Which Flats Count Towards a Licensable HMO?

Licensable HMOs – rather an esoteric subject which turns out to be rather complex. As complicated as it is, a Landlord also has to get it right because failing to license an HMO carries draconian penalties:

  • A fine and costs – the legislation says up to £20,000 but prosecutions are generally brought for multiple offenses, so the biggest fine I have heard about personally was a Blexley Landlord who had to pay £110,000 + £5000 costs.
  • Rent Repayment Order – Tenants and Local Authorities are entitled to have their rent & Housing Benefit returned to them.
  • No Eviction Rights – If a property is unlicensed a Landlord cannot serve legal papers such as S21 Notice, or proceed with evictions.

I think that this illustrates that the issue is more than theoretical and Cotswold District Council established in Court :

This case brought by Cotswold District Council is of particular importance because it clarifies the ambiguous legislation that defines which storeys within a building should be counted when determining if a house in multiple occupation, or part of it, comprises three storeys or more.

A legal judgment on the case given on December 21st 2007 at Gloucester confirmed that a self-contained ground-floor flat at a property does in fact count towards the total number of storeys. This clarified a grey area within the legislation.

However 5 years later another court made what I consider an inconsistent ruling:

when counting storeys in a building for HMO purposes it is not necessary to consider other residential storeys unless they are actually part of the HMO being considered. It is necessary to consider business premises.

And now we have yet another oddity as the above cases relied upon 2004 Housing Act defines a Mandatorily Licensable HMO as:

a)the HMO or any part of it comprises three storeys or more;

(b)it is occupied by five or more persons; and

(c)it is occupied by persons living in two or more single households.

It additionally defines which parts of a building should be defined as a storey where there might be some doubt or argument as to whether they are included in the living accommodation:

3) The following storeys shall be taken into account when calculating whether the HMO or any part of it comprises three storeys or more—

(a)any basement if—

(i)it is used wholly or partly as living accommodation;

(ii)it has been constructed, converted or adapted for use wholly or partly as living accommodation;

(iii)it is being used in connection with, and as an integral part of, the HMO; or

(iv)it is the only or principal entry into the HMO from the street.

(b)any attic if—

(i)it is used wholly or partly as living accommodation;

(ii)it has been constructed, converted or adapted for use wholly or partly as living accommodation, or

(iii)it is being used in connection with, and as an integral part of, the HMO;

(c)where the living accommodation is situated in a part of a building above business premises, each storey comprising the business premises;

(d)where the living accommodation is situated in a part of a building below business premises, each storey comprising the business premises;

(e)any mezzanine floor not used solely as a means of access between two adjoining floors if—

(i)it is used wholly or mainly as living accommodation; or

(ii)it is being used in connection with, and as an integral part of, the HMO; and

(f)any other storey that is used wholly or partly as living accommodation or in connection with, and as an integral part of, the HMO.

These are the clauses which caused so much heartache in the previous 2 cases.

If you have an HMO with 2 principle storeys of living accommodation on the 1st and 2nd floor, but a private access stair from the ground floor, Local Authorities have been reading this as a 3 storey mandatorily licensable HMO. The situation translates directly to the specific example given in the Housing Act where it talks about counting a basement if it is the main entrance to the HMO, so I agree with that.

Link to Original Story

Original Story

However in an odd and contradictory development a recent judgement at Bristol Magistrate’s Court District Judge Zara ruled that a property on the upper two floors of a two story building, accessed by a private staircase leading from the ground floor is not a Licensable HMO. Bristol City Council believed that the layout at the premises was such that the ground floor hallway and first floor landing associated with the maisonette constituted a storey, thus making the premises liable to licensing. The judge however ruled that the areas concerned only formed part of a storey. The ruling means that Local Authorities that have two storey maisonettes with private means of access within their areas may now face claims for the return of licensing fees.


How The Taxman Finds the Tax Cheats

HM Revenue & Customs

Landlords are a recent target for HMRC – in January the latest target was taxpayers who have failed to pay capital gains tax on the sale of second homes & Taxpayers will have until 9th August 2013 to disclose to HMRC details of unpaid capital gains tax on the sale of second homes and up to 6th September 2013 to settle the unpaid tax. HMRC will charge a lower penalty to taxpayers who come forward voluntarily. There may be some taxpayers who may not be aware that they owe tax because they do not know the rules. In particular:-

•The taxpayer(s) may have gifted their second property to a relative (i.e. son or daughter). In this circumstance, capital gains tax could be payable with the open market value of the property at the time of the transfer forming the sales proceeds in the transaction;

•The taxpayer(s) may have lived in the property before moving to a new home. Instead of selling the property, the taxpayer(s) rent out the property to tenants. The Principal Private Residence Relief will not apply to the property when the taxpayer(s) move to their new home so some capital gains tax, relating to the period of non-residence, could be due.

How does the Taxman identify Property Tax Evasion?

•CENSUS – The 2011 census revealed a large number of UK citizens who own a second home including homes abroad;
•BANKS – Now have to provide more information to HMRC;
•PROPERTY WEBSITES – Can give readers an indication of the capital uplift in the value of the house since the last transaction;
•OTHER WEBSITES – Sites such [url=]Search for People, Businesses and Places –[/url] contain information from Land Registry showing the value of the last transaction on the property;
•CREDIT AGENCIES – Are required to give details of loans and mortgages linking them to names and addresses;
•DATABASES – HMRC can search databases such as the Northgate Public Services System which shows details of housing benefits paid to landlords by any UK Council;
•LAND REGISTRY – HMRC can ascertain who owns any particular property and details of any sale proceeds;
•ELECTORAL REGISTER – Can ascertain who lives at a particular property;
•PURCHASE DOCUMENTS – These documents should now disclose the National Insurance and Ultimate Tax Reference for individuals and/or VAT numbers for companies and partnerships.

Connect Computer System

HMRC will then use their Connect Computer System to draw all this information together so that they can correctly target taxpayers. It is understood that HMRC have ALREADY used all of this available data to check over 10m property transactions.

When Mike Wells touches a button on his keyboard, a tangle of tiny lines bursts on to his computer screen. Within seconds, it weaves an elongated spider’s web connecting small graphic symbols representing people, addresses, phone numbers, bank accounts and employers.

When he clicks on an icon, another maze of connections ripples across the screen. At a glance, a skilled investigator can detect a pattern of concealment. Wells, director of risk and intelligences services at HM Revenue & Customs, says: “Over time you get familiar with a normal person’s spidergram. When someone is operating in a hidden economy it has a different shape.”
This is the tax authority’s “breakthrough” computer system, a new, powerful weapon against the fraud, evasion and avoidance that costs the Exchequer billions of pounds every year. The system – known prosaically as Connect – was designed by defence contractor BAE Systems and launched in the summer of 2010. It cost HMRC £45m, but even by 2011 it had delivered £1.4bn of additional revenues, according to the National Audit Office. Wells says: “Its power is making it so much harder to hide from us.”

Six out of ten inquiries now make use of the system, with investigators working “hand in hand” with 3,000 Connect analysts in offices up and down the country. It uses a mathematical technique known as social network analysis that ploughs through disparate, previously unrelated information to detect otherwise invisible networks of relationships. It automates analysis that would once have taken months, if it could have been done at all. “If a human being tried to plough through 26 databases, they just couldn’t do it,” says Wells.

Connect is an appropriate name. HMRC has a unrivalled wealth of information about people living in Britain, due in part to its many connections with other databases, such as the Land Registry, Companies House and the electoral roll. “We have more data than the British Library,” says Wells, adding that the HMRC website is one of the world’s biggest websites at peak filing time.

Access to such comprehensive data does not just allow investigators to spot anomalies. It also makes it much easier for HMRC to check up on individuals’ tax returns. Take inheritance tax, where HMRC receives about 300,000 paper returns every year. Around 200,000 of those come from estates claiming to be below the taxpaying threshold.

Using Connect, HMRC can sift through information on property transactions, company ownerships, loans, bank accounts, employment history and self-assessment records to spot where estates might be under-declaring. In its first year it raised an extra £26m in inheritance tax.


Disgruntled Tenants paying cash are the Taxman’s best friend. City law firm Reynolds Porter Chamberlain (RPC) says HMRC paid out 21 per cent more to informers in the tax year to April 2012 than the £309,620 in the previous year. “HMRC is under intense pressure from the Treasury to increase the tax yield for the Exchequer and it is increasingly resorting to unorthodox methods to get the job done,” says Adam Craggs, tax partner at RPC. “Other informers include those reporting someone bragging in the pub or doing a lot of jobs cash-in-hand.”. Rewards vary from a few hundreds to tens of thousands of pounds, but are paid only once tax has been recovered – and payments are not a fixed percentage of the tax recouped.

Third Party And Online Information

HMRC has recently beefed up its powers to demand “bulk” information from businesses or government agencies. In 2008 it homed in on the medical profession, acquiring information from National Health Service trusts, private hospitals and medical insurance companies to test its suspicions that practitioners were failing to declare fees for consultations, medical examinations and other services. Plumbers and heating engineers have also been targeted, after HMRC obtained information from the Gas Safe register. This trawl resulted in five arrests. The tax authority’s access to Land Registry and DVLA data means it knows how much someone has spent on their house and can see vehicles registered to each address. If someone has bought a Ferrari but is living in a modest flat, that might not fit with that individual’s financial affairs according to the Revenue. Or if someone owned three properties in their name but had not declared any rental income, that would also be a warning sign.

Social Networking sites, such as Facebook or Twitter provide evidence of a lifestyle that’s out of kilter with declared income. If the Revenue has doubts about someone’s tax affairs they will search for any information they can find on that individual, including posts on Facebook and tweets. Several individuals were caught out after appearing on the Channel 4 television programme My Big Fat Gypsy Wedding spending thousands of pounds of undeclared income on lavish family weddings. Another individual came under HMRC’s watchful gaze after posting photos of their luxury holidays on Facebook.

Higher-rate taxpayers with properties abroad are among those targeted by the 200-strong “affluence unit”, which is dedicated to checking that those who pay the 50 per cent tax rate, but are worth less than £20m, are complying with tax law. The team uses “sophisticated data mining techniques” on publicly available information to identify individuals who own property abroad. It then uses risk assessment tools to highlight those who do not appear able to afford those properties legitimately as well as those who have not declared the correct income and gains from the property. The affluence unit has been set a target of raising an extra £560m over the next four years.

Further Reading:

Pimlico – The Number One BTL Hotspot


Buy-to-let (Photo credit: Alan Cleaver)

Writing in yesterday’s Daily Telegraph respected Property Journalist Graham Norwood fingered Pimlico as the nation’s number one Buy To Let hot spot.

In a typical “New Year” article Graham explains why thousands of people have resolved to dive into the only housing sector that is truly booming: buy-to-let (BTL).

  • Average UK rents have risen by 13.6 per cent since 2009
  • Capital values in most places have stagnated or fallen.
  • The proportion of households renting has increased in the past decade from 31 per cent to 36 per cent. In Westminster, for example, four out of every 10 homes are privately rented, not owned.

Graham’s Top 10 buy-to-let hot spots in 2013

1 London, Victoria/Pimlico

2 Maidenhead

3 Exeter


5 Bristol

6 Milton Keynes


8 Aberdeen

9 London, Canary Wharf

10 Central Manchester

Graham’s How to be a buy-to-let landlord Check List

• Do your research. Pick a sector: students, professionals, first-time buyers or retirees?

• Buy in winter when sellers are anxious and may sell cheaply

• Don’t buy in a large scheme.

• Choose areas with diverse employment, great transport links, such as Reading and Southampton

• Find the right mortgage, or remortgage your main home if this option is cheaper.

• Most buy-to-let mortgage offers require at least a 25 per cent deposit – a few want 40 per cent

• Avoid ground-floor flats, which tenants believe are security risks

• Family homes rent well if they are in key school catchment areas.

• Aim for five per cent return on your investment per year

• If you use a letting agency, ensure it is Association of Residential Letting Agents-registered

Forum discussion of the article

Complete Article Logo of The Daily Telegraph, a British newspap...

How to Style Your Rented Property


Neutral white walls, mismatched second hand furniture and an eclectic mix of plates and cutlery, must be a rental property. A rental property doesn’t need to be so bland. Here are three easy tips to making your rental property feel more like home.


1. Insert a bit of colour.

Paint is a great way to brighten up your flat and at £25 a can it’s cost effective too. Most landlords won’t mind if you re-decorate but if your personal taste is outlandish (think bright pink walls) they may request that you return the property back to its original state when you leave.

Before you make any changes it is imperative that you seek approval from your landlord first. The landlord may even pay for the paint if you offer to do all the manual work.

2. Choose statement pieces that you can take with you

When furnishing your new place, choose pieces that are easy to pick up and take with you. Smaller items such as light fittings, lamps and rugs are easy items to remove that help your new place look more homely.

The nomadic life of a renter means that with no fixed residency you may not want to spend money on furniture that may not suit or worse fit into your next property. If you live a transient lifestyle bespoke furniture hire might be a better option for you.

3. It’s all in the details.

You’re not in high school anymore so retire those old movie posters in favor of unique artist prints. Many artists these days create limited prints of their work that won’t break the bank. Prints start at around £20 and can go up to £500.

If you shop around at markets such as Spitalfields and Brick Lane you can find some great artist works.

Photos are also a great way to show you actually live at your flat. IKEA stock some cheap photo frames, or for a more individual, eclectic look grab some old photo frames from your local charity shop.

Just because you are renting doesn’t mean that you home needs to look drab. If you are not prepared to invest in a few brushes and paint remember an oversized vase with flowers go a long way.

The author of this post writes for Roomservice by CORT the UK’s leading home furniture hire provider.

Right to Buy hits Pimlico Rents for Westminster Council

Margaret Thatcher

Margaret Thatcher

An interesting article today in Social Housing and Local Government news website about how Right To Buy has affected Westminster Council.

Nearly half of Westminster’s 22,000 council homes have been sold through Right-to-Buy in the past 30 years, and because government rules don’t allow local authorities to keep the proceeds of sale the properties haven’t been replaced by further social housing. Of course many of the flats purchased under Rent to Buy have been recycled into Private Sector renting – I personally know of 4 people who were able to retire to the country in middle age on the proceeds of the Right to Buy windfall which could be as much as several hundred thousand pounds in extreme cases.

This has left the council with a situation where they are paying housing benefit to tenants who are renting ex-council properties from private landlords – and this costs the council around four times the rent charged for a council home rented directly from the council, and on occasions up to five or six times the council rent.

What a mess – but probably not a mess that the government wishes to acknowledge as it stems from a conservative policy a generation ago, rather than something that can be neatly pinned on the last government.

Why Landlords Need Regulating


Landlord? (Photo credit: the justified sinner)

Just visit any property forum or website & ask what landlords think of the idea of licensing and regulation and you will get a loud and clear indication that Landlords consider regulation to be an expensive useless waste of time.

In spite of this new rules were introduced in January 2010 which meant landlords of houses in multiple occupation (HMOs) must have their properties inspected and licensed. During the first year, until December 2011, Oxford City Council issued 338 licences – and just 11 of those, or three per cent, were issued without any additional conditions. To my mind this sends a loud and clear signal – either the Private Rental Sector is rotten to the core, or the Regulations are!

97% of Privately Rented Accommodation Isn’t Fit For Purpose?

The new regulations were introduced in two phases. From January 2011, landlords of three-storey houses or two-storey houses for five people or more were told to get their property inspected for £362, make any necessary alterations and renew the licence annually. The rules were then rolled out to include properties with three or more sharers this January, resulting in an extra 1,065 applications. Oxford is currently the only council in the country to require all HMOs to be licensed, more than 2,000 warning letters were sent to landlords in December, and since the scheme came into effect there have been eight prosecutions against landlords managing unsafe HMOs and one letting agent. The council has also taken over the management of one HMO because the landlord was not a fit and proper person to hold a licence.

So what is wrong – Landlords, or Regulations? During 2011 Pimlico Flats received 2 letters from Westminster City Council threatening enforcement action.

  • One was because we had 5 Flats which only had 1 lock on the door – in spite of 30 years without a crime, a daily manned reception and a 24/7 CCTV monitoring service WCC still estimated that the likelihood of death or serious injury from there only being 1 lock on each flat entrance was 1/7. It was cheaper to put a second lock on every door than argue with the Environmental Health Office about the regulations.
  • The second was that a tenant wasn’t sleeping with his girlfriend. How WCC were able to identify the couple’s nocturnal habits is beyond me, but they readily confessed to their crime – apparently they were working different hours and were using a sofa to avoid disturbing the partner. WCC were not prepared to accept the argument that as Landlord I had no right to dictate my tenant’s sexual habits, but fortunately the tenants were happy to give me a letter voluntarily committing themselves to sleeping together.

Clearly when 97% of the Private Rented Sector fails to meet regulations something needs to be done – what do you think should be done?

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