HMO - Mandatory or Additional

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    HMO - Mandatory or Additional

    Hello,
    Just registered with this wonderful forum today.
    I own a 3 bed house within Newham council area, which can easily be converted to a 5 bed HMO (My friend has done it with a house having identical measurements in 2013).
    I am planning to rent it out now.

    I have been reading up so much about Article 4, and Licencing. I understand the law and rules (I think). But I really don't have a clue about the implications.
    I guess I am suffering from "Too much knowledge, but too little experience" syndrome!

    Can any one of you show me the correct path please...


    I advertised the house a few weeks ago, but have taken it off market now.
    I struggled to find single families with enough earnings who can afford the rent (top end of the market) and take the whole house.
    Probably family men these days prefer to raise their kids outside London, in leafier areas.
    However, I got a lot of interest from groups of young professionals who would like to take the house together.
    And here is where I am stuck, and need your good advice folks...

    My house got the most interest from groups who wanted to use the property in the following way...
    2 couples (4 people) will take the 2 double beds upstairs.
    1 single person will take the 3rd bedroom.
    NOTE: The house has massive living room, two bathrooms, massive kitchen with dining space, so most of the HMO requirements will be easily met.

    This means I will need to get Mandatory HMO Licence from the council.
    But if I do that, why not go all the way, and split the massive living room into 2 bed rooms (they will be more than 10.22 sq m each), so that I have a 5 bed HMO.
    I am sure the Mandatory Licence will be granted by the council, as I will do everything by the books... space, safety, garbage, parking etc.
    But I am doubtful that they will grant me Planning Permission to convert from C3 to C4.


    (Q1) What happens in this case i.e. I have Mandatory Licence, but no Planning permission? Can I still rent it out as a 5 bed HMO legally?
    Or will the council stop me from renting it out to multiple sharers?


    (Q2) Could the council ask me to convert the house back to 3 bed configuration again?


    (Q3) What would be the safest way to get started with renting out this property?
    Single let is out of the question.
    I can probably take a lower rent, and get 3 unrelated tenants sharing 3 bedrooms (without splitting the downstairs living room) and get Additional Licencing.
    I'll still have to apply for Planning permission, which I am not sure I'll get.
    But is this option any safer than the (Q1) option above i.e. Mandatory Licence with 5 bedrooms?

    PS: By safer, I mean to say, council might give me planning permission, they might be a bit lenient towards me, I will be able to continue with my letting to sharers without planning permission etc.

    Thanks in advance guys

    #2
    Talk to the councils planning department.

    They will usually give you an initial no-cost meeting to discuss the implications of your proposal (s).

    Comment


      #3
      The issue is change of use, rather than the internal changes.

      Comment


        #4
        Hi nukecad, and leaseholder64,
        Thanks for your replies.
        I just posted for the first time and already got two replies on this forum.
        Great!

        Comment


          #5
          Would anybody else like to share their thoughts?

          Comment


            #6
            Can I perhaps go back to basics , Is the property subject to a residential mortgage? If yes then you will need to notify them of what is proposed and seek their consent to have the funding arrangement changed to a BtL , this assumes that the lender also provides BtL mortgages and accommodates HMO’s. Given the nature of such niche properties many lenders are inclined to assist where the applicant has experience of owning other residential investment properties, there are however a small number who are not as strict. It is important to note that Local Authorities have a legal right to notify any lender that their borrower has applied for an HMO license, so better to get ahead before the Council notifies. Clearly if your property is unencumbered there is no such need apart from having to obtain new Buildings Insurance since the existing cover is entirely different.
            From my experience Landlords engage with the relevant parties within the council upfront in order to establish what is feasible and what complications might exist.
            I wish you success, it is a challenge and clearly you are focused on maximising the potential which your home affords,so be upfront with all parties and seek advice from the Council.

            Comment


              #7
              I have taken time to read Newham Councils briefing notes on HMO’s etc and clearly your concerns over the change of-use from C3 to C4 are fully justified and definitely need prioritising before paying out the level of fees due on an application for a Mandatory License. Ifthe Change of Use-is granted then the next stage is the application for thelicense. It’s a bit like a jigsaw puzzle, get the straight edge bits sorted before doing the fancy bits .

              Comment


                #8
                Hi loanarranger,
                I cannot believe someone would be so helpful, and invest their own time in going through my council's rules, just to answer my question on this forum. Thanks you so much!

                As I say, I have read up a lot, and spotted the mortgage related complication you mentioned already. I have procured a consent to let, and in the coming months will be remortgaging anyways.

                I seriously doubt that I will get planning permission. But someone told me, I will very easily get HMO Licence though. And this very experienced person advised me, just to get the licence, and start renting. Then apply for planning.

                But now this guy is out of the country and I can't get hold of him. So, I am not sure which licence to apply for - Mandatory or Additional? And can I really rent with just the licence, even though my planning permission is turned down?

                Help!!

                Comment


                  #9
                  "Someone" is giving terrible advice.

                  Your mortgage lender, insurance company and local authority won't be happy if you change the use of the building without planning consent.

                  Newham has an article 4 restriction which means that any conversion to an HMO requires planning permission (and they are reluctant to grant it) in the borough.

                  Newham has one of the more notoriously robust licensing and housing enforcement regimes in the UK.

                  Local Authorities aren't usually very joined up, but when you apply for an HMO licence, the chances are they'll check.
                  When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                  Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                  Comment


                    #10
                    Thanks for your kind words, however can I enquire whether you have made all the proposed Letting arrangements known to your lender, normally a Consent to Let is understood to be on the basis of it being let to a family and not a multi person let. I urge you to resolve this issue with your lender and indeed the Insurance Co before progressing to the next stage.
                    It is offer sad that we’ll meaning persons like you can be given such dangerous and unqualified advice by a “friend” , fortunately you have posted on an excellent forum where contributors have a wealth of experience from being involved in residential property investment and the associated elements like accountancy, mortgage finance and legal expertise. Ignore anything proffered over the bar counter and take heed of the replies here on Landlord Zone.

                    Comment


                      #11
                      Hi jpkeates,
                      Thanks for your input.
                      The way you senior members are painting the picture for me, I am guessing that planning permission first and then licencing is the safer way to go. But also, it appears I will not get planning permission.

                      But under the new Article 4 rules, I will have to apply for some kind of licence...

                      Selective licence - rented by a single family household or shared by two unrelated tenants.
                      Additional licence - shared by 3-4 tenants living in 2 or more households.
                      Mandatory licence - shared by 5 or more people living in 2 or more households.

                      Of the above, Selective will not be good for me, as no single family would be able to afford this large house by paying a fair rent.

                      I guess I will have to check with the council planning department, and see what they suggest.


                      Personally, I feel a bit sad as I feel this is a draconian legislation which is unfair to me as a landlord, who has got a great property but can't let it out at a fair rent, and unfair to the young professionals too who want to live here on sharing basis, but can't due to this law.

                      Comment


                        #12
                        Hi loanarranger,
                        Good point. Although I have got consent from Lender, I completely forgot to inform the Insurer.
                        But as I am delving deep into this world of Article 4, I am not sure I will be able to rent it out to multiple people.

                        Comment


                          #13
                          Unfortunately as landlords one has to accept that certain aspects are tough like having to pay SDLT premiums but that’s life and we have to work within the rules, failure to adhere to such requirements can result in serious penalties being applied and remember if you were to be prosecuted and found guilty this would impact on your chances of obtaining mortgage funding as lenders always ask”Have you been convicted of any offence other than minor motoring offences”, so play by the rules even if you consider them to be unfair.

                          Comment


                            #14
                            Originally posted by loanarranger View Post
                            lenders always ask”Have you been convicted of any offence other than minor motoring offences”, so play by the rules even if you consider them to be unfair.
                            Top tip of the day!



                            Comment


                              #15
                              Originally posted by BentuKala View Post
                              Hi jpkeates,
                              Thanks for your input.
                              The way you senior members are painting the picture for me, I am guessing that planning permission first and then licencing is the safer way to go. But also, it appears I will not get planning permission.
                              Don't be fooled by the "senior" tag, you get it when you post a lot (not because what you post is any use!).

                              Your property is in one of the few regions of the UK that has a tough housing policy.
                              I suspect that the policy is designed (in part) to deter "young professionals" and landlords who want to rent to them.

                              You do need to talk to the planning department, because I suspect that they'll just say no.
                              When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                              Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                              Comment

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