You can’t go wrong renting out a property…

We were in the public bar of one of the few remaining pubs not converted into flats in this quiet part of North London. My friend Danny told me I didn’t need to worry all that much about how to go about renting out the three bed flat that I used to live in with my family. “A lick of paint, a couple of new kitchen appliances and sort out the bathroom so that your new tenants don’t flood the floor when they have a shower and you’re good to go! There’s nothing much else to think about.”

That is what a friend said.

If only it were that easy. Be very careful when taking at face value what a friend said. Years ago, just before we moved in, I had spent a fortune refurbishing the old place (a nice maisonette at the back of a shopping parade) and now with the flat to rent ads up on rightmove and zoopla, I was worried about actual physical parts of the place that might not be up to scratch. Things like a bit of threadbare carpet on the stairs and a couple of broken drawers in a dresser in the largest bedroom. Does it need a lick of paint? Should I change the battery in the smoke alarm? How furnished does “furnished” mean?

These are all legitimate concerns (for another time). The elephant in the room that I am alluding to is something far more likely to cause anxiety and what my friend actually said turned out to be unjustifiably reassuring. Let me explain.

The simple case is that I  could be renting it out to John and Janet Smith and their son Peter, and then it’s just a simple rental situation. No special status or anything that needs to be addressed with any remedial building work, new furniture, administrative tasks or fees. It could be said, in this instance, that my friend’s throwaway comment was accurate.

Another possibility though is that the flat, when rented out, could turn out to fit the characteristics of an HMO – a house in multiple occupation. 

This would come about when, say, three young friends who met at university, decide they want to share my place because it’s handy for the tube and their active social life, and we have a completely different scenario. You see, now we have people from more than one household. The three friends are not related so each one counts as an individual household. This is crucial because the definition of an HMO hinges on there being at least two households present in the arrangement. 

Indeed, the definitions also sub-divide in that three or four tenants forming at least two households is one category of a licence that you require (“Additional HMO Licence”) and five people upwards up as far as nine, with more than one household is another category (“Mandatory HMO Licence”). In either instance, you get the licence for your HMO from your local authority. It is a lot of irritating administrative hassle and a not inconsiderable sum in licence fees. There is also some remedial work necessary in the property. If you don’t get the appropriate licence, you can be fined up to £30,000. It isn’t just a slap on the wrist!

Take one council that I know well, Haringey, in North London. You have to go on their website and answer various questions about your property including how many bedrooms, how big they are, how many storeys in the building, how many occupants, what fire precautions you have in place, and upload various documents like gas certificates and floor plans. At the time of this blog post the cost of both types of licences is £500 at application and a further £600 taken before the licence is issued (ie. £1,100) and this lasts for five years.

On top of the licensing requirement, the property needs to adhere to a minimum level of fire prevention which includes at least a fire door for the kitchen (I ended up fitting them for all rooms), a fire blanket in the kitchen, a multi-purpose fire extinguisher at each level of the property (my place was on two storeys so I needed one for each), smoke detecting alarms wired into the mains at each level (this is for non-HMO too), a wired in carbon monoxide alarm in the kitchen if there is a gas boiler there (again, not just HMO) and an emergency lighting system in the hallways in case electrical supply is lost. 

In answer to Danny, yes, renting out a property is simple. To a point…

Get professional advice. Check online, using reputable sources.  Never rely on what someone has heard from someone else. Don’t take a friend’s opinion as something to be counted on. 

A friend said. That could cost you £30k…

Toby Pierides 11th April 2022

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