When a residential HMO landlord rents out more than one unit at the same time, they can get the benefits of economies of scale, the possibility of more rental income, and a lower risk of vacancy. This is because there are already multiple tenants in the property.
On the other hand, this may necessitate additional management time and effort, as well as compliance with new regulations, such as a licence from the local government.
Define HMO Things
Finally, let’s define this HMO management thing. There are two types of HMOs: those that require a licence and those that do not.
Properties with more than two stories and five or more unrelated tenants, who together make up two or more households, and who share kitchen, bathroom, and toilet facilities, are subject to licensure requirements. A home that has been turn into a series of separate sleeping quarters, such as a bed-sit, would fall under this category. Purpose-built apartment buildings and those that have been fully convert into apartments that adhere to the 1991 Building Regulations are typically exclud.
Tenants
Tenants must occupy the property either exclusively or primarily as their primary place of residence. Renters in the following categories will have their properties treated the same as those who use them as their primary residence: students, nurses, and migrant workers.
Any HMO that requires a licence from the government must have either the owner or the managing agent apply for and be issue one. The cost of the licence, which is determin at the regional rather than federal level, is valid for a period of five years.
Requirements
The general requirements (many of which apply even if the HMO is not licensable) are that the property be maintain in a safe condition. Such as obtaining annual gas safety certificates, making sure there are no major hazards, and making sure there are adequate means of escape in the event of a fire.
A criminal offence, punishable by a fine of up to £20,000 plus costs, is failure to obtain a licence when required. The maximum penalty for violating the terms of a licence is £5,000 plus costs, making it a criminal offence as well. Any property that falls outside of the aforemention categories may be grante a licence by the relevant local authorities.
Insurance
Although homeowners insurance may not have a direct bearing on HMOs, insurance companies will still need to know the specifics of the occupancy, as this may affect the premium or even the scope of coverage. Loss of rent coverage in particular may require some thought to ensure it meets your needs.
In addition, you should check that your insurance policies adequately protect the contents of any furnished units you rent out and the common areas of the buildings.
Rent guarantee insurance, in particular, may be of great use for HMO landlords. As it reimburses them for lost income up to a year after a tenant stops paying rent due to default (normally excluding the first month’s rent, as this is typically covered by the deposit). Legal fees and other expenses incurred during an eviction process are typically cover by the schemes as well.
If you own a home or other property, it’s a good idea to review your homeowner’s insurance policy on a regular basis to make sure you have had enough protection at a fair price.
Your insurance advisors should have extensive experience insuring commercial properties for property owners, so be sure to inquire about their track record in this area.
