A survey of National Association of Estate Agents (NAEA) members into the effects of the HMO (House in Multiple Occupation) legislation has revealed that 63% of agents have seen landlords reduce the number of tenants in their properties in order to avoid the HMO licence.

In addition to this 35% of members reported an increase of properties onto the market that would otherwise have been classed as HMOs. In order to avoid the costly licence, the potential huge fines and the perceived expensive amendments to the property required to meet the licence criteria, some landlords are choosing to sell and cash in on property price rises.

The new laws governing HMO’s came into effect on the 6th April this year and were set to be fully enforceable on the 6th July. Under this new law landlords are required to hold a licence, which dependant upon the location of the property could cost as little as £200 and as much as £1,500 to apply for. If landlords do not comply they could be left with a huge fine.

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Whats a HMO?
If you rent your property to three or more unrelated people it will be classified as a House in Multiple Occupation and be subject to HMO Legislation. That means you must have an HMO licence and may be guilty of an offence if you rent a property without it. To get a HMO licence you must comply with the following:- Toilet - one for every five people
- Bath or shower - one for every six people
- Washbasin - within or adjacent to each toilet
- Adequate heating, lighting and ventilation
- A mains operated fire alarm system must be installed
- All gas and electrical appliances must be maintained in a safe and satisfactory condition
- Any furniture must meet with the legal regulations on fire safety
- In some properties doors must be upgraded to fire door standards
- At least one fire blanket and fire extinguisher must be provided

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Jan Bartlett, residential lettings expert at the NAEA comments: “A good lettings agent will be able to help the landlords through the new licensing process, and could in fact use the license as a selling point to prospective tenants. I would advice against landlords reducing the number of tenants as the property will still need a HHSRS check (Housing Health and Safety Rating System) in order to be deemed a suitable standard, and changes they are required to make are likely to add capital value to the property.”Peter Bolton King, Chief Executive at the NAEA comments: “The inefficient implementation of the licensing has resulted in widespread confusion. The Government failed to set cost guidelines and refused to subscribe to just one definition of a HMO. Reports indicate that the problems are by no means being felt nation wide, as some local authorities have dealt with the legislation more efficiently than others and well informed agents are capable of helping the landlords get to grips with the new requirements.

However, as local authorities have been left to charge as they see fit for the license, this has resulted in large discrepancies in expenses to landlords. It seems that a postcode lottery situation has been created. The confusion as to what constitutes a HMO and what doesn’t has led to many landlords being left vulnerable to huge fines of up to £20,000 and legal action from tenants.”