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investors-guide

hmo properties Any

hmo properties Any property rented to 3 or more unrelated tenants will require an HMO licence. HMO properties can return excellent yields, however they do come with an element of risk. The first thing to check is whether the property is eligible for an HMO licence (note: a property that has a valid HMO licence at the time or purchase does not mean you will be successful in being awarded a new one). Properties within the central conservation area The map above outlines the central conservation area in St Andrews. There is currently a ban on planning applications for new HMO licences for properties within this central conservation area (in force until June 2016 but may be extended further). This means if the property does NOT hold a Certificate of Lawfulness OR a Change of Use to be used as an HMO, then the property will NOT qualify for a new HMO licence. You can check what planning consents the property has via the Fife Council planning website. There is an exception to this. If the property is classified as a house with no separate dwellings above or below, then you are able to apply for an HMO licence for up to 5 persons without applying for planning consent, regardless of whether the property is in the central conservation area or not. Properties outwith the conservation area If the property is a flat and located outwith the central conservation area, it will still need either a Certificate of Lawfulness or a Change of Use to be used as an HMO before the HMO licence can be applied for. Given the property lies outwith the central conservation area there are no planning restrictions on applying for these, though the Change of Use is subject to a public consultation meaning the granting of this is not a 100% certainty.

HMO Physical Standards If the property is eligible for an HMO licence, the next step is ensuring the property meets (or can be made to meet) HMO physical standards. These are a fairly complex set of regulations which dictate things like safety requirements and minimum room sizes. For example: the property must be fitted with fire doors, a full hard-wired smoke detector system; emergency lighting; 6 x electrical sockets in rooms; fire fighting equipment and safety restricted windows. The requirements vary depending on how many bedrooms a property has. For example: 6+ bedroom properties need to double up on everything in the kitchen: two sinks, two ovens, two fridges etc. As a general rule, if the room sizes meet the minimum requirements, almost any property can be brought up to meet HMO physical standards. The full list of physical standards can be found on the Fife council website in a PDF spanning 12 pages. The cost for installing such items varies widely depending on the property and what is required. If the property has held an HMO licence previously, you may find little or no work is required in order for the property to meet HMO physical standards. Applying for an HMO Licence Even after the property has been brought up to meet HMO physical standards and holds all the relevant planning consents, there remains an element of risk when the licence is applied for or renewed (an HMO licence needs renewed every 3 years). The risk comes from the 21-day public consultation that landlords / agents need to abide by via the displaying of a public notice. Should any members of the public (including neighbours) object to the application, the case is automatically referred to a council committee hearing. The landlord (or their appointed representative) and any objectors are required to attend and speak at this hearing, where the committee will then decide whether there are grounds for the licence being denied. It is exceptionally rare for a committee to deny awarding an HMO licence unless there are special, extenuating circumstances. For example: if the owner has been negligent in their duties as a landlord, or if the property is in a particularly sensitive location that could have a considerable negative impact on those around it if it were to be run as an HMO property. We must add we have never known an HMO licence to be denied at a committee hearing, and none of our HMO applications have received any objections. However that is not to say it will not happen one day so prospective landlords must be aware of this. Costs of running an HMO property The costs involved running an HMO property are more than that of a 1 or 2 bedroom property. Aside from the fact HMO properties are generally larger and therefore cost more to repair and maintain, HMO regulations specify more frequent safety checks (see certificate section below). New HMO applications cost £1300, or £500 for a renewal which is required every 3 years, plus the cost of the letting agent fee to administer the application. Get the licence awarded and the returns on an HMO property can be very good however, with the room rental rates quoted earlier being applicable for properties right up to 6 bedrooms. Indeed, demand is especially strong for 4 and 5 bedroom properties in the green and amber areas of the town given their relative rarity.

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