Complex made easy

HMO

The definition of Houses in Multiple Occupation is defined as a property rented out by at least 3 people who are not from 1 ‘household’

HMO

The definition of Houses in Multiple Occupation is defined as a property rented out by at least 3 people who are not from 1 ‘household’ (i.e not a family or other special relationship) but share facilities like the bathroom and kitchen. 

It is worth noting that not all HMO’s require licencing and/or change of planning.  #teamVIBE can assist on both of these points as it is dependent on your local authority

HMO Mortgages are a specialist type of mortgage product available where lenders will accept House in Multiple Occupation as acceptable lending security. 

Whether it be finance required on a small or large HMO, here at VIBE we specialise in not only the ‘vanilla’ type cases but also the more ‘complex’ ones – it’s simply the core of what we do! 

We’re here to help our clients whether experienced professionals or first-time landlords – speak to one of our HMO specialist advisors today to see how we can help.

  • Small and large HMO’s considered (no maximum number of bedrooms)
  • More than one kitchen acceptable
  • Maximum typically 75-85% LTV (more if providing additional security)
  • Licenced and unlicensed HMO’s
  • Competitive rates
  • DSS tenants acceptable to some lenders
  • Individual or Limited Company / SPV applications accepted
  • Corporate lets

FAQs

Are there lenders that will lend to first time HMO landlords?

Yes.  Some lenders require clients to have investment experience (minimum 12mths or more) and/or be a homeowner. There are however, specialist lenders that can consider if a first time buyer/first time investor subject to certain criteria however options are limited.  Speak to one of our specialist HMO advisors today to see how VIBE can assist.

Does my HMO need a licence?

In the first instance we would always recommend you speak to your local council to check if you need a licence.

 

You must have a licence if you’re renting out a large HMO – you’re property is defined as a large HMO of all of the following apply;

 

  • It is rented to 5 or more people who form more than 1 household
  • Some or all tenants share toilet, bathroom or kitchen facilities
  • At least 1 tenant pays rent (or their employer pays it for them)
I have a HMO licence - does this mean I do not require planning?

It is worth nothing that the HMO Licencing and HMO Planning is dealt with by 2 completely separate departments at all local authorities. You will need to consult with both departments to see if a licence and/or planning is required.

Does my HMO require a change of planning?

There are 2 types of HMO Planning Permission changes;

C4 HMO Planning small shared houses occupied by between 3 and 6 unrelated individuals

Sui Generis HMO Planning shared houses occupied by 7 or more unrelated individuals

In the first instance we would recommend speaking to your local authority to see if the property in question is located within an Article 4 Directive area.

If the answer is yes – a full planning application is required

If the answer is no – a full planning application is not required and planning permission may be obtained through permitted development

What is an Article 4?

An Article 4 Directive are a means by which a local planning authority can bring within planning control certain types of development or changes of use which would normally be permitted development.

 

You will need to check with your local authority if your HMO is within an Article 4 area.

What are the national minimum room sizes for licenced HMO’s?

From 1 October 2018, when granting a licence for a HMO property, a local authority must impose conditions relating to the minimum room size which may be occupied as sleeping accommodation. Any room which does not meet the minimum requirement must not be used a sleeping accommodation.

 

A HMO licence granted under Part 2 of the Housing Act 2004 (that is pursuant to mandatory and additional licensing schemes) must contain conditions requiring the licence holder to ensure that any room used for sleeping accommodation is;

 

  • Not less than 6.51 m2 for one person over 10 years;
  • Not less than 10.22 m2 for two persons over 10 years of age; and
  • Not less than 4.64 m2 for one person aged under 10 years.
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The conditions will apply to all licences granted on or after 1 October 2018, this includes renewals of existing HMO licences

Will the lenders valuation be based on bricks and mortar (vacant possession) value or investment value (yield based)?

As a general rule of thumb – small HMO’s (up to 6 bedrooms from a lenders perspective) will be based on a bricks & mortar basis on a short form valuation.

 

Large HMO’s (7 beds +) will be based on a yield (investment value) on a red book RICS ‘long form’ report.

 

However, there are a few lenders that could consider the investment value of the property on smaller HMO’s (typically 5 beds +) taking the following considerations into account;

 

  • Does it have C3 or C4 planning?
  • Is it in an Article 4 area?
  • How much has been spent on works to the property if recently converted to a HMO?
  • What is the clients own experience as a HMO investor?

 

Ultimately the question lenders will ask themselves is; ‘can the property only really be sold as a HMO?’

What is the difference between C3, C4 and Sui Generis planning?
  • C3 Planning; Dwelling Houses (permitted change to C4)
  • C4 Planning; Houses in Multiple Occupation (permitted change to C3)
    Use of a single dwelling by 3-6 residents as a ‘house in multiple occupation’
  • Sui Generis Planning; Large HMO’s (more than 6 people sharing)

Sui Generis is Latin for ‘a class of its own’

Will I be fined for letting out an unlicensed HMO?

If the property requires a HMO licence in order to be let as a HMO then yes you can get an unlimited fine for renting out an unlicensed HMO.

How long is a HMO licence valid for?

A HMO licence is valid for a maximum of 5yrs.