Legal Case: HMO licences and the purchase of an HMO

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It involved a claim by a tenant who had applied for a Rent Repayment Order (RRO) in relation to his two-year occupation within an HMO.

Mr Taylor the tenant and appellant had taken a tenancy at the property from the 1^st of July 2016, leaving on the 14^th of August 2018. At the time other tenants occupied and the premises and the landlord was covered by a valid HMO licence.

The valid HMO licence was issued in 2016 and this was due to expire in 2021. The respondent in this case was the new landlord who had taken over the property during the period of the tenancy, sometime around October 2016.

The new landlord did not apply for a new HMO licence until 12 May 2017 and a new licence was not issued until the 6th September 2018, after Mr Taylor, the tenant, and the appellant in this case, had left.

In November 2018 Mr Taylor applied to the First Tier Tribunal (FTT) for a Rent Repayment Order RRO on the basis that the respondent had committed an offence by not having a licence in place during the period of his tenancy.

Any person who manages, or who has control of a property used as an HMO must by law obtain a licence from the Local Housing Authority (‘LHA’) under under section 72(1) of the Housing Act 2004. It is a criminal offence not have a licence in place and failure to do so can result in a fine of up to £30,000, as well as being made the subject of an RRO, which requires a repayment to the tenant of up to 12 months’ rent.

Mr Taylor presumably being savvy with the law spotted his opportunity to get a 12-month rent-free stay at the property by receiving a refund.

The first point to make here is that this case confirms that such an HMO Licence is personal to the landlord and non-transferable on the sale of the property. It means that if the property is sold, the new owner cannot rely on an existing licence to satisfy the licensing requirements and must therefore apply to the local authority for a new licence.

But the FTT in this case declined to make the award of an RRO to Mr Taylor. Although the new landlord had not applied for a new HMO licence immediately, due to a misunderstanding on the landlord’s part that an HMO Licence does not run with the land, so the new owner did not get another licence. The FTT decided that the landlord was in breach.

However, the FTT took the view that while the respondent landlord held no licence, the existing licence from the previous owner remained in force until such time it was revoked. It seems the Housing Act 2004 has no provision for a licence to terminate automatically, and without a decision from the local authority, other than on the death of the licence holder under section 68(7), it remained in force.

The conclusion of the FTT was that an HMO licence in these circumstances continues unless and until the LHA decides otherwise and therefore the FTT did not have the power to make a RRO. It dismissed the application.

Mr Taylor being a persistent type appealed the decision to The Upper Tier Tribunal (Lands Chamber) (UTT).

The UTT disagreed with the FTT, finding that it remains the law that where a property is sold and the new owner takes over management and control, the new owner (landlord) is required to apply for a new licence. Stating in judgement the UTT says:

“The previous licence cannot be transferred to the new owner and is of no assistance, whether or not expressly revoked, because the new owner does not have a licence.”

The UTT alluded to the temporary exemption created under section 68(7) of the 2004 Act, which is where the licence ceases to be in force in the event of death of the licence holder. Section 68(8) goes on to say that for the following three months the house is to be treated as if it had the benefit of a temporary exemption notice. But the Tribunal confirmed that a new owner must take steps to comply with the law by immediately applying for a new licence, and found for Mr Taylor.

This case demonstrates and confirms the personal nature of an HMO licence (being tied to the person of the landlord and not the property). It also demonstrates the importance of applying for a new licence on the purchase of an existing HMO.

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Chancellor cuts housing support

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The NRLA has criticised the Chancellor, Rishi Sunak, for cutting the amount tenants relying on benefits will be able to claim to pay their rent.

According to a report by the Office for Budget Responsibility published alongside the Spending Review today the Local Housing Allowance will be frozen in cash terms from next year.

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SPENDING REVIEW: Landlords and tenants face grim future as LHA is frozen, warns NRLA

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The National Residential Landlords Association (NRLA) has criticised the Chancellor Rishi Sunak for cutting the amount those on Universal Credit will be able to claim to pay their rent, pushing millions of landlords and tenants into financial difficulties.

According to a report by the Office for Budget Responsibility (OBR) published at the same time as Rishi Sunak’s Spending Review presented today in parliament, the Local Housing Allowance will be ‘frozen in cash terms from next year onwards’.

This means that the rate will fall below the current level which is set to cover the lowest 30 per cent of rents in any given area.

The NRLA says the announcement is a ‘kick in the teeth’ for both renters and landlords struggling with the consequence of rent arrears through no fault of their own.

The current rate was set in April to help renters whose incomes had been affected by the pandemic to meet the cost of their rents.

A recent analysis by the Joseph Rowntree Foundation suggests that five per cent (200,000) households in the private rented sector are in arrears.

Also, 30 per cent of all private rented households are worried about paying their rent in the next three months, compared to 19 per cent immediately pre-COVID-19.

Ben Beadle (pictured), Chief Executive of the National Residential Landlords Association, says: “Many renters and landlords are struggling with the consequence of rent arrears through no fault of their own yet the Government is failing to take the action needed to address this.

“Whilst the Chancellor has spoken about the need to support those who find themselves homeless, it would be much better for all concerned to provide the funds needed to sustain tenancies in the first place.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – SPENDING REVIEW: Landlords and tenants face grim future as LHA is frozen, warns NRLA | LandlordZONE.

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Criminal landlord ordered to pay £259,475 or face jail

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A rogue landlord who let a flat that was too small for one person to at least eight tenants has been ordered to pay back £259,475 in rent.

Shafait Ali, 51, from Deptford, admitted illegally converting a building in the Old Kent Road (pictured) designated for office or light industrial use into five grossly undersized flats which he then rented to families.  

Southwark Council officers found at least eight people in one of the flats that was two metres below the minimum size for a one-bedroom flat. They were living in three bedrooms – one without windows – each with at least two bunk beds.

Some of the bedrooms didn’t have heating, while there weren’t proper fire escapes, alarms or smoke detectors and some bathrooms had no ventilation. 

Poorly constructed

And some exit routes were through kitchens, while electrical sockets were found in bathrooms. Council officers said they were so poorly constructed they would never have been granted planning permission.  

Ali charged tenants £259,475 in rent, which he now has to pay back along with more than £23,000 in a fine and costs, otherwise he faces two and half years in prison. 

At his sentencing hearing at Inner London Crown Court he was also ordered to stop using the building as a residential property and remove the conversion materials.  

Councillor Johnson Situ (pictured), cabinet member for climate emergency, planning, and transport says it is deeply shocking that families were cramped into properties not even big enough for one or two people. 

He adds: “This is a great result and another success for our planning and trading standards teams, whose joint efforts have amounted to nearly £1.5 million in confiscation orders issued to landlords renting out illegally converted properties in Southwark since 2019.”  

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TV property tycoon rejects claim he’s a ‘notorious rogue landlord’

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Multi-millionaire property tycoon Andrew Panayi (pictured, above) has hit back at councillors who dubbed him a “notorious rouge landlord”.

Islington Council refused planning permission for a two-bedroom flat in London’s Caledonian Road, submitted by Panayi who infamously, “builds first, asks permission later” – a boast he made when appearing on a BBC documentary, The Secret History of Our Streets when he spoke about “milking” tenants.

Neighbours raised concerns about the application as well as his alleged failure to maintain the block and deal with mould and damp, drainage problems, and health and safety issues over electrical cabling and gas meters.

At the council meeting, Councillor Paul Convery (pictured) told colleagues: “I’m pleased he’s modified his business model and we have an application before us today, in advance before beginning construction work. That’s an advance. He is, I’m sorry to say, a notorious rogue landlord.”

Councillors rejected the plans on the grounds of overdevelopment and because the design wouldn’t fit into the conservation area.

However, Panayi, whose rental empire includes 40 properties in The Caledonian Road, told the local press that he wasn’t aware of any problems with the gas meters or electrical wires.

He said: “I licensed under the house in multiple occupation regulations by Islington Council. Notorious rogue landlords do not qualify to hold a licence.

The new development is for one two-bed flat, and two additional people, making a total number of 33 people [in the block] will not be an over-development.” He is appealing the planning decision.

Panayi has been involved in a long-running battle with the council. In 2016 it discovered 90 of his flats didn’t have adequate planning permission, while enforcement notices were served on more than two dozen bedsits, described by one tenant as, “worse than prison cells”.

In 2015 he was ordered to pay back £70,000 in rent he had earned by illegally letting out a substandard flat.

Read about rogue landlords in London.

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The housing sector is a bellwether of confidence in our wider economy

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The Minister of State for Housing Christopher Pincher has given a speech at the Savills Annual Housing Seminar outlining the government’s strategy for housing and re-confirming how important the housing market is to the general health of the economy. He also acknowledges how the housing market is at the sharp end of changes to the way we live our lives caused by the global pandemic.

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Government being extensively lobbied to extend Stamp Duty Holiday

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The Government is being lobbied from all quarters of the property industry from Conveyancing, Surveying, Agent and Landlord groups to extend the Stamp Duty holiday and help unplug the logjam of housing transactions that are trying to complete before the holiday at the end of March ends.

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Landlord scores victory over London’s ‘excessive’ bike parking HMO planning rules

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New HMOs in the capital might not have to conform to the draconian one bike space per bedroom rule after a landlord’s planning victory over Ealing Council.

The authority had rejected an application from Trentwood Ltd to convert ten self-contained flats into an eight-bedroom HMO because it didn’t have eight bike spaces, despite the landlord’s explanation that there wasn’t scope to provide accessible facilities at the front or back of the property – on an upper floor of the building – in The Avenue.

But a planning inspector has now ruled that it can go ahead with just four spaces, which could set a precedent for other developments.

Unreasonable

Inspector Elizabeth Lawrence said the appeal proposal was for an HMO with two communal kitchens, therefore it wasn’t unreasonable to compare it to two four-bedroom flats, which would only need four bike spaces according to the London Plan, while the standard for student accommodation was one bike space for every two bedrooms.

Lawrence added: “It would be reasonable and necessary to either provide storage for four cycles within the building, potentially under the stairs…alternatively, for arrangements to be agreed with the local planning authority for the provision of enhanced private or public cycle parking facilities in the locality, as an alternative to providing four on-site cycle parking spaces.”

The London Plan states that new developments should provide secure, integrated, convenient and accessible cycle parking facilities, “to increase the use of active and sustainable modes of transport”.

Read more about planning and landlords.
More advice: Differences between HMO and bedsit.

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EXCLUSIVE: NatWest stops buy-to-let mortgage lending to freelancers who received Covid grants

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LandlordZONE has been shown paperwork that indicates leading mortgage provider NatWest has stopped approving buy-to-let or residential mortgages for anyone who took a Self-Employment Income Support Scheme (SEISS) grant.

This scheme is now closed but was a vital financial lifeline for many freelancers who had temporarily or permanently lost contracts during the Covid lockdown. The decision by NatWest shows that there will be consequences for landlords who took out Covid loans and grants when applying for mortgages.

The move by NatWest covers any freelancer including landlords who received an SEISS grant on or after July 14^th, LandlordZONE understands.

Although the government has asked lenders not to downgrade the credit ratings of borrowers who have been in receipt of its various Covid loans during the pandemic, banks appear to be dodging this by building loan and grant decisions into their lending criteria.

NatWest tells LandlordZONE: “We look to understand an individual customer’s circumstances so we can lend responsively and within that we apply different maximum limits to different customer groups based on their individual risk profile.”

We asked leading buy-to-let mortgage broker Dan Lee (pictured) of Total Landlord Mortgages, to comment.

“It is a lender’s duty to assess affordability now and in the future and ultimately if you have taken help from the government be it grants, loans or payment holidays, this is a red flag to a lender that you have been negatively financially impacted by the effects of COVID,” he says.

“Ultimately lending has to be responsible and sustainable for the future.

“Potentially thousands of homebuyers and landlords looking to expand as well as wannabe landlords will not be able to access mortgages that were previously available.

“The question therefore arises how long will the effect of these grants, payment holidays or government loans have a negative impact? We will have to wait and see.”

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – EXCLUSIVE: NatWest stops buy-to-let mortgage lending to freelancers who received Covid grants | LandlordZONE.

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