reunion 2015_raj beri

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MLCS Reunion 2015

Audacious Article 4

& Challenging Licensing


Raj Beri – property investor/landlord

HMOsLHA


HMOs – Some Basics

• Also known as multi-lets, house share, shared house

• Property let to 3 or more unrelated people = HMO!!

• There are different HMO markets– Workers, students, LHA

• Renting out HMOs: single/joint tenancies– Single: Workers, LHA– Joint: Students


Some myths about HMO Legislation

• Myth #1: Article 4 Direction developed for HMOs: NOT TRUE

• Myth #2: Article 4 means no NEW HMOs: NOT TRUE

• Myth #3: All HMOs need a license: NOT TRUE

• Myth #4: Only larger HMOs need a license: NOT TRUE

• Legislation– Article 4 Direction– Licence to operate


What is an Article 4 Direction (A4D)

A landlord has the right to convert a family dwelling to an HMO within their General Permitted Development Rights

• An A4D removes the General Permitted Development RightPlanning permission required from local council: may be refused

Remember: Aim of an A4D is to stop new HMOs


HMO Licencing - overview

Housing Act 2004

Licencing (2006)

Mandatory(UK-wide)

• 5 or more people AND• 3 storey's or more AND• >2 household

Discretionary(Council-led)

Additional Selective

• All HMOs • All Rental properties


HMOs: Article 4 versus Licensing

Article 4 (planning) & Licensing are entirely different bits of legislation, dealt by different council

departments

Article 4 = Licencing


Article 4 Direction in Nottingham (2012)

Whole of Council Area Could be Ward-specific Street Specific % specific Other criteria

• CHECK!!


Article 4 – The benefits?

• Less Competition- More Room Demand- R2R: LL maintains HMO- HMO value increases

Student Street


Scenarios in Article 4 area

Buy/R2R an existing HMO Rent out as HMO NO

Planning Permission required ?

Buy/R2R an existing HMO Re-Let as HMO NO

Buy a family home orstandard rental property

Rent out as HMO YES

Buy or have an HMO Re-Let as HMO YESRent to2 people or family

empty

Evaluate local planning regulations carefully!!


Licencing in the recent news…..


Licencing on the increase?


Case Study 1: Rolleston Drive, Nottingham (2010)

• Q1: Did I need permission to change use?• A: NO: permitted development• Q2: Do I need a licence to run the HMO• A: It depends!!

• Let to 4 sharer’s…….NO• Let to 5 sharers over 3 floors…..YES

4-bed family home with 2 reception rooms; Change to a 5-bed/ 3 storey HMO


Case Study 2: Salford Gdns, Nottingham (2011)

• Q1: Did I need permission to change use?• A: NO: permitted development• Q2: Do I need a licence to run the HMO• A: It depends!!

• Mandatory Licence…….NO• Additional Licencing in place…..YES

6-bed family home with 1 reception room; Change to 6-bed/2 storey HMO


Case Study 3: Gadd Street, Nottingham (December 2013)

• Q1: Did I need permission to change use?• A: NO: already an HMO• Q2: Do I need a licence to run the HMO• A: YES, Mandatory Licence

Purchased as 6-bed, 3 storey HMO, let to students


Hypothetical Example: Nottingham (Article 4 since March 2012)

• Q1: Do I need permission to change use?• A: YES: Article 4 in place

• Will council allow change in use to HMO?

• Q2: Do I need a Licence to run the HMO• A: YES – mandatory and additional licencing in place

• BUT irrelevant as Article 4 is in force

3-6 bed family home or single-let houseChange to a 3-6 bed HMO


A world outside of Article 4…..

Implement a different strategy

Salford Gardens: 6-bed student HMO• Purchase Price PLUS refurbishment & furnishing: £110K• Gross Annual Rent (no bills): £17,000• Gross Yield: 15%

Bancroft Street: 3-bed unfurnished property: LHA/HB• Purchase Price PLUS refurbishment: £60K• Gross Annual Rent (no bills): £11,000• Gross Yield: 18%


Investment Decision Tree

Purchase or R2R

Is it already an HMO**

** Seek evidence

Is Article 4 in place?

NO

Speak to local council

YES

Confirm Licencing rules

& proceed

NO

YES

Confirm Licencing rules

& proceed

** Article 4 not relevant


Thank YouQuestions

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