

Of course this would mean that each tenant is liable if one of the others were to default.

As far as I understand it, this would not be considered an HMO.

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Re: HMO query

#23568

Postby modellingman » January 16th, 2017, 5:47 pm

Amaryllis wrote:Can they ask the landlord whether he would consider issuing a new tenancy agreement, with the three as joint and severally liable tenants?

Assuming that this friend would pass any credit and other checks that this landlord requires, this might be most acceptable to both your relative and the landlord.

Of course this would mean that each tenant is liable if one of the others were to default.

As far as I understand it, this would not be considered an HMO.


They can ask, but the landlord does not necessarily have to agree to the request. Although most landlords would want some form of referencing, this may not be the landlord's only consideration in responding to the request.

Adding the relative's friend as an occupant of the flat will cause it to become an HMO. Making all three occupants joint and severally liable as tenants does not make them all part of the same household any more than making the friend a lodger does. The question of whether individuals are in the same household or not is set out in the Housing Act and in the CLG guide. Other than the exclusion for owner occupiers, the tenure arrangements are immaterial. They are also immaterial for determining whether the flat falls within use class C3 or C4 and will almost certainly be immaterial as far as the landlord's lease is concerned.

Whether or not creating an HMO, changing the flat's use class from C3 to C4 and the conditions of the lease are considerations in the landlord's decision-making will, of course, depend on the circumstances: is additional licensing in force, is an Article 4 direction in force, what conditions does the lease impose?

In addition to these legal-type considerations, there are a couple of others I can think of that might be relevant to the landlord.

First, the landlord may not consider the flat suitable for 3 people. There will inevitably be greater wear and tear and greater levels of internal condensation simply because there are 3 rather than 2 people living there. Second, issuing a new tenancy agreement means that the landlord has a new commitment of 6 months (as a minimum) before he can gain no-fault possession under a Section 21 notice, this might be a consideration if, for example, the landlord was looking to sell the flat.

Again whether such considerations are relevant will depend on circumstances.


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