Buy-to-let market prepares for new licences

Posted: 06 Apr 2006 10:33:33 GMT

            Property News - Buy-to-let market prepares for new licences

Today sees the beginning of a new set of licences for Houses in Multiple Occupancy (HMO), but one expert has suggested the impact may be less drastic than many have claimed.

Buy-to-let landlords will first of all need to establish whether a property is classed as an HMO and the definition is not the most straightforward.

At a basic level, an HMO has five or more unrelated tenants living over three storeys or more. A two storey property with an occupied basement will also count, however, and the cost of the licence will be in the region of £1,100.

This will be paid to the relevant Local Housing Authority, in a scheme that has theoretically been designed so that it will only bring in enough money to fund the licence system.

A number of analysts have speculated that landlords will pump up rents to cover the cost of the licence, but Lee Grandin, managing director of Landlord Mortgages, believes that this is only partially true.

The vast majority of houses, he argues, will not be classed as an HMO, although he concedes that students in particular may face a hard time from rising rents.

"Landlords who operate in the highly lucrative university lettings market are likely to feel the pinch and will naturally pass on the costs to their tenants - not what most cash-strapped students need," he told IFA Online.

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