Can classification as an HMO reduce your house value when you sell?

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  • inthelandlordzone
    Hi gnvqaos,

    YES, on further looking in to all this, it seems that some of the comments made that HMO status *of itself* will reduce value seem to be plain wrong.

    Certainly if you have to change the *planning status* of the building to a category that specifically only allows use as an HMO, that could be a problem on sale.

    However, this only applies (in my area) to houses with more than five occupants in total (or it may be more. In any case, it won't affect me)

    That IS something you need to keep an eye on, because these planning requirements may indeed be something that a local council can change. And selling a house which has a specific form of planning that only allows the use of the building AS an HMO would indeed be an issue on sale (reducing the market of potential buyers, and subjecting buyers to specific requirements from lenders).

    However, if an additional license is granted, but no planning alteration, the seller can just stop or revoke the license, i believe, by changing the use of the house to having just a single household present .

    It would be up to the new owner to have to renew and sort out an additional license anyway, if the buyer then wanted to rent to more than two unrelated people.

    This is the information i've got from an environmental health officer who has a lot of experience.

    So, some 'overenthusiastic' responses in the thread, perhaps.

    Even so, other reasons may indeed work against someone applying, such as the cost of compliance in general being too great, especially if you are talking about just having one extra lodger (physical alterations, plus licence fees, plus general bureacratic hassle....all for renting one extra room to a lodger, in my case)

    ALSO - i still have a background worry about (at some stage) someone in the council attempting to band any room with an ensuite water closet as a 'separate dwelling' in the case of them having asserted that a room , which they are now saying is 'a bedsit' (simply because it has a connected toilet)

    Because it seems there can still be some stuff to do with it being 'at the discretion' of the council whether a shared house is in fact a 'bedsit HMO', or simply a 'shared house'...Both of these scenarios can apply while a house is still designated as an S254 HMO. and it all seems quite subjective and up to them.

    Regarding the theoretical danger of a council issuing separate band A council tax bills for different parts of an HMO.... No one seems to be very up on this.

    If it's a shared house where each house dweller is actually sharing a kitchen, garden, perhaps a living room, i can't really see how they can do that.

    But some legal professionals who write their thoughts on various forums and sites are putting that up as a danger (hopefully not just because legal professionals like to foster a bit of angst and fear, so that you pick up the phone to them)....

    Certainly if it happened, that could indeed be a BIG PAIN in the backside if you were selling a house, as a single house , to a family. no one would want to have to deal with the hassle of untangling the multiple council tax bills.

    I haven't heard of a case of this happening within a building designated as some form of S254 HMO. And if it did, i don't see how they could sustain that banding if you changed the use of the house back to a single dwelling (which it seems to me, you have every right to do , if there is not and has never been a requirement to change the planning status of the building (which there isn't, as discussed above).

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  • gnvqsos
    I cannot see how this designation will reduce value. However many such places are hard to convert back to homes which are aesthetically pleasing .They have been spoilt by ruthless partitioning ,fire doors ,locks etc Many owners put little investment back, opting to draw rent and take a profit.

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  • flyingfreehold
    Will drastically reduce value

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  • inthelandlordzone
    Hi DoricPixie,

    thanks for your response.

    I can honestly now say (at last) that I'm giving up on any plans to come to any solution which involves multiple occupancy and HMO status.

    It just isn't going to happen because of all these issues.

    I've been mulling it over for a while, but basically, HMO legislation, and the complications connected with it, must (as far as I can see) completely rule it out for any 'small time' landlord and individual who has extra space and would like to let some rooms (either more than two, or with additional licensing schemes coming in left right and centre, more than ONE additional room in their house .

    These risks (for anyone who is still not put off and removed from contention) can be summarised as

    1. planning risks
    2. mortgage risks
    3. reduction of property value at sale
    4. excessive expenses to comply with the VAST number of physical modification requirements
    5. likelihood of not being able to rent specific rooms in a house (examples - rooms more than one floor from a kitchen, but numerous other similar things apply)
    6, i could go on but that is more than enough.

    Although it amazes me that this situation has now come to pass,
    I can at least say that i'm now going to stop worrying about it.

    If the powers that be don't want me to provide much needed accomodation for single people THEN SO BE IT.

    My understanding is that this currently causing a large scale withdrawal of property from the rental market that could otherwise be availabe, and also a sell off of properties by small scale landlords who would otherwise be happy to rent them out.

    This, i understand, is causing a shortage of available property RIGHT NOW, and is a big reason why rents are in fact increasing strongly (lack of supply)

    All that is left, I suppose, is to ponder WHAT the govt is seeking to achieve, in view of all these counterproductive 'side effects' of the legislation?

    Anyway, i feel a certain sense of relief, because i can drop the subject now, exclude it from my options,
    the only solutions left within my situation is to let to a single household or family
    or sell up

    Thanks for sharing your point of view and knowledge on the subject

    with kind regards.

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  • DoricPixie
    Advised by a professional what?

    People who want to a buy a property with a regular residential mortgage will struggle to buy a property that is a licensed HMO with a residential mortgage. Much like people using a residential mortgage would struggle to buy a former guest house of B&B even if the intention is to live in the property as a family home.

    If you have a mortgage secured to the property then you might find what you are planning a breach of your own mortgage's T&C. I'm not sure of the ins and outs of HMO licensing and planning permission in England so I can't say if you'd need planning permission for turning your home into a HMO with 3 lodgers.

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  • AndrewDod
    This forum is such a resource for all the harmful side effects of bonkers legislation -- so here is another - legislative incentive to keep property unoccupied as a result of imposed risk.

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  • Can classification as an HMO reduce your house value when you sell?


    I have a single dwelling five bed house with one kitchen,
    but two bathrooms
    and one 2 room 'suite' that has it's own shower and toilet
    though kitchen and all other areas are shared
    + the house has one shared single main entrance and shared garden

    I live here but the place is too big for me (single person)
    So I currently have two lodgers (so no need for HMO license at this point)
    but would prefer at least one more (HMO licence required)

    I am advised by a professional that,
    even though I'm a resident landlord with sharing tenants on lodger agreements
    it would (nonetheless) be at the discretion of the council to decide whether the house is considered one building with several bedsits
    (OR , there's a possiblity they *might* consider it as shared house)

    MY QUESTION is -

    Would the licensing of the house as "a building with several bedsits" affect the value of the house if I decide to sell later on?

    BIGGEST WORRY HERE - having defined the house as an "HMO with bedsits",

    I understand that they could (in due course) decide to issue separate council tax bills for parts of the building (I believe).

    The obvious case being the room with its own toilet and shower -though it may not stop there?

    I presume this could be a sizeable problem if I decide to sell the house later (which I prob will)

    I'd be restricted to buyers who plan to be HMO landlords, maybe cash buyers
    as this would be a problem for an ordinary family buyer (plus their mortgage provider would not like it etc)

    Any advice or views on these (or similar HMO/house value hazards) would be appreciated !

    Thank you

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