A recent report reveals ‘instant postcode lottery’ and bewilderment for buy to let landlords. The new UK-wide HMO (Houses in Multiple Occupation) licence fees range from £60 to £1,100.

Half of landlords don’t know about new law for student and other shared rental properties. Heritable Bank have urged the government to provide local authorities and landlords with clearer guidelines.

Following the introduction in July of licence requirements for Houses of Multiple Occupation (HMO), such as student house-shares and properties housing several families*, a study published today by specialist lender, Heritable Bank, highlights huge inconsistencies in local authority implementation of these new rules and the resulting costs for buy to let investors. Worse still, half (50%) of UK landlords do not understand these requirements, and one in eight (12%) have never even heard of them.

Based on a survey of 57 local authorities across the UK during July and August, and a separate survey of 143 UK property investors, Heritable Bank’s study reveals HMO licence fees range from £60 per year in Hillingdon to £1,100 per year in Newcastle, with four councils still to agree their fees. Landlords with an average HMO property in the neighbouring London boroughs of Richmond and Wandsworth will be expected to pay £105 and £1,100 per year respectively, a difference of almost £1,000.

With the average basic licence fee costing £358 per year, UK landlords will shell out a minimum of £38 million in licence fees, or £1,702 per landlord, based on the Department for Communities and Local Government’s initial estimate of properties affected**.

While 61% of councils surveyed charge a different basic licence fee, Heritable Bank is also warning landlords to check the small print, since seven out of ten councils would levy additional fees and costs for properties with extra occupied rooms or survey requirements. The lender is calling on Government to create clear licence fee guidelines for councils and landlords and to reconsider introducing a cap on licence fees.

Mark Sismey-Durrant, Chief Executive of Heritable Bank comments: “This is a textbook example of a postcode lottery being faced today by tens of thousands of buy to let investors. Although the licence scheme was set up with worthy intentions which we support, the Government’s decision not to set a cap or provide any real pricing guidelines means honest landlords face a startling range of fees, and many will simply steer clear of the costliest boroughs, especially portfolio property investors.

We’re also alarmed by how little this new scheme has been communicated to landlords, since they now face significant fines for non-compliance, but half of them are unaware what they need to do. Although less than three months old, our research among both local authorities and active landlords confirms that the HMO licence scheme is already a confusing, chaotic mess.”

Other observations from the report include:
Councils’ licence fees vary between 1, 3 and 5 year deals
The cost of the licence fee is not determined geographically
Wandsworth proved to be the most complex licence depending on number of levels and occupied rooms
Some local authorities have not finalised their requirements
Notes
* Department for Communications and Local Government press release – 6 April 2006 (p11)
** 100,000 (22,500 landlords) properties to be affected

Copyright © 2007 First Mortgage Trust