HMO Mortgages

HMO Mortgages

What is a HMO?

In legal terms this is a House Of Multiple Occupancy requiring a licence to operate.

Prior to October 1st 2018 HMO licensing regulations required individuals to acquire a licence from the local authority, depending on where the property was located. Following this date however, new laws were introduced requiring more landlords to have an HMO licence, subject to changes in the definition of properties requiring licensing.

As the law stands, all HMO’s occupied by five or more people must have the appropriate licence – and remember – the focus is on the number of persons who live in the property regardless of how many storeys it may have.

Who is in the market to live in an HMO property?

You’ll find a wide range of people who might live in such a property including:

  • Professionals working in both town and city centres.
  • Students.
  • Local Housing Allowance claimants.
  • Tenants on low incomes.
  • Contact workers.
  • Foreign workers.

As you can see it’s a pretty extensive list, but it’s important to note if you have student accommodation in mind, this won’t work unless the property is in close proximity to a college or university.

What are my responsibilities as an HMO Landlord?

New laws in 2019 are working to ensure landlords get it right when it comes to their properties and the people who live in them. In fact, HMO landlords have legal requirements and responsibilities right down to the size of letting rooms. There’s even a minimum size permitted for bedrooms, but your local authority also has licence to set their own criteria around this. Always ensure you check with them first.

New Minimum Bedroom Size Requirements are:

  • For rooms accommodating one adult – sleeping space is 6.51 square metres
  • For rooms housing two adults – sleeping space must be 10.22 square metres
  • For rooms occupied by children aged 10 or younger – sleeping space is 4.64 square metres.

Please remember – it’s important to check the size of all bedrooms in your HMO, as you may need to carry out renovation work to increase the floor space.

What kind of tenancy agreements are there for HMOs?

There are two types of tenancy agreement an HMO landlord can offer. Namely, a joint tenancy and a single AST or assured shorthold tenancy agreement. A joint tenancy agreement involves all of the tenants living in the property, jointly signing an agreement on moving in. All will have the same rights, and all are equally responsible for adhering to the terms of the agreement including payment of rent.

In the case of a single assured shorthold tenancy individuals will have a separate agreement with you, and each will be responsible for their own rent, even if they share a kitchen or bathroom. These agreements will usually last for a six- or 12-month duration. You need to ensure however, you protect the deposit of the tenant. You must also give a minimum of two months’ notice for any tenant to leave.

What type of financial products are available to HMO Landlords?

It’s important to be clear when it comes to HMO’s, you’ll need specialist finance from Lenders well versed in this area of property.

Our experts can help facilitate several lending options to find the right package for your project. It may be a refurbishment loan is needed to bring your property up to current legal requirements, or update everything to maximise your rental income. On the other hand, you may want to purchase a property with HMO very much in mind

Whatever your requirements, we can talk everything through using our vast experience in the HMO sector to find you the very best deal. Why not give us a call today to find out more?