Converting your property into an HMO – What landlords need to know

It’s no surprise that, as a landlord, you might be considering converting your property into a house in multiple occupation (HMO), also known as a House of Multiple Occupancy or house share. This sees at least three people from different households renting out rooms and sharing common facilities such as the kitchen and bathroom. Doing such a conversion can help reduce your risk exposure since you aren’t dependent on just one tenant, while also boosting rental income with yields that can be twice what you would get from a traditional buy-to-let.

But it’s not as simple as just enjoying the benefits. To ensure a successful transition when converting to an HMO, it’s vital to know what you are doing and to comply with the specific regulations, safety standards and licensing involved. Before you even think about an HMO conversion, you’ll also need to understand whether you have a suitable local market that is likely to want to live in an HMO.

Planning permission

Before you begin an HMO conversion, you’ll need to obtain planning permission from your local council. If you are renting to seven or more unrelated people, regardless of the number of bedrooms, it will definitely be required. However, the rules about planning permission vary by location and also by property size.

Specific regulations

There are several important regulations to be adhered to and these can vary by local authority. It’s essential to check regulations with your local body before you begin the conversion so you know exactly what will be expected of you.

HMO licence

As part of these specific regulations, an HMO licence has been required since 2006 under the rules of the Housing Act 2004 before you can rent out an HMO property to five people or more who form more than one household. This is one area where rules can differ according to your particular local authority, particularly for smaller HMOs.

In Peterborough, you will need an HMO licence if you are interested in letting to at least five tenants forming two or more households and sharing amenities. Application costs start at £750, and you will required to provide specific details in addition to proof of identity such as your mortgage, photo ID and proof of address.

Health and safety

As with traditional single-let tenancies, health and safety in an HMO is paramount. You will need to book an annual gas safety inspection and obtain an Electrical Installation Condition Report (EICR). Your gas safety certificate and EICR will also need to be shown when initially applying for your HMO licence. Smoke alarms and carbon monoxide detectors must also be fitted and tested. Appliances provided by you within the property will also need testing.

Fit & Proper declaration

Another part of the HMO licence application is a Fit and Proper person declaration which must be filled out by the proposed licence holder, or manager of the property. Managing agents have to fill out a separate declaration. Essentially, it requires the form-filler to confirm they are of good character and, if they have previously acted as a landlord, that they haven’t contravened any regulations or practises and therefore won’t pose a risk to prospective tenants.

Check your mortgage terms

When planning to convert to an HMO, it’s important to check your mortgage terms as not all buy-to-let mortgage terms will allow the conversion. You may have to take out a new type of mortgage in order to comply.

Planning rooms in accordance with regulations

The regulations also stipulate minimum room sizes which should be adhered to. For children under 10, the minimum is 4.64 sq m, 6.51 sq m for tenants over 10 and 10.22 sq m for two tenants aged 10 and beyond. For every four tenants, one bathroom should be provided – so that’s another factor to bear in mind when planning the floorplan for your HMO conversion.

Management challenges

It’s also worth noting that managing an HMO will be different to a traditional let. You will be managing multiple tenancy agreements, all of whom are more likely to move on sooner leading to extra admin. Of course, we can help source reliable tenants for you. Bonds or deposits should also be lower since the tenant is responsible only for their room, but the extra work of managing multiple clients and their references and rent collections will drive up your overall management time or management costs if you choose to outsource. Be aware too that, unlike with traditional lets, you will be responsible for paying utility bills as well as, most likely, council tax.

We Can Help

At Progressive Lets, we are experts in managing profitable HMOs all over Cambridgeshire, Northamptonshire and Lincolnshire as well as single lets in the Peterborough area. We can help with the extra work an HMO involves using our specialist knowledge of the market and also offer full management services and a variety of payment solutions.