Landlords wishing to buy or convert property with the intention of creating a House in Multiple Occupation (HMO) need to be fully aware of any possible financial implications if Article 4 Directions have been put in place by the Local Authority.
Commercial conveyancing lawyer, Vili Chung from Tallents Solicitors in Mansfield explains more:
The need for shared housing the UK has increased over the last few years as mortgage lending criteria has become tighter and there is a reduced supply of affordable houses available in the housing market.
What is a House in Multiple Occupation?
In April 2010, the government changed the planning law, creating a new Use Class of ‘C4’ or House in Multiple Occupation, which allowed landlords to apply for planning permission to let a former family home (C3) as a small HMO (C4) to between three and six unrelated occupants.
In October 2010, the legislation was further amended to allow a landlord to effect a ‘Change of Use’ from C3 to C4 within the General Permitted Development Order (GPDO), without the need for formal planning permission.
What is an Article 4 Direction?
However, to limit the number of HMOs in a specific geographical area, since March 2012 the legislation also gave Local Authorities the power to remove automatic permitted development rights for C3 – C4 ‘Change of Use’ and instead requires landlords to apply for planning permission if the HMO is located in a designated area. This is known as an ‘Article 4 Direction’.”
Investment landlords need to be aware of the Local Authority’s approach to Article 4 Directions and whether HMO thresholds have been specified for certain areas of a town or city before they invest significant sums in renovating existing properties or buying HMOs for development and subsequent letting.
HMOs in Article 4 Direction areas
Existing shared houses are not subject to Article 4 if the property was used as a HMO prior to 12 March 2012, as planning permission would not be required. However, the council would usually require evidence of old tenancy agreements to support this.
Some people are mistaken in thinking that an existing HMO property with a current HMO licence will be would be sufficient. However, this is incorrect and if a buyer purchases a property as a HMO in an Article 4 Direction area, then potentially they are at risk of enforcement action being taken against them and being fined up to £20,000.
Landlords with HMOs in different Local Authority areas may be subject to several different Article 4 Directions, so we would recommend that landlords do not commit to buying a property as an HMO in a designated Article 4 Direction area before permission from the Local Authority has been received in writing.
Our conveyancing experts at Tallents are here to help any landlords with concerns about HMOs and Article 4 Directions. Just call us on 01623 666700.