It doesn’t matter whether you’re a veteran HMO landlord or brand-new to HMOs, you need to be fully aware of any changes that could impact the industry. In recent years, there have been a number of reforms to regulations and HMO landlords’ legal obligations.
In this blog post, we’ll cover some of the important timings and changes that could impact HMO landlords throughout the rest of 2022 and beyond.
1. Right to Rent Checks
Landlords, including HMO landlords, must carry out right to rent checks to verify all of their tenants are legally allowed to live and rent a property in England. Throughout the COVID-19 pandemic, temporary measures had been put in place to allow these checks to be done remotely via video calls.
These temporary regulations are set to expire on 30 September 2022. The Home Office has also updated its code of practice for the right to rent checks, which landlords need to ensure they stay up-to-date on.
Since 6 April 2022, checks have been able to be undertaken digitally for British and Irish citizens who hold valid passports. Additionally, checks must be done through the Home Office online service for tenants who have a Biometric Residence Card, Biometric Residence Permit, Frontier Worker Permit holders, or who have been granted status under the EU Settlement Scheme.
2. Renters’ Reform Legislation
The long-awaited white paper for the Renters’ Reform Bill is expected to be published at some point in 2022. The bill could bring forward widespread changes to the private rented sector, so landlords need to be prepared well in advance and keep up with the bill’s progress.
Last year, it was announced that the bill was expected to include scrapping Section 21 evictions, providing landlords with more rights to remove tenants if they have a valid reason, and creating a lifetime deposit scheme for tenants.
The Levelling Up White Paper, which was released in February 2022, included some renters’ reform legislation, such as the creation of a Decent Homes Standard and setting up a new landlords register. However, further details on reforms to the private rented sector are expected to be announced at some point this year.
3. Energy Efficiency Requirements
Last year, the government announced proposals to increase the minimum energy efficiency standards of privately rented properties from the EPC rating E to C. This change could be phased in from 2025, but this hasn’t been written into law yet.
Currently, the Minimum Energy Performance of Buildings (No. 2) Bill is in its second reading in the House of Commons. Many are expecting the government to lay out some form of variation to energy efficiency rating requirements for properties owned by landlords soon.
At the same time, the Bank of England is starting to subject UK banks to climate-related stress tests. There are even proposals that lenders will soon have to start providing information on the energy efficiency of their mortgage portfolios.
This could mean that landlords may not be able to get a good mortgage deal, or maybe even a mortgage at all, for properties that have low EPC ratings, so this is something to keep in mind moving forward.
4. Carbon Monoxide and Smoke Detectors
The rules for carbon monoxide detectors in privately rented properties are being expanded. New proposals by the government include requiring a carbon monoxide alarm to be fitted in any room with a fixed combustion appliance, such as fires or gas boilers.
It will also become the landlords’ responsibility to ensure the alarms are installed, maintained, and replaced when they are told they’re faulty. These new rules are expected to be introduced sometime this year.
5. Rising Interest Rates
With inflation continuing to surge, interest rates have also been on the rise. On Thursday 5 May, the Bank of England increased the base interest rate by 0.25% to 1.0%. This is the fourth consecutive increase since December 2021, making rates hit the highest level since 2009.
With further rises expected for mortgage rates in the coming months, this is another area you really need to plan for as HMO landlords. Make sure you know how this will impact you, and find ways to get yourself into a super lendable position.
6. Reporting Capital Gains Tax
Any property you sell is subject to potential Capital Gains Tax. Previously, landlords and property owners had 30 days to file and pay their tax bill. However, this has been extended to 60 days.
The government had been urged to make this change by a number of different professionals in the property industry, and it’s been welcomed by landlords. While this extended time period for reporting Capital Gains Tax took effect in October 2021, some landlords are still unaware of this.
7. Pet-Owning Tenants
Currently, there is legislation pending in Parliament that could advance this year about making it easier for prospective tenants with pets to qualify for renting properties.
If this ends up being enacted, it would require landlords to offer a reasonable explanation for rejecting prospective tenants on the basis that they have a pet. That means the default expectation could be that pets should be accepted, except for any extenuating circumstances. It will be important for HMO landlords to understand how this could impact their portfolios.
We know this can be a dry part of property investment! But there are serious consequences if you don’t keep up with changes within the HMO industry, so make sure you stay on top of these and prepare for them ahead of time.
For more advice and resources on how to start, scale, and systemise your HMO business, including up-to-date information about legislation and your legal obligations, sign up for The HMO Roadmap!
About the Author:
Andy Graham is the founder and the lead trainer at The HMO Roadmap! He is also the co-founder of The HMO Mastermind and Smart Property, a specialist HMO property investment and management company. He writes as a regular columnist in different magazines about a variety of HMO topics and is the host of The HMO Podcast! Follow Andy on Instagram!