HMO - Company - owner occupied?

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    HMO - Company - owner occupied?

    Trying to get to understand the criteria a bit better, in particular for a company owned property. To this point, as I understand it:

    There is no HMO if: the property ownership is not held by a single company at more than 66.6%. For example Company A owns the freehold and the lease of 50% of the flats and Company B has a lease greater than 21 years for the other 50% of the flats.

    Looking at the Housing Act, and in particular owner-occupier;

    OWNER:
    The lease of Company B allows for disposal and reversion
    The lease of Company B is created at more than 21 years
    Company A is the freeholder
    Both companies are entitled to the rent and profit they generate

    OCCUPIER:
    Both companies have "an interest in the premises."

    The confusion is obviously a company cannot physically be an occupier, but I imagine there are many flats in buildings where the ownership is in one or more companies and I'm trying to understand how that impact the HMO criteria please?

    #2
    You appear to be talking about section 157 HMO's, under the 2004 Act.

    I would say that it was the clear intent that no exemption should apply.

    The obvious theory behind the owner occupation rule is that owner occupiers generally take on more responsibility for the property than a landlord or short lease tenant, and would be more willing to challenge defects, so a property that might be unsafe when filled with short lease tenants, is likely to be safe with majority owner occupation.

    Of course, the drafters may have got it wrong, and allowed a loophole, but there would still be a duty of care to ensure the building was safe.

    The only borderline case would be if the flats were void, so that there was no short sub-lease.

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      #3
      Assuming with regard to the above, that these were not companies, but investment individuals; Individual A and Individual B, then I’m assuming there would be no HMO classification?

      Changing this from individuals to two companies does that change anything so far as it not being an HMO?

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        #4
        It would be an HMO if the people who actually lived in the flats did not own them on a lease. Although ones one owner occupied property is an investment, it is not normally described as investment property.

        As I said before, I believe the intent of the rule based on real owner occupiers actually caring about the property.

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          #5
          I think the actor is trying to protect certain situations from HMO regulation. For example, a house converted into four flats where there are 7 parties, (1) freeholder (6) flats owners on long leases. If those 6 owners move out at various times and let their property as an AST it is possible that all six properties might be let at the same time. Assuming the property was converted prior to 1991 building regulations for all intents and purposes it would be an HMO. However because of the different owners, and from a very practical sense it would be difficult to ascertain who would be responsible for the HMO license, the Act would appear to relieve such a property from HMO registration because of the 2/3 rule.

          Now take exactly the same situation, where those six owners purchased their flats in the name of their own company, whether they live in the property or not, the situation is surel the same from an HMO perspective?

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