Insight and events

With many moving parts and more complexities than your standard buy to let case, HMOs can present many obstacles for both investors and lenders.

We want to make it easier for you and help you feel confident to take on more HMO cases, so we’ve put together a list of the most common questions we receive from brokers.

From the 2018 licensing changes, to simple case queries – get the answers you need today.

1. When does an HMO property need a licence?

The classification of an HMO changed in October 2018. The new definition is a property that has five or more people occupying a property, who come from two or more separate households.

2. What are the different room size restrictions on HMOs?

Since October 2018, the minimum usable floor space to qualify as an acceptable bedroom is 6.51 square metres for single occupancy dwellings, and 10.22 square metres for double occupancy dwellings. Find out more about the HMO room size restrictions.

3. How does Kent Reliance base it’s valuation on HMOs?

Kent Reliance values properties on a "best rent" basis – i.e. based on the transactions of other HMOs and private dwellings of a similar size in the local area. This means the valuation produced is on a bricks and mortar basis and not on an investment basis.

4. What space do you allow for HMO bedrooms in terms of ensuites?

Ensuites are acceptable within bedroom spaces. If there’s anything additional like this in a property, please speak to your senior business development manager to discuss further.

5. What communal space is required for you to accept an HMO?

There must be a communal living space, in accordance with the RICS guidance. This can be in the form of a separate communal living room or a large kitchen/diner, for example. If you’re unsure, you can speak to your senior business development manager for further guidance.

6. Does my client need an HMO licence in place on completion?

It depends on the case. For purchases, HMO licences need to have been applied for on completion. For remortgages, HMO licences need to be in place by completion. When remortgaging a converted property into an HMO, or a property in an area where licensing rules have changed, your client needs to have applied for the licence on completion.

7. Can HMO licences be transferred between vendor and purchaser?

No – licences are produced for the property and the landlord, which means your client must apply for a new licence.

8. What are the different planning requirements – i.e., C3/C4/sui generis – that are needed?

If the HMO is to be occupied by three to six unrelated occupiers, then the property will need C4 planning in place. If there are more than seven unrelated occupiers, then sui generis planning must be in place on completion. For groups of people living together as a single household as a principle or secondary residence (such as a family), C3 planning will be required.

9. What is sui generis and when is it needed?

Sui generis is Latin for ‘of its own kind’. In terms of HMOs, it’s a type of planning required for properties where seven or more unrelated occupiers will reside – it doesn't fit with the standard C4 planning in place for six or fewer households.

10. When is planning permission required?

Planning permission is granted when moving from C3 to C4 under permitted development, or when sui generis is required. An Article 4 area is one that’s had some (or all) of the permitted development rights removed; therefore, any amendments to the property will require full planning permission.

11. Can you capital raise on an HMO?

Yes, you’re able to capital raise on an HMO.

12. Why is an HMO more expensive to value than a standard property?

The complexity – HMO valuations are more detailed and complex in nature than a standard property.

13. What is selective licensing?

Some local authorities state that all houses rented through the private rental sector need a licence – this is regardless of size. We do accept this, but if you need more information on the matter, you should refer to the local authority websites.

Your support matters

Although your clients should know about the licensing rules, feel free to support them where necessary – especially if they’re remortgaging a property.

If their properties fall within the licensing rules and they don’t follow procedure, landlords could have the local council chasing them, or be forced to quickly renovate properties to make them legally habitable. Plus, there’s an unlimited fine.

How else we could help

We understand the complexities of HMOs, and have the experience and flexibility to help you tackle these cases. Get in touch with your senior business development manager or speak to the broker liaison team for more information on how we can support you.