More properties are to be classed as Houses in Multiple Occupancy, which means they will come under the mandatory licensing scheme. New rules, which have been approved by Parliament, mean that properties of any height which are occupied by five or more people from at least two different households will need the mandatory licence. At present, the scheme only applies to properties of at least three storeys. This new ruling means a further 160,000 properties, including flats and bungalows, will come under the licensing programme. The price of a licence varies enormously from one local authority to another. New licences can be around £750 or more, while renewals can be about £500. If you take the 160,000 extra properties which are now included in these licensing schemes, this will bring in about £120 million of extra funds in the first year and £80 million every five years after that to renew the licenses. Hefty fines can be imposed if landlords do not have licences, so it is important to check what requirements are needed to acquire the HMO licence in your particular local authority area.
The new rulings will also set minimum sizes for bedrooms in these HMOs. Local authorities will also have to make sure that rooms which meet this standard are used for sleeping in. Bedrooms occupied by one adult will have to be at least 6.51 square metres, bedrooms for two adults will need to be at least 10.22sqm while rooms where children of 10 or younger sleep cannot be smaller than 4.64sqm.
At the same time, HMRC has announced plans, in a consultation document which is open for discussion until March 2, that landlords will have to be registered with HMRC for tax purposes before applying for an HMO licence. This is a clampdown on expat landlords who are not registering for tax, as well as UK landlords who are slipping under the radar.
At the same time, 2018 will see a blacklist of landlords and letting agents being introduced from April, housing minister, Alok Sharma, has confirmed. Local authorities and the Department for Communities and Local Government will have access to this register. It is not known whether landlords, tenants, prospective employers or other members of the public will be able to look at the list.
With these new regulations, on top of the tax changes and stamp duty charges, there are more reasons than ever for landlords to keep on top of administration. As well as the increased costs involved with acquiring local authority licences, fewer tax breaks and stamp duty for landlords looking to extend their portfolio, any additional costs through fines for non-compliance could make the difference between profit and loss. Investing in software and apps can ease the administration side of the business and automate it, so that landlords know when licences, contracts and safety certificates are about to expire. Specialist landlord software is also useful for drawing up contracts and making sure bills and rent are paid.