As of 1st of October 2018, there will be an extension to mandatory licensing requirements of HMOs, under section 55(3) of the Housing Act 2004. Currently (in most cases) a license is only required when a property has a) three storeys or more and b) five or more tenants from more than one household who collectively share some of the property amenities.
The main change to the HMO legislation that will take effect from October 1 2018 will be the removal of the current three storey rule. This could result in as many as 177,000 additional HMOs becoming subject to mandatory licensing in England, according to Residential Landlords Association research.
How will I know if I am one of the 177,000 HMO landlords now subject to mandatory licensing?
Landlords will have to obtain a mandatory licence where their property meets the following criteria:
- It is occupied by five or more persons
- Is occupied by persons living in two or more separate households; and meets:
- The standard test under section 254(2) of the Act
- The self-contained flat test under section 254(3) of the Act but is not a purpose-built flat situated in a block comprising three or more self-contained flats
- The converted building test under section 254(4) of the Act.
An HMO license usually lasts for five years and separate licenses must be obtained per property. HMOs that are currently on the selective licensing scheme will be subject to mandatory licensing when the extension comes in.
This is likely to mean far more properties will require licences before they are let out, including purpose built flats composed of two flats in a block.
Additionally, it was thought that there would be a grace period of 6 months – this is now NOT the case and all mandatory HMO licenses must be applied for by 1st October, 2018.
The new legislation also makes provision for room sizes. Double-rooms require a minimum of 10.22 sqm and single rooms a minimum of 6.51 sqm. For children under the age of 10, rooms must be at least 4.64 sqm.
New room size requirements for HMOs.
How will the new HMO legislation affect me?
The extension comes in a bid to improve standards within the private rental market, particularly reinforced following stories of unscrupulous landlords such as the one letting a two-bed to 16 tenants paying £50 a week in Kingsbury, north west London.
Evidently, this behaviour is a tiny minority and the more common initial impact of the extension is likely to be on urban flat letting landlords and student landlords.
The new minimum size rules are also particularly relevant to the latter who look to make economic use of space and squeeze a number of (student) tenants from different households into houses with limited facilities and usually three or less storeys (more often than not due to build).
The new regs are likely to damage private landlords profit margins further with costly improvements and additions and may even force some landlords out of the market if they lose rooms and are unable to remortgage on like-for-like basis.
The knock-on effect is likely to increase rents as landlords pass on costs as well as fewer rooms increasing demand.
Many landlords may also reason that if they have to use this summer to renovate in order to comply, then they might go full hog with a total refurbishment and target the more profitable but smaller Young Professional market (we gave our pros and cons earlier this year).
An extension to landlord stress levels
Regulators have been particularly proactive in the private renting market of late, with BTL landlords hit hard with recent tax changes, energy performance certificates and interest rate hikes. It leaves landlords reaching for the pack of paracetamol as they try and work out the regulatory headache that is besieging the HMO market.
It is no isolated incident either as new research reveals that 18.2% find it ‘impossible’ to keep up with constant regulation changes with a further 29.9% finding it ‘very difficult’ and 31.2% finding it ‘quite difficult’.
The report from The House Shop surveyed landlords on the 145 individual laws and 400 regulations relating to the private rented sector. Only 5.4% found it ‘fairly easy’ to keep up with new regulations and 3.6% ‘very easy’.
The survey also found that 63.4% listed compliance with legislation as the most challenging aspect of managing rental properties.
Landlord stress is a serious thing
This is all the more aggravated by the fact that some 60% of property investors are accidental landlords and potentially inexperienced with the sector, according to a report by MakeurMove.
Mental health is often stigmatised and many skeptics will point to the overmedicalization of symptoms of the modern day – cynics may find this article on ‘The evolution of stress’ thought provoking – but the ‘toughen up and deal with it’ attitude helps very little and can often prove detrimental.
The UK stress epidemic – some 3/4 respondents claimed to feeling overwhelmed by stress in 2017 and a worrying 1/3 reported suicidal thoughts – has led to the Mental Health Foundation calling on the government to regulate stress as a workplace hazard.
Identifying stress and use it to your benefit
The Mental Health Foundation definition of stress:
‘At the most basic level, stress is our body’s response to pressures from a situation or life event. What contributes to stress can vary hugely from person to person and differs according to our social and economic circumstances, the environment we live in and our genetic makeup.
Some common features of things that can make us feel stress include experiencing something new or unexpected, something that threatens your feeling of self, or feeling you have little control over a situation.
When we encounter stress, our body is stimulated to produce stress hormones that trigger a ‘flight or fight’ response and activate our immune system. This response helps us to respond quickly to dangerous situations.’
Below is a handy chart from Mental Health Foundation and the NHS:
How to deal with property stress
First of all, name it. Stress can lead to negative procrastinating behaviour which leads to a snowball effect as the problem does not go away. Tell yourself you are stressed and work out how you’re going to use those stress induced biological chemicals to your advantage.
- Go for a walk
- Get some oxygen and natural endorphins and it will help clear your head and refocus your attention.
- Get some oxygen and natural endorphins and it will help clear your head and refocus your attention.
- Enjoy a productive hobby
- There’s a reason DIY feels so satisfying.
- Why not pull out those old brushes and paper and see what you can paint in 10 minutes, or take time repotting or weeding some plants?
- As opposed to distraction hobbies (like movies, books or music) doing something you enjoy and deriving some form of creation from it is immensely satisfying and gives you productive purpose.
- Make a list.
- Humans have a habit of mixing all of life’s problems into one gigantic knot.
- Untie the knot, lay out your tasks and rank them in order of importance and urgency. This will help focus your energy and avoid burnout and procrastination.
- It will also give you better time management and a clear roadmap of jobs to execute.
- Likewise, break up mammoth tasks.
- Have a 20 page legal document to read? Read 5 pages a night (with notes) with a cup of tea.
- Have a 20 page legal document to read? Read 5 pages a night (with notes) with a cup of tea.
- Talk to someone
- Have a problem tenant? Use another human as a soundboard to see if you/they are being reasonable/unreasonable.
- The soundboard human may bring up something you hadn’t thought of and this might improve the actual situation.
At Smart Property, we know all about the industry’s stress – and have the t-shirt – but we’re a dedicated bunch of people who look after each other and our clients. We’re always a phone call away to be that soundboard or to run through a piece of legislation.
For this and more informative material from the Smart Property team, head over to our blog and join our fast growing newsletter. We’ll send insights straight to your email!
