Many people tend to think that getting a license from the Council means that they have received approval for Housing of Multiple Occupancy (“HMO”) means that you are off the hook. Unfortunately, not knowing the difference between a license and planning is one of the biggest pitfalls I have seen many people fall into.
This article is an informative warning to those who purchase homes to convert into an HMO or those wanting to rent out their buy to let properties.
A license
A license is an agreement that makes something lawful that would otherwise be unlawful. Most councils in England require owners to apply for licenses to rent out their homes. These licenses are generally there to eliminate unscrupulous landlords from providing substandard housing. Most people will know these licences as selective, HMO etc. It allows the Council to step in and stop a person from renting out their home if it is not up to standard and is renewed every five years.
The relevant law that allows Councils to implement selective licenses is Part 3 of the Housing Act 2004. A bit of bedtime ready should you be interested.
These licences cost some money, and applications need to provide gas and electrical certificates and confirmation that there are functioning fire alarms on the property. For HMO licenses, more information is required, such as details on fire doors, fire risk assessments, signage etc.
Licenses have specific applications, which I am sure makes people feel that securing a license is a triumph, and it is. However, applicants must be aware that depending on whether a local authority has article 4 directions, you will have to also submit for a change of use application, giving you a different outcome to what you received on the license.
Before purchasing a home that you will hope to rent out as a single let or HMO, be sure to check the Council’s website to establish what type of license you need.
There are two types of licenses which are Selective and Housing of Multiple Occupants licenses.
My wife and I have one buy to let flat, and we had to apply for a selective license where the Council asked us to fill out an online form. We required to provide details of Gas and electrical certificates. The council also came to inspect the property to ensure that it was of a habitable standard.
Planning permission
Planning permission is generally required for change of use applications that are not covered under the permitted development order. Planning permission assesses the impacts of your proposal on a local area. It considers the character, national space standards (room sizes, storage and ceiling heights), parking, and appearance, which is more thorough than a license. The Permitted development order is express planning permission which the government grants provided that the applicant meets the conditions stipulated within the order. In essence, permitted development takes away planning permission and locations that do not have article 4 directions can benefit.
Examples
A one-bedroom flat to be let to single-family only requires a selective license.
A three-bedroom home to be let to a single-family only requires a selective license.
A 3-bedroom shared house that seeks to provide rented space for up to six unrelated individuals will not only require an HMO license but potentially planning permission if the home is within an article 4 area. If the article four direction is in place, then planning permission will have to be sought. If a property is seeking to house more than six individuals
A maisonette or flat with three bedrooms that seeks to be used as an HMO will need both planning permission and an HMO License. Maisonettes and apartments do not benefit from permitted development rights. The critical point to remember is that permitted development only applies to houses when considering C3 (Houses) to C4 (HMO).
License vs planning permission
A license is a Council’s tool to control the quality of homes in a particular borough and eradicate “slum landlords” who provide substandard living spaces. Planning permission is used to control/ manage building uses and is assessed using planning policy.
I strongly recommend that readers should not confuse themselves between the difference between a license and planning permission. An approved license from the Council does not, in any event, mean that your proposed use is lawful. Be warned.
Due diligence
If you are purchasing a building with the hope to rent it out, make sure you research whether the Council in question has a licensing scheme. If they do, apply for the relevant license before you move anyone into your property. In addition, you will need to make sure you have evidence on your EPC (minimum of E rating), an electrical certificate and Gas certificate.
If you are buying a property that is already let as a single let or HMO, ask your solicitor to obtain the license details together with any relevant planning permission or certificate of lawfulness. It is better to be thorough at the beginning than to be reactive at the end.
Suppose the planning situation is not clear; factor the above into your to-do list and do not bury your head in the sand. I have always found that it is better to understand the full risks/ issues relating to a particular venture than to be surprised. So seek to remove the element of surprise.
Enforcement
There have been cases where a license was granted, and a planning enforcement notice followed. Try not to find yourself in the situation. Some people assume that the licensing and planning teams are the same until they receive an enforcement notice. They are separate teams and have two distinct functions.
When wanting to rent out a home for a single let or HMO, in most cases, you will need both a license and planning permission (not applicable if permitted development can be used).
Key lessons
Do your due diligence before deciding to purchase a home. Also, remember that there is a difference between planning permission and securing a license. Not understanding the difference between the two could cost you a lot of money and heartache.
Remember that it is a criminal offence to rent out a property in a borough that has a licensing scheme in place without you having an approved license in place.
Finally, be thorough in understanding the requirements for any property venture you want to enter. I have seen time and time again, people who enter into property not fully grasping the legal and regulatory requirements for their proposals. Furthermore, it is far better to hear than it is to feel, so take time to research the points raised in this article.
