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2 couples (4 tenants) = HMO?


scoot2001

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Hi,

I have a house currently advertised to let and it has been unusually slow getting tenants. Yesterday I showed 2 couples round the house together (they are all friends) and at the end of the viewing they said they would like the house but they wanted to rent it between them. It is a basic two bedroom, mid-terraced property so each couple would share a bedroom and they would use the other facilities communally. The couples are basically a brother and sister, each with a partner and they want to rent together as it would be cheaper.

Usually I would not be in favour of this option in case of potential fall-outs and such but as I said the letting market is slow here at the moment. On that note I have a couple of questions I could do with some input on:

1) Would the four of them moving in constitute an HMO, if so it's a non-starter as I don't want to go down that road?

2) If not what is the best way to get the tenancy signed, can I have all four signatures on it and if I only got one signature say, what would happen if that tenant moved out, would the others basically be squatting?

I'm just a little unsure as I have never let a house under these circumstances before, any help would be very much appreciated.

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I would definately have all four sign the AST whatever, as that makes them all accountable, if one leaves the other three have to find that share - explain this upfront to them - takes care of Q2.

Don't think it falls in the HMO's bracket, however, each council seems to have their own take so a call to check with your local council is the best bet.

I personally wouldn't, no couldn't, share with any of my brothers or sisters, sends a warning flag up to me.

hope it helps

cheers

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Have done this quite few times

Yes it is an HMO , but not licensable (any thing more than 1 house hold is an Hmo ) but this shouldn't cause any problems !

I find that as rent is so cheap it works well !

Also due to "extra wear and tear" on the house you have the perfect reason to notch the rent up slightly like about £200 pcm ....eg on a 2 bed at £650, i charge £850 if 4 occupants, which is still cheap living for them !....but as always you can of course negotiate......

All parties to sign AST ....

The Rodent

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Thanks folks.

They are supposed to be ringing me back tonight so I will see how it goes.

The rent going up is a good (and fair) idea though for 2 couples.

Cheers.

So the rental market is slow - you are struggling to find tenants - you don't want a void period - then 2 couples (brother and sister come along) - and you decide to increase the rent by £200.......

.... and you think that is GOOD and FAIR ........

Explain - so that I can understand - what your additional costs are re: 2 couples living in the house versus 1 couple ... and before you say "additional wear and tear" .... I would suggest that 1 couple and 1 child (which would be the norm for a 2 bedroom house) will cause more wear and tear (because of the child) than 2 couples.

The only reason you are increasing the rent is because you see an opportunity to profiteer...... (egged on by rodent).

I hope the couples turn your house down (because of the increase in rent and your sharp practices) and you then end up getting a long void period ..... I would have thought that you would have been grateful for getting more tenants without being greedy as well ......

PS: A property is only a HMO (from a licencing perspective) if it has 3 floors ........ and assuming the 2 bed house doesn't have a cellar then it is NOT a HMO.

Mark

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Not sure about increasing the rent as they are all signing one AST.....

However, if you were to rent the rooms on their own, what would you get? The norm for bedrooms let out individually in my area is 400 pounds per room, but for couples you are looking at at least 500 pounds. So what Rodent is saying could be reasonable, all depends how you look at it.

I guess another question is that if you had 2 parents and 2 small children that wanted to rent it...would you increase the rent? I doubt it.

You can talk about what is fair etc, but at the end of the day this is a business. If the four people are working, they can afford much more than 1 parent working with 3 to support, so you could probably get away with charging more. The main thing is, do you think other landlords would rent them their 2 bed properties for 650 pounds? If so you won't get away with increasing by 200 pounds.

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FTAO MR TRENNERS .....Just because a prop is not 3 storey >5 tenants DOES NOT mean it is not an HMO. see below.

The 1985 Housing Act definition of "House in Multiple Occupation" was a "house which is occupied by persons who do not form a single household".

Over the years, a body of case law relating to the HMO definition has developed. Currently, in its broadest meaning, a house is 'a building which is constructed or adapted for use as or for the purpose of a dwelling (Ashbridge Investments Ltd v Ministry of Housing and Local Government 1965). It is also 'a place fitted and used and adapted for human habitation' (Reed v Hastings Corporation 1964).

There are a variety of other premises included as houses under case law (e.g. lodging-houses, holiday homes for children, hostels and hotels occupied by homeless families). Houses converted into flats (whether self-contained flats or not) are still houses (Okereke v London Borough of Brent 1967). However, a single flat cannot be a house for the purposes of this part of the Housing Act. Although it has not been legally tested, it is generally assumed that a single tower block is not a house.

Occupied means 'lived in' (Silbers v Southwark LBC 1977). Therefore vacant houses cannot be HMOs under the legal definition.

The 'not of a single household' is the most complex part of the HMO definition. A 'single household' is not defined. Before 1969, membership of a family group or lettings in lodgings were considered a household, but this is no longer the case. The question of whether a group of people living in a house constitutes one or more household depends on the specific facts of the case in question.

There is no single criteria to decide if a single household is present. However, in 1995, the Barnes v Sheffield City Council case provided nine 'helpful indicators'.

a. whether the persons living in the house came to it as a single group or whether they were independently recruited;

b. what facilities were shared;

c. whether the occupants were responsible for the whole house or just their particular rooms;

d. whether individual tenants were able to, or did, lock other occupiers out of their rooms;

e. whose responsibility it was to recruit new occupiers when individuals left;

f. who allocated rooms;

g. the size of the property;

h. how stable the group composition was; and

i. whether the mode of living was communal.

If residents are recruited individually by the landlord and allocated a room, do not share facilities, have little communal living, and live in a large property with a rapid turnover of residents, then they are likely to be considered separate households.

However, each case is decided on its own merits. For example (Simmons v Pizzey 1979), 75 people were in occupation of a refuge for victims of domestic violence. The women organised the business of the house collectively, eating and undertaking the arrangements of the house together. No occupant had a special part of the house to herself. However, it was not intended that the women should live at the refugee indefinitely.

Some would move to permanent accommodation of their own, and others return to their former homes. Despite, the communal arrangements, it was held that this could not amount to occupation as a single household.

The legal definition of HMO is very complex and often revolves around the definition of a household. Within the legal definition, there is no attempt to distinguish between different types of HMO.

Once again the letting market has been hit by complex legislation, which was supposed to make life easy for landlords and agents alike.

However, since the introduction of the Housing Act 2004, the power for this piece of legislation - life has been made difficult – Why?

Simply because there are vague descriptions being branded about as to what constitutes an HMO? Does it need a Licence? etc.

How is an HMO defined by the Housing Act 2004?

In principle it is the same as under the Housing Act 1985, but with subtle changes

The Housing Act 2004 now defines an HMO in three key parts, 'House', 'Occupied' and 'Not A Single Household'.

This definition of a HMO comes under sections 254-258 of the Housing Act 2004

Housing Act 2004 - Section 254

(1) “ For the purposes of this Act a building or a part of a building is a ” house in multiple occupation

“ if:

a - it meets the conditions in subsection 2 (“the standards test”)

b - it meets conditions in subsection 3 (“ the self contained flat test”)

c - it meets conditions in subsection 4 (“the converted building test”)

d - an HMO declaration is in force in respect of it under section 255

e - it is a converted block of flats to which section 257 applies

(2) A building meets the standard test if

a - it consists of one or more units of living accommodation not consisting of self contained flats

b - the living accommodation is occupied by persons who do not form a single household

(section 258)

c - the living accommodation is occupied by those persons as their only or main residence or they are to be treated as so occupying it (section 259)

d - their occupation of the living accommodation constitutes the only use of that dwelling

e - rents are payable or other consideration is to be provided in respect of at least one of

those persons’ occupation of the living accommodation

f - two or more of the households who occupy the living accommodation share one or more basic amenities or the living accommodation is lacking in one or more basic amenities

Section 257

(1) For the purpose of this section a “converted block of flats” means a building or part of a building which-

a - has been converted into, and

b - consists of,

self contained flats

(2) This section applies to a converted block of flats if-

a - building work undertaken in connection with the conversation did not comply with the appropriate building standards and still does not comply with them; and

b - less than two thirds of the self contained flats are owner-occupied.

(3) In subsection 2 “appropriate building standards” means-

a - in the case of a converted block of flats-

on which building work was competed before 1st June 1992 or which is dealt with by regulation 20 of the Building Regulation 1991 and which would not have been exempt under those Regulations

Section 258

HMOs: persons not forming a single household

This section sets out when persons are to be regarded as not forming a single household for the purposes of section 254

(2) persons are to be regarded as not forming a single household unless-

a - they are all members of the same family, or

b - their circumstances are circumstances of a description specified for the purposes of this section in regulations made by the appropriate national authority.

(3) For the purpose of subsection 2(a) a person is a member of the same family as another

person if-

a - those persons are married to each other or live together a husband and wife (or an equivalent relationship in the case of persons of the same sex);

b - one of them is a relative of the other, or

c - one of them is, or is a relative of, one member of a couple and the other is a relative of the other member of the couple

(4) For the purposes-

a - a 2couple” means two persons who are married to each other or otherwise fall within subsection (3)(a);

b - “relative” means parent, grandparent, child, grandchild, brother, sister, uncle, aunt, nephew, niece or cousin;

c - a relationship of a half-blood shall be treated as a relationship of the whole blood; and

d - the stepchild of a person shall be treated a his child

Occupied means 'lived in' (Silbers v Southwark LBC 1977). Therefore vacant houses cannot be HMOs under the legal definition.

So if the criteria fits, the property, by definition is an HMO.

In the main, in residential letting, the properties that are generally associated with an HMO are student lets. However, properties can, in some areas be let to sharers due to necessity of costs or just because there is a lack of self contained affordable accommodation in that area, thus bringing them into an HMO classification. .

The other main area is properties being converted into self contained accommodation by landlords to maximise the rental yield on a property. Depending on when the property was converted and if planning permission was sought, then this type of accommodation may well fall into being an HMO.

HMO Occupation

That is the critical word “Occupation” not the number of TENANTS you have on an agreement. As the law is currently, there is no legal obligation to have an agreement in writing. Of course, it is legally safer to have a written tenancy agreement for all concerned and I would not advise any landlord to create a tenancy without a written tenancy agreement.

The crux here is that you could let a house to a couple, who sublet one room to a third unrelated person. Immediately this puts this property into an HMO classification

1 Property x 1 couple + 1 single = 3 occupiers = Two households = HMO

How many properties are no affected by this scenario?

1 Property x 3 single unrelated persons sharing = 3 households = HMO

But:

1 Property x 2 single unrelated persons sharing = 2 Households = NON HMO

Licensing of an HMO

This is the area where many people are confused. Do I have to have a licence for my property?

The main criteria - Numbers:

Numbers of People and

Numbers of Stories

A three storey property being occupied by 5 or more persons forming two or more households, is, by definition an HMO, but this type is more critical as it comes into the Mandatory licensing regime.

A two storey property occupied by 5 or more persons forming two or more households is an HMO, but would come under Additional Licensing rather than Mandatory

How is a three storey property defined?

If a property has a basement that is habitable and two other floors - classed as three storey property

If a property has a mezzanine floor and two other floors – classed as three storey

If a property has ground floor, rear annex and stair to the front part of the house ( a typical Victorian mid terraced property) – classed as three storeys

If these types of properties were occupied by 5 or more persons forming two or more households they would need to have a Mandatory License

A two storey property has just two flooring levels - Ground and First (no basement or attic conversion

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So the rental market is slow - you are struggling to find tenants - you don't want a void period - then 2 couples (brother and sister come along) - and you decide to increase the rent by £200.......

.... and you think that is GOOD and FAIR ........

Explain - so that I can understand - what your additional costs are re: 2 couples living in the house versus 1 couple ... and before you say "additional wear and tear" .... I would suggest that 1 couple and 1 child (which would be the norm for a 2 bedroom house) will cause more wear and tear (because of the child) than 2 couples.

The only reason you are increasing the rent is because you see an opportunity to profiteer...... (egged on by rodent).

I hope the couples turn your house down (because of the increase in rent and your sharp practices) and you then end up getting a long void period ..... I would have thought that you would have been grateful for getting more tenants without being greedy as well ......

Mark

???????????????? Mark .. when you get on a bus do you ask the driver why you must pay for a ticket, as he is going your way anyway ?

If i rent out a property to 2 people for £650 then they are paying £325 each.....

If i rent it to 4 for £850 then they pay £212.5 each ....that makes it £112.5 cheaper per person .......cheap living ..i would say ......

As for w/t ....yes too Bxxxxy Right .........twice the work done by washing machines, dish washers, showers, boilers etc more w/t to all furnishings and carpets .....

Also when letting rooms i charge £350 inc bills (for single occupancy) if a couple want a room then guess what?

YES OF COURSE I CHARGE MORE ......BUT AS A VERY RESONABLE LL not double, just an extra £100 (£450) ....

Profiteering ...sharp practice .....are you having a laugh Mark !!!!?? (i reckon as forum been a bit quiet lately , Mr Trenners thought he would spice it up a bit with this ....guaranteed to get a response eh !??)

YES very guilty of attempting to make a profit .....not sure about anyone else but that is exactly why I INVEST IN PROP !!!!

NO i am not running a charity !

Terms are discussed and agreed with T before hand so NO SHARP PRACTICE .....

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You can talk about what is fair etc, but at the end of the day this is a business. If the four people are working, they can afford much more than 1 parent working with 3 to support, so you could probably get away with charging more. The main thing is, do you think other landlords would rent them their 2 bed properties for 650 pounds? If so you won't get away with increasing by 200 pounds.

The desperate ones maybe !! the same ones who are buying "luxury appts"!!!!]

If either party not happy then cleary deal will not be done ....Personally, as stated have done this plenty of times, with no problems ...and if they dont want to pay ......no problem ....NEXT PLEASE !!!

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Hi,

Many thanks (rodent) for correcting me on what a HMO is. My definition related to mandatory licencing and I stand corrected!

However - I still stand by my initial comments re: sharp practice of increasing the rent for a 2 bedroom house if approached TOGETHER by 2 couples. ie: Not letting the rooms out separately but creating a single tenancy with 4 people on it.

Why is this a sharp practice ?

If I went into a sweet shop and was going to buy a bar of chocolate then it would be priced, for example, at 50p. If I told the shop keeper that I intended to share the chocolate bar with my partner then I would not expect the shopkeeper to increase the price to 75p (just because 2 people could share the cost of buying it).

Similarly, if I went to furniture shop and was going to buy a 2 seater sofa - I would not expect the price to rise when the owner finds out that my partner will be sitting on the sofa as well.

So - why should a landlord (who is supposedly running a letting business) be able to increase the price when he discovers that, perhaps, the purchaser might be able to afford to pay more. THAT IS A SHARP PRACTICE.

Mark

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If you book a holiday in greece for example for 4 people, often you will get charged more for the same room than if there were only 3 going. Sharp practice....I don't think it is.

If you stay over at a hotel your single room will be much cheaper than the twin which are often the same rooms..... again fair to pay more as 2 people staying.

These are more closely related comparables.

Another way to look at it, you are going for a Job which advertised a salary of £40,000. It is going well and as you are already on £40,000 a year, you think you would get away with demanding an extra £5,000 a year, because you're worth it and you think they willl do it/can afford it. I think this would be fair to do so and just the way business should work? I wouldn't see it as sharp practise.

If there is nobody else who can take the room in the same time period then I would start negotiations on £750, if they don't like it and won't agree I would end up agreeing to the £650.

If there are others which could take it (i.e. 2 friends) in the same time period then I would start at £800 and probably want at least £700 pounds to cover extra wear and tear and the fact that the more tenants will generally mean more hassle. If they won't pay it go with the 2 friends for £650.

The whole reason most landlords don't treat it as a business and don't try to make rental profits is because of the Capital gains which in the past have by far outweighed the profits to be made by the monthly rent.

However I think the 10% gain per year is going to be a thing of the past really, as it is not sustainable in the long term. I think over the next 20 years, 3% per year may be more realistic (or in line with inflation/pay rises, whatever they turn out to be). If this were to happen we would start seeing rents jump significantly as landlords would be forced to re-evaluate their strategy. Mark would not be happy with a 5% return and a small loss each year, as the maintenance of a house is likely to eat up much of the 3% increase in value over the long term, leaving you with pretty much no proft over the 20 year period and a lot of hassle......which sounds more like a charity.

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To muddy the water, I have a one bedroom holiday apartment in Portugal that sleeps up to 6. The price is the same per week whether it's 1 person or 6 staying and is standard practise for private lets. If anyone's interested check the link below (sorry for blatantism). However, a rent increase under an AST might be justified for multiple occupants due to increased wear & tear over same period. This isn't sharp practise, it's allowing for increased usage on own property as opposed to the other arguments by Mark that relate to something being sold and passed on. Applicant can vote with feet and go elsewhere if they don't like it; a commercial risk the landlord takes. My neighbour was buying a house until he found that the seller wanted a 10% share of any profit from future growth as part of the deal - he no longer has a buyer.

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To muddy the water, I have a one bedroom holiday apartment in Portugal that sleeps up to 6. The price is the same per week whether it's 1 person or 6 staying and is standard practise for private lets. If anyone's interested check the link below (sorry for blatantism). However, a rent increase under an AST might be justified for multiple occupants due to increased wear & tear over same period. This isn't sharp practise, it's allowing for increased usage on own property as opposed to the other arguments by Mark that relate to something being sold and passed on. Applicant can vote with feet and go elsewhere if they don't like it; a commercial risk the landlord takes. My neighbour was buying a house until he found that the seller wanted a 10% share of any profit from future growth as part of the deal - he no longer has a buyer.

Hi GPEL,

Thanks for your comments. Of course, if the landlord is incurring more cost (ie: additional wear and tear), additional utility bill costs (if these were included in the original rent) etc etc it is fair to pass these charges (plus a margin) onto the tenant - as we are all in business to make a profit.

However, increasing the price just because the tenants can afford it (with no additional cost incurred by the landlord) is sharp.

Rental properties let to named individuals under a single AST are always priced "per number of bedrooms" - "not per number of people sleeping within those bedrooms". Landlords do not charge hotel prices!

Also ... how a holiday company chooses to rent a room on a weekly basis via a holiday let is not a fair comparison with how a residential landlord charges for a house under an AST.

Mark

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Wear and tear will be greater (from my experience of HMOs and "multiple" occupancies) ......I also charge a higher bond for various circumstances ie...mediocre referernces, s/e inadequate income history, commission only etc

Also pets invite a higher bond and agreement to clean all soft furnishings to a professional standard ....

Rent in advance can vary from one month to six mths upfront and bond can be single or double....ast terms adjusted to fit circumstances .......

As well as all of the above NOT being BLACK / WHITE so is the rent dependant on exactly who is renting and what prop is used for .............

A 2 bed prop is "generally" rented to 2 adults/friends sharing or to a small family .........i consider this the "norm" once we step outside the "normal arena" terms will be negotiated .........I think this is perfectly reasonable .....???

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So long as both parties are open and honest about their reasoning, I don't see a problem with asking for more rent when the interest is from more than the usual number of occupants. Ultimately, no contract is set in stone until both parties sign up to it.

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