Investing in rental property can be a lucrative business, especially if you own a house that can accommodate multiple tenants Renting to separate occupants in an aptly termed house in multiple occupation (HMO) can increase monthly returns However, owning an HMO has its legal limitations; landlord with no licence for HMO are not exempt from the consequences of flouting the law.
In the UK, all HMOs occupied by five or more unrelated occupants require licences A licence ensures that the property meets standards, such as suitable fire escapes and safe electrical and gas facilities.
The repercussions of operating an unlicensed HMO can be severe, both from the law and financially Here are some reasons why landlords must obtain an HMO licence to avoid severe consequences.
Legal implications of unlicensed HMOs
Owning an HMO without a licence is a criminal offence If convicted, you could face hefty fines and contribute to a criminal record that can severely impact your future business ventures or employment.
Moreover, unlicensed HMOs could result in civil penalties In England, consequences might include:
– Issuance of a civil penalty of up to £30,000 per breach.
– Order to repay rent received from the occupants.
– Inability to provide a section 21 notice to tenants seeking eviction.
The Financial pitfalls of unlicensed HMOs
During local authority inspections and HMO licensing applications, landlords may incur other costs These include the cost of necessary improvements to the property, permit applications, and loss of rent while complying with repairs.
The cost of retrofitting a property can be substantial compared to the price to perform prior renovations Retrofitting can cost tens of thousands of pounds, making the risks of not obtaining an HMO license substantial.
The benefits of obtaining an HMO licence
The benefits of obtaining an HMO licence to overcome the legal and financial consequences far exceed the costs The primary advantage is the assurance that you are providing a suitable living space for tenants As an HMO property owner, you can benefit from the following:
– High returns in market competition
Due to the specific requirements and costs involved in owning an HMO, not all landlords are willing or capable of entering this market Propertyowners who do not have HMOs may cash in on the higher returns that owning an HMO can provide.
– Reduced risk of legal action
Obtaining an HMO licence eliminates the risks of criminal prosecution, civil court orders, and costly property retrofitting Landlord with no licence for HMO. The benefits of an HMO licence extended to a range of financial benefits.
– Increase in Property value
Investing in retrofitting an HMO property increases the value of the property An HMO licence will also attract up to 20% more rent than a non-licensable property in the same area.
Costs of obtaining an HMO licence
HMO application costs vary, depending on the type of property being occupied Typically, the cost of an application ranges from £600 to £2,000 Several additional costs must be taken into consideration, including maintenance expenses and license renewal fees.
In addition to the application fee, HMO property owners must prepare the property to conform to specific legal requirements before applying Ensuring that your property meets fire safety, utility, and livable condition standards may involve structural changes, system installations, and other modifications.
Costs to maintain the property after receiving an HMO license may include refurbishment costs and insurance premium surcharges These expenses are, however, likely to be less than if you operated an unlicensed HMO.
How to obtain an HMO licence
Whether the property is owned by an individual or a limited company, only one licence is required per HMO property Landlords can apply for an HMO licence from their local authority, and the regulations require the property to meet fire safety, utility, and livable condition standards.
Landlords can access details about the requirements from their local council or seek the services of an experienced HMO licensing specialist The property may undergo unannounced inspections at any point during tenancy to ensure that the landlords are maintaining the property to appropriate standards.
Conclusion
Being a landlord with no licence for HMO can be a costly business failure Investing in retrofitting and obtaining an HMO licence gives the landlord peace of mind and a range of benefits in the long run All HMO property owners must apply for an HMO licence, follow the regulations, and maintain the property to an appropriate standard.