SMF - Just Installed!

HMO rules

Started by Kizzy, October 27, 2024, 10:34:56 AM

Previous topic - Next topic

Kizzy

We are hoping to buy a small two bed property as an investment and to help our son with housing security. We would be cash buyers, no mortgage.

The plan would be for him live there with his best friend and best friend's partner. Son wouldn't pay rent but would pay bills and maintain the property. The other couple would pay us some rent (but below average rates).

We want to take our legal responsibilities seriously but we are confused as to whether this would be a multiple occupancy? They would be two separate parties/households meaning an HMO, but the wording of everything I've read suggests that this applies to tenants. Our son wouldn't technically be a tenant, so - possibly a naive question but I can't find the answer - would a license still be necessary?

jpkeates

The rules apply to occupants, not tenants, so it would be an HMO. It would be a small HMO, so you'd need to look at the local policy relating to such properties.

It wouldn't be an HMO if your son owned the property, or part owned it, so you could make them a part owner, and avoid the issue entirely.

There are obviously other implications of your son being a part owner (such as being ineligible for first time buyer schemes) so it would need some thought.

David

Rule 1. Never rent to friends or family, familiarity breeds contempt.

Rule 2. Read Rule 1

Honestly friends are only friends because you don't live with them, you could call this "how to lose friends".

Not only are friends and friends of friends lost, but they can become surprisingly vexatious on legal matters.

If investment is your key concern maybe put the property in your son's name from the start, lend him the money at a low interest rate, or have him pay you some repayment.

This would cut out the 7 year gift rule changes in the budget or alternatively make him the freeholder giving you a lifetime lease, such a lease would have no value on your death so no taxes. 

The way to avoid a lot of the hassle is for your Son to be be the live in Landlord and to have a Couple as lodgers (seriously not friends).  It might still trigger some HMO rules depending on area and local Council where the property is located, but it also changes the dynamics of the relationship between them.  A live in Landlord can evict a Lodger with a reasonable notice, say two weeks. Also no deposit protection requirements for lodgers.

What I am seeing a lot of lately is properties modernised to avoid HMO by getting rid of shared facilities, essentially they put in a shower and kitchen in a single room or zone of the property and call it a studio or maisonette, so no shared areas or access routes.  These are often done with the approval of the Council and used as temporary accommodation. Messy splitting energy meters etc so not everyone's cup of tea.

Another option is to make the flat his and use the spare room for AirBnB, there may still be local rules and tax must be accounted for as always, but I know of quite a lot of people who did that for a temp period and then decided to do it full time.  You can either delegate the admin to him or do it yourself.  I think there is a course on it somewhere online.

The key Council consideration are fire regulations and environmental and repairs, it is always a good idea to seek the advice from your local Council on fire regs, do more than is necessary even, it keeps em sweet.

Your local Council will have their HMO rules (mostly garnered around core Gov legislation) on their website and list whether your property is in a an area defined under an "additional licencing Area" "zone" or "scheme". Note the differences between Selective and Mandatory.

e.g.  look at the approaches of these Councils

https://www.towerhamlets.gov.uk/lgnl/housing/Health_and_housing/Landlord_licensing_scheme/Additional_Licensing_Scheme.aspx

https://www.redbridge.gov.uk/housing/private-rentals/hmo-licences/

https://www.basingstoke.gov.uk/hmo

https://www.reading.gov.uk/housing/private-renting/landlords/houses-in-multiple-occupation-hmos/


Quote from: Kizzy on October 27, 2024, 10:34:56 AMWe are hoping to buy a small two bed property as an investment and to help our son with housing security. We would be cash buyers, no mortgage.

The plan would be for him live there with his best friend and best friend's partner. Son wouldn't pay rent but would pay bills and maintain the property. The other couple would pay us some rent (but below average rates).

We want to take our legal responsibilities seriously but we are confused as to whether this would be a multiple occupancy? They would be two separate parties/households meaning an HMO, but the wording of everything I've read suggests that this applies to tenants. Our son wouldn't technically be a tenant, so - possibly a naive question but I can't find the answer - would a license still be necessary?