A survey of National Association of Estate Agents members into the effects of the HMO legislation has revealed that 63% of agents have seen landlords reduce the number of tenants in their properties in order to avoid the HMO licence.

No guidelines have been set by the government for the cost of the licence local authorities can charge landlords for registering houses in multiple occupation, and this has created a postcode lottery for landlords, according to NAEA chief executive Peter Bolton King.

In addition to reducing the number of tenants, landlord are also selling properties and cashing in on property prices rises. Over a third of NAEA members reported an increase of properties onto the market that would otherwise have been classed as HMOs.

The new laws governing HMO’s came into effect on the 6th April this year and were set to be fully enforceable on the 6th July. Under this new law landlords are required to hold a licence, which dependant upon the location of the property could cost as little as £200 and as much as £1,500 to apply for.  If landlords do not comply they could be left with a huge fine.

Jan Bartlett, residential lettings expert at the NAEA commented: “A good lettings agent will be able to help the landlords through the new licensing process, and could in fact use the license as a selling point to prospective tenants.”

“I would advice against landlords reducing the number of tenants as the property will still need a HHSRS check (Housing Health and Safety Rating System) in order to be deemed a suitable standard, and changes they are required to make are likely to add capital value to the property.” 

Peter Bolton King, Chief Executive at the NAEA commented:  “The inefficient implementation of the licensing has resulted in widespread confusion. The Government failed to set cost guidelines and refused to subscribe to just one definition of a HMO.”

“Reports indicate that the problems are by no means being felt nation wide, as some local authorities have dealt with the legislation more efficiently than others and well informed agents are capable of helping the landlords get to grips with the new requirements.”

“However, as local authorities have been left to charge as they see fit for the license, this has resulted in large discrepancies in expenses to landlords. It seems that a postcode lottery situation has been created. The confusion as to what constitutes a HMO and what doesn’t has led to many landlords being left vulnerable to huge fines of up to £20,000 and legal action from tenants.”