What you really need to know to be an HMO landlord
What you really need to know to be an HMO landlord
A while back I wrote this blog, about the pros and cons of owning and running a House of Multiple Occupation, or HMO. These are typically converted homes designed to give multiple tenants their own living space, often with shared facilities such as kitchens. These can be a really profitable way to use a larger property, with higher income than renting it to a single family or individual. However, they do come with some significant differences from normal properties – including the need to get a licence from the local authority.
So this week I’m going to look at what you really need to know to be an HMO landlord.
Firstly – don’t expect it to be easy. Whilst there is a small market for high-end HMO properties in certain areas (usually in expensive cities like London), in most cases HMOs are sought out by those who cannot afford to rent a property of their own. Many will be in receipt of housing benefit, and by the nature of the property, your tenants will not have chosen each other as housemates. This means that there are more frequent arguments and social problems, and a higher turnover of tenants.
Knowing this, the government has added regulations over the years that govern how a HMO must be run – known as the Management Regulations:
Whilst these do place extra burdens on a HMO landlord, they exist to take account of the extra problems that can arise. Primarily they exist to improve the health and safety of HMO tenants.
Landlord obligations for a House in Multiple Occupation
Since there will be several tenants living there, is a requirement that you post a notice in the public area (such as a shared kitchen or hallway) a notice of your name, address, and contact telephone number, or that of your manager. Think about that for a moment. If you manage these yourself, you need to give your full personal contact details to tenants, who can call you or potentially visit you at home at any time of the day or night. I wouldn’t want my details out there like that, as it only takes one unreasonable tenant to make your life a real pain. However, if you use a letting agent as a manger, it is legal to provide their details, ensuring your privacy, peace and quiet in the wee hours! I would also advise that you keep a photo of it’s placement inside the property – as if it is removed the council could decide to penalise you for not complying with the regulations.
This is probably the most important part of the regulations. Escape routes must be kept clear and in good repair, as must any fire fighting equipment, alarms, exits and fire notices. Landlords most often come unstuck by not being active in forcing tenants to remove personal belongings, such as bicycles, from these areas, or not checking on them often enough. Make sure that these issues are addressed in the tenancy agreement, and if necessary backed up with signs in the relevant areas. If someone is not complying, make sure that you keep a record of your conversation (email or written letter), showing that you spoke with the offending tenant and reminded them of their responsibilities. Follow this up with another visit to ensure that your instructions are being followed. All of this could be vital if the worst were to occur and you were facing a prosecution for blocked fire exits. It may also be worth conducting a full fire-safety risk assessment – your letting agent should be able to assist here if you don’t know how. Whilst not strictly necessary, it does show the council that you take your responsibilities seriously.
Likewise, you must ensure that the property is kept safe for its intended uses. Things like wobbly stairway bannisters, balconies without proper railings, or upstairs windows that open fully without a child safety catch could all land you in serious trouble. Once again, a health and safety risk assessment, whilst not mandatory, could be a very worthwhile exercise both in preventing injury, and in justifying your actions if an accident should occur.
You must arrange for a qualified electrical to inspect the wiring in your HMO at least every 5 years, and provide you with a certificate. Once again, you’ve got 7 days to provide this to the authorities upon request.
You might also choose to fit a metered supply to HMOs. This can be a good way of making sure that your tenants do not run up bad debts against the property by not paying for their electricity bill, and you can arrange to have each room or sub-let area have it’s own supply and meter for this purpose. However, if you are still responsible for the electricity supply to the common areas, you have to ensure that this supply never runs out.
Just like any let property, you need to conduct annual gas safety checks, and keep a copy of the certificates. Unlike other properties though, the council can demand to see a copy of it within 7 days – and they absolutely will prosecute anyone who fails to supply it within that time frame. Tricky if you happen to be on holiday for 2 weeks, as they will prosecute even if you can show you had a valid certificate all along but supplied it late! Once again, having an agent can avoid that potential nasty surprise.
You will be responsible for ensuring that all common areas, inside and out, are kept in a decent state, fit for habitation (and safe, of course). However, unlike a normal property, you could also be prosecuted if you fail to repair damage made by one of the tenants, because it would be disadvantaging the other tenants.
You may well have decided to provide your HMO accommodations with basic furnishings. The type of tenant who would be looking to live there is more likely to want a furnished property than those seeking an entire home. You should remember that all furniture needs to meet modern fire regulations, and any appliances should be in good working order and checked annually by a qualified electrician. It will be your responsibility to keep everything in the property that you have provided in good repair, although if the tenants cause the damage then you will be able to charge them for the cost of doing so (subject to normal wear-and-tear considerations).
In summary, running an HMO is not as simple as running a normal rental property. This is only a quick overview of the regulations, and I would advise anyone considering this as an investment to read the regulations carefully to ensure that you understand your obligations, and seek independent advice on how to run an HMO in your area, since local authorities can differ slightly in the way they licence such properties. If you are considering this type of investment in the Derby or Nottingham areas then please give us a call on 0115 945 5179 any time.