I’m a landlord of a 3 bed, 3 bath apartment, in London
For years I’ve managed the property directly, with no issues despite living abroad (I’m retired so I have lots of time to quickly solve any issues that arise).
My council´s new HMO rules mean that 1) I need a licence now and 2) I cannot be the licence holder as I am not UK resident.
If I want to continue with 3 tenants I’ll need to use a letting agent who is willing to put their name down as licence holder.
This, in my opinion, means the following:
- Significant new costs due to letting agency fee of ~20%
- Significant new costs due to licence regulations (e.g. 6 new fire doors are likely to be requested / annual payment to a professional to come in and confirm all electric appliances are working etc etc). I´m already complying with regulations for HMOs that don’t require a license (smoke & CO alarms, EICR, gas safety certs etc), but the licence carries with it additional regulations.
- Potential additional costs from agent arranging unneeded works without getting my permission (but sending me the bill of course) because he can always say its what the council would want, and he has the liability so has be conservative in those decisions. And he’ll be further incentivised to do this because of commissions from the contractor. Some assumptions made here obviously…whether you agree or not likely depends on your experience/opinion of letting agents…
- Additional hassle and cost from council communications (where they was none before for me), new demands and ad hoc changes to regulations etc.
- Potential complications in making changes in future. e.g. If agent turns out to be dishonest or adding unjustified costs and I change agent, then I’ll need to pay for a new licence application just to change the name (~GBP1,000 more). Or it may be difficult to end a tenancy, since the agent in the role of licence holder may have the power to stop me from doing this, or the council may be more likely to prevent it. Also it may be more difficult to sell the property because of the two new parties involved (agent and council) and the HMO status that the property has may put off potential buyers. I feel like once I apply for the licence I will have crossed the Rubicon…
So, I’m going to ask my tenants to leave (I have a break clause so it’s not a problem contractually. Obviously I don’t feel great about it, especially because they have been great tenants).
Then I’ll advertise it with reduced rent for max occupancy 2, or a family (though unlikely), make sure the contract clearly states max occupancy 2, and have documented inspections every 6 months for which I’ll request comments from the inventory company of any signs for occupancy breach, and continue to manage it directly.
Reduced return of course, but on a net basis result will be similar to proceeding with the licence (but with none of the hassle).
I will eventually sell it anyway, but cannot do that for the next 3 years (for reasons I don’t need to go into here).
The council has been useless in responding to any requests for information, and their documentation online doesn’t cover everything adequately (e.g. the timeline is unclear). I contacted them in March with 5 simple questions and despite chasing them multiple times it was only last week that I received a response, which was to answer 1 of the 5 questions, specifically that I could not be the licence holder due to living abroad.
Thoughts on my plan?
Has anyone done something similar?
Thanks in advance for any helpful advice or comments.