Following the introduction in July of licence requirements for HMO, the report revealed half (50 per cent) of UK landlords do not understand the requirements and one in eight (12 per cent) have never heard of them.
Based on a survey of 57 local authorities across the UK during July and August, and a separate survey of 143 UK property investors, Heritable Bank’s study revealed HMO licence fees range from £60 per year in Herefordshire to £1,100 per year in Newcastle, with four councils still to agree their fees. Landlords with an average HMO property in the neighbouring London boroughs of Richmond and Wandsworth will be expected to pay £105 and £1,100 per year respectively, a difference of almost £1,000.
With the average basic licence fee costing £358 per year, landlords will pay a minimum of £38 million in licence fees, or £1,702 per landlord, based on the Department for Communities and Local Government’s (DCLG) initial estimate of properties affected.
While 61 per cent of councils surveyed charge a different basic licence fee, Heritable Bank also warned landlords to check the small print, as seven out of ten councils would levy additional fees and costs for properties with extra occupied rooms or survey requirements. The lender has called on the government to create clear licence fee guidelines for councils and landlords and to reconsider introducing a cap on licence fees.
Mark Sismey-Durrant, chief executive of Heritable Bank, commented: “This is a textbook example of a postcode lottery being faced today by tens of thousands of buy to let investors. Although the licence scheme was set up with worthy intentions which we support, the government’s decision not to set a cap or provide any real pricing guidelines means honest landlords face a startling range of fees, and many will simply steer clear of the costliest boroughs, especially portfolio property investors.
“We’re also alarmed by how little this scheme has been communicated to landlords, since they now face significant fines for non-compliance, but half of them are unaware what they need to do. Although less than three months old, our research among both local authorities and active landlords confirms that the HMO licence scheme is already a confusing, chaotic mess.”
Other observations from the report include:
- Councils’ licence fees vary between one, three and five year deals
- The cost of the licence fee is not determined geographically
- Wandsworth proved to be the most complex licence depending on number of levels and occupied rooms
- Some local authorities have not finalised their requirements
