Single property divided internally into 1-bed + 3-bed flats

Hi all

Advice please.

I’ve just bought a large 3-bed flat in very good condition, which was lovingly converted into 2 separate properties (accessed via 2 internal entrances) via extensive loft conversion (upstairs- 1 bed flat / downstairs- 3 bed flat). The property is spacious and centrally located in London so would ideally suit 4 working professionals - 3 sharing; 1 single. It’s my intention to let it on this basis with bills included to maximise yield and avoid requirement for HMO licence (in the borough this is required for 5+ sharers).

A couple of questions -

  • As mentioned I will let it all bills included, but I’m concerned that this could be a ‘blank cheque’ for tenants to make excessive use of energy. I am thinking to add a separate ‘contribution to bills’/fair usage clause to the listing (e.g. 60GBP per person per month), but I wondered if anyone could advise on how to do this in terms of the AST and also having a review clause in case usage exceeds what could be deemed reasonable?

  • The property does not require HMO licence but I want to make sure I’m fully compliant as it’s still technically a HMO let. What’s the best way to cover this off or would be covered via Open Rent’s service if I let through them?



The building may also be a s257 HMO as its been converted and will be let. This will depend on whether you can prove that the conversion meets at least the 1992 building regulations.

Look at the HMO Management Regulations 2006 for information on your obligations. If the tenants are in a joint tenancy you would not normally need to get a Fire Risk Assessment done as the Fire Safety Order 2005 wouldn’t apply. However, if it is a s257 HMO, that would change things as the 2005 Order would then apply. In any case, you would probably be advised to get this to cover yourself, especially if the conversion is making use of the loft space, and the Management Regulations still require you to ensure that the property is fire safe. This may mean installing interlinked, mains wired smoke alarms and fire doors. Just follow the advice in the assessment.

Council tax may also be an issue if you now have two self contained properties and it might be levied on each.

One other thing to be aware of in relation to the HMO status, is that if any of the tenants move their boyfriend/girlfriend in, it would become immediately licensable and as the HMO Manager, you would be expected to know this has happened. You should probably have a carefully worded disclaimer in your tenancy agreement about liability for any fine/penalty imposed by the Council as a result of the tenants actions. This would be more of a deterrent than a remedy though, as the Council would still come after you and you would need to try to sue the tenant to recover any losses, which may not be successful. Make sure your landlord insurance knows of the set up and that its an HMO. Also make sure there are no restrictions on your plans in the lease or any mortgage terms you might have.

With regard to the utilities, you should expect a constant battle as the tenants may have the heating on full blast if the bills are included. You can impose limits on the amount of included utilities in the contract, but this needs to be carefully worded and I would suggest you get some advice on the drafting.