The Houses in Multiple Occupation Act (Northern Ireland) 2016 came into force in April this year. It brings the regulations for HMOs in line with the rest of the UK and imposes tough new requirements on landlords to avoid overcrowding in residential properties. Landlords, managing agents and lenders need to be aware of this legislation.
An HMO is a property in which three or more people from different families live. It includes properties that have been converted into self-contained flats. Previously, it was the property that was the subject of the HMO Licence – and licences were granted by the NI Housing Executive, subject to certain works undertaken by the landlord to bring the property to HMO standards.
But now the responsibility for licensing is now passed to local councils. A landlord now must apply to register themselves as an HMO provider and must prove that they match the requirements to hold a licence and that granting the licence will not breach planning.
This regulation will influent on landlords and managing agents across Northern Ireland, particularly those owning properties let to Queen’s University and Ulster University students at their various campuses and those who are going to sell residential property portfolios.
In general, the licence will be granted for a five-year period, but it can also be shortened by the council. Licences can also be renewed and revoked. An owner of an HMO must apply and have a licence before it can be used as an HMO and the council can refuse to grant a licence if it is not satisfied that the property has the relevant planning permissions. Although, there is an option to appeal if applications are revoked or refused.
If the ownership of a property is transferred, any existing HMO licence also ceases to have effect. This may cause difficulties for vendors and purchasers with properties being sold with existing tenants in sit. The responsibility will be on the purchaser to apply for and be granted a new licence as the landlord for each property it purchases.
If a property does not have the required planning, then a Certificate of Lawful Existing Use or Development (CLEUD) must be obtained to evidence planning, before any HMO application is made by a prospective landlord.
Five years continuous use of the property must be demonstrated and proven, in order to make a CLEUD application. It will be important to have five years’ tenancy agreements and rental statements showing payments in this regard. A purchaser may lodge a planning application for change of use but given the over-saturation of HMOs in certain areas in Northern Ireland, in the alternative, though there is no guarantee that planning will be granted and could be refused. This could leave a purchaser and a lender in a difficult situation.
Landlords who are found to be operating an HMO without the appropriate licence – can be prosecuted and fined. Managing agents can also be prosecuted if they are complicit in the landlord’s activities.
It is therefore imperative proper advice is obtained from both a legal and planning perspective whenever a client is considering acquiring an HMO (and a lender is funding that purchase) – to ensure the property and the landlord do not fall foul of the new legislation.
Also, managing agents should ensure their clients meet the HMO requirements when letting such a property on their behalf. This is a complex piece of new legislation and those dealing with residential real estate and HMOs must familiarise themselves with it to avoid issues in the future.
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