In this month’s edition I thought I would do an HMO Q&A based on the top questions that people post in my HMO Community Facebook Group. I have taken the top 5 most popular and most recent questions.
- Q Do HMOs have to pay individual Council Tax by the room?
A This is probably the biggest question that we have had this month, and it has been raised a few times.
The Valuations Office Agency (VOA) are responsible for the calculation of the value of Council Tax for residential property which includes Houses in Multiple Occupation (HMOs). They will either asses the property themselves by visiting personally (sometimes they don’t even need to gain access) Or they will assess the property remotely from receiving a report from the Local Council. In many circumstances this will be prompted following an inspection from the Housing Team / HMO Officer.
Like many things in business it seems that we are lacking continuity across the country with the valuation of HMO rooms and certain geographical areas are indeed charging single banding rates for HMO rooms, yet other areas are not. Approximately 6 months ago we called our VOA and asked the question “How do you band an HMO room” the reply was as follows. “HMO rooms will be banded as a single unit of accommodation if the person has all the facilities inside the room and doesn’t need to leave, so for example a room that has a kitchen and toilet facilities and a bed would be classed as a single unit of accommodation.” That was the reply, but it seems not every VOA are adopting this, and some areas are charging as a single unit if the room just has an en suite.
So how do we tackle this inconsistency? When you begin your due diligence on a property it would be good practice to call the VOA that deals with your area and ask the question, at least that way you have it from the Horse’s mouth. If they stipulate that they will be charging single band rates, then you may have the following options: -
- Don’t construct en suites and only have shared bathrooms that fall within the amenities standards for HMOs in your area.
- Don’t include kitchens or sinks with running water in the room.
- Let to Students who are exempt, please note that the property will need to be populated exclusively by students in order for the exemption to apply, if you populate 1 room with a non-student then the exemption won’t count.
- Charge the Council Tax back to the Tenant, if they are living alone then they will receive a single person discount.
- If you already have en suite HMOs and currently only pay 1 band then it may be a great idea to include a clause in your contract that stipulates if the VOA change to single banding, then the Tenant will be responsible to pick up this bill.
The main point here is not to panic, after all we can’t control everything, if this happens then we will adjust and deal with it. In our own experience we have several units that are single banded, and as much as it pains us to do so, we simply stipulate that the Tenants register and pay for their own CT, these properties are always fully occupied.
NB always conduct your own DD"
The following has been taken from the GOV.UK website for your information
"Banding of houses in multiple occupation Domestic properties that have separate dwellings are known as houses in multiple occupation (HMOs). Each separately let part of a property qualifies as a separate dwelling with its own band. There may be circumstances where the VOA can combine the bands. Examples HMOs with little or no adaptation: Where minor adaptations have been added then the VOA can put the whole property into one band. This could be where door locks are added and the occupants of the separately let parts share the kitchen and bathroom of the original house. HMOs with adaptations to each floor: A single band can be given where each floor of a house let in parts has standard facilities and can be treated as a self-contained unit. This applies where the occupiers of the floor share a kitchen and a bathroom. HMOs with adapted letting rooms: Separately let rooms in an HMO may have been adapted, for example, so that they have their own kitchenette or separate shower/bath and WC. They will be given their own band even though may share some facilities. In making a decision, the VOA will look at the degree to which each part has been structurally altered. Purpose built HMOs: These properties would generally not be combined and would have separate assessments for each internal unit. There’s more information available on houses in multiple occupation. Your local authority calculates a separate Council Tax bill for every property banded and collects payments. The council is responsible for applying relevant discounts or exemptions. If you believe your band is wrong, or your household shouldn’t be banded at all, you may be eligible to appeal."
- Q. Where can I obtain legal documents for HMOs and Rent to Rents on the Internet? A. I know that when we start out in any business we have to watch the bottom line, and yes absolutely every penny does count! I can see the attraction of sourcing free documents from social media groups and such like but please, before you do this ask the following questions. Is this really a suitable document for your transaction? Is this a legally binding document? Is the document subject to any copyright? Has the document been changed and altered over the years?
There are many more reasons why you shouldn’t obtain shared documents for your business, I have listed only a few. The best advice I can give here is to make sure that you and your vendor are both covered legally should you ever have to refer to this agreement in the future. Professionally commissioned agreements will indeed come at a cost, but this may pay dividends to you in the future. Please always use a suitably qualified person to construct your legal documents.
Q. I have quite a few empty rooms at the moment can you advise me on any marketing tips? A. Yes absolutely! Voids are something that will certainly eat into your profits and can run away with us if we are not constantly tweaking and updating our marketing. So here are my top tips:- There are many platforms on the internet that will allow you to advertise your rooms, all of which have many benefits and work well within their own rights.
Make sure that you have really great photographs, and when I say really great I mean REALLY GREAT, you could use a professional photographer, or if you feel that you have the skills then you could do this yourself, it’s your call, but either way make them count and remember to dress the room and make it look attractive, ask yourself if you were looking for a room would this catch your eye?
Make sure that your description doesn’t sell the room!! Yes, that’s not a typo, most people use the description to sell the room and they don’t look at the bigger picture! We need to park that aspect and instead we should be selling the lifestyle that the room gives!! Look bigger, be more descriptive and boast the benefits that will enhance the Tenants lifestyle, tell a story don’t pitch!, why would this room enhance the Tenant’s lifestyle? would it take the stress out of paying bills? Will the garden help them chill out and relax after a hard day at work, college etc.? Remember we are adding value to their lifestyle and if we can add value then we will get paid, simple!
Constantly renew your advert and pay for featured listings, many platforms will allow you to “bump” your add up, take advantage of this, it will help you remain at the top of the listings.
Market to local employers, this is a great way of filling rooms, if your target Tenants are employed then put together a PDF presentation of your property, don’t forget to really sell the lifestyle not just the house, explain how your company adds value to those seeking shared accommodation. Contact the HR team in these companies and ask for an email or a name and full address, then send the PDF presentation over to them with a covering letter asking them to consider your property / company if they have any Graduate schemes or Locums etc. that may be seeking accommodation.
Gifts and Gratuities. Current Tenants are a really great source of marketing, send a letter / text (presuming you are GDPR Compliant) to the current Tenants in the property asking if they have any friends or colleagues that would consider taking a room and maybe offer a cash reward or a voucher or similar. This is great leverage and tenants will only recommend people with a similar mindset as themselves, after all the will have to live in the same house.
Offer a discount for the first month? From experience it’s better to take a small hit up front then have a long-term void.
Consistency is key, be consistent and don’t just complete the above tasks once, this is a marketing plan and will need to be repeated constantly in order to keep the wheel turning.
Q Should I use Macerator toilets in my HMO? A I would avoid using any form of electronically operated toilet in an HMO wherever possible. In certain properties it may not be an easy job to install a regular WC owing to the location of the soil pipe, if this is the case then you may not have an option but to install a Macerator type toilet, if this is the case then please follow these tips:
1) Have a very easy to understand notice that is fixed to the wall in front of the toilet which would explain that the toilet can only accept natural waste and toilet tissue, nothing else should be flushed under any circumstances as this will cause the toilet to block and overflow! 2) Make sure that you have a written policy in place and explain the policy thoroughly to the tenant when they check in, also explain that any cost resulting from negligence will be their responsibility. I really don’t like Macerator toilets and from my own experience they should only be used if there can be no other solution.
- Q What contracts should I use for my HMO Tenant? A. This is a great question and one that does come up frequently. Very often Investors are mistaken in the belief that a non-Housing Act agreement such as a license can be used and as it’s a license then there is no requirement to give notice. Please note that this is NOT the case. If the circumstances fit below then you should only ever use a Housing Act Agreement / Assured Shorthold Tenancy (AST)
• They are an individual (not a company) • It is their principal residence • The Landlord is not present • They have exclusivity to the whole or a part of the property
If your Tenant does not fit with the above criteria, then a non-Housing Act agreement can be used such as a lodging agreement or a license. I think that it’s safe to say if you are operating an HMO in most cases the only correct agreement would be an AST. If you are issuing licenses when they should be AST contracts and you are evicting under the terms of the license, then you may be liable for prosecution for unlawful eviction.