BTL changes add costs to landlords

Angela Faherty

June 17, 2006

The changes will be introduced on 6 July and are designed to improve the quality and safety features of the rental properties affected and to vet investors’ suitability to be landlords. Those not compliant in time could face fines of up to £20,000.

The most significant change will be the introduction of a landlord licence for any house in multiple occupation (HMO). This will apply to properties of three or more storeys, occupied by at least five people. However, each local authority will have the discretion to require other HMOs to have a licence and to choose the price of the licence.

Ray Boulger, senior technical manager at John Charcol, said: “Choosing an appropriate property and attracting the right tenants has become even more important with these new regulations. The variation in the cost of a licence means that location will now become an even more important factor.”

Boulger also warned lenders that do not lend on HMOs could inherit such properties by default through the changes. He said: “Under the new rules, the average quality of HMOs should improve over time, and so there are pro’s as well as con’s for lenders.

“Much depends on how many buy-to-let investors will avoid the sector in view of the extra costs and hassle of these legislative changes. This will determine to what extent, if at all, investor demand will be reduced for the types of property affected.”

Lynsey Scrivener, marketing director of The Money Centre, said: “It’s good that the HMO regulation is being brought in and that properties will be brought up to standard as a result, but with different rules and fees it makes the subject confusing. Some landlords we have spoken to might sell their properties as they can’t afford the licence.”

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