If you are purchasing a property as an investor for buy to let purposes, you will need to consider if the property is classed as being a house in multiple occupation, also known as an HMO.
An HMO is a property which is rented out by at least 3 people who are not from one household but they share facilities such as the kitchen and bathroom.
If the property is an HMO then you will need to contact your local authority to see if you need a licence to use the property for this purpose. If the property is being used as a large HMO (which means it is rented to 5 or more people who form more than 1 household, some or all of the tenants share bathroom or kitchen facilities, and at least one of the tenants pays rent) then you must have an HMO licence. If the property is rented to fewer people then it will depend on the area as to whether you need a licence.
An HMO licence is valid for a maximum of 5 years and is particular to the property and the person who has applied for the licence. This means that if you’re buying an HMO property and are going to continue this use, you will need to apply for your own licence following completion of your purchase.
In certain areas within a local authority, if you wish to change the use of a property from a residential property to a HMO then you will need planning permission for this change of use as well as an HMO licence. This will be shown on your local search as an “Article 4 Direction”, which places restrictions on development which is usually permitted. This means that an HMO will require planning permission as well as a separate licence from the Council.
It may be that the property in question has been used as an HMO since before the Article 4 Direction came into force. This means that planning permission is not required as there has been no change of use, as the property has continuously and consistently been used as an HMO over the preceding years. Evidence will be needed to show that this is the case. If you are buying an HMO, the seller must be able to provide either a valid planning permission for the change of use of the property to an HMO since the Article 4 Direction came into force, a certificate of lawful use which has been issued by the local authority to confirm that the current use of the property is lawful, or appropriate evidence to demonstrate the continued use of the property as an HMO prior to the introduction of the Article 4 Direction. This can be in the form of historical assured shorthold tenancy agreements, historical HMO licences, or an appropriate statutory declaration from the seller to confirm the continued use of the property for this purpose. It is important to evidence the continuous and consistent use of the property as an HMO.
Any buyer of an HMO property should ensure that satisfactory evidence or documentation is provided, otherwise they may run into problems either during their ownership of the property or when they come to sell the property. Buyers must also be aware of the local authority’s requirements which must be met before they grant an HMO Licence, and their ongoing responsibilities as a landlord of such a property.
