From HMOs to anti-social behaviour - here’s the regulation student landlords need to know
Even in the face of the COVID-19 crisis, the student rental market is growing. It’s a reliable market that offers landlords the best rental yields in the UK. But landlords who are considering student lettings need to do their homework.
The student market differs from the traditional private rented sector (PRS) market in a few important ways and there is regulation around HMOs that you need to comply with. Landlords who don’t fulfil their responsibilities as student landlords could face hefty fines. And those who don’t research the market and build the right relationships may struggle to fill their property or turn a profit.
In this post, we’ll discuss the legal, regulatory and tax implications of renting your property to student tenants. If you have any questions on anything below, feel free to drop us a message on Twitter or LinkedIn for more information.
Homes in multiple occupation
The majority of student accommodation is made up of houses in multiple occupation (HMOs).
The rules around what constitutes an HMO vary from council to council. As a general rule, if you’re renting to three or more tenants with shared facilities such as a bathroom and kitchen, that counts as an HMO. If a property houses more than five tenants and is over three storeys this qualifies as a ‘large HMO’. Landlords renting out large HMOs need to apply for a licence in order to do so.
Landlords with three or more tenants may also have to apply for a licence depending on where they live. You can use this handy GOV.UK portal to find out which rules apply in your area.
If you’re applying for your licence you will need to prove that the facilities provided are suitable for the number of tenants.
You will also need to provide gas and electrical safety certificates for all appliances and maintain smoke and carbon monoxide alarms throughout the property. As of 2018, you also need to provide bedrooms of a certain size: 6.51 metres square for single rooms and 10.22 for doubles.
Landlords who rent out an HMO without the proper licence could receive an ‘unlimited fine’. As we reported at the time, one landlord in Burnley received a £56,000 fine for not complying with HMO regulations, the largest fine ever handed out in the UK for that kind of offence.
While not specific to student lets, it’s also worth mentioning that all landlords need to obtain an Energy Performance Certificate (EPC) for their property. The certificate should be renewed every ten years and properties must achieve a grade of at least E in order to be fit to rent. This is likely to increase sooner than expected too, since the Department for Business, Energy and Industrial Strategy recently announced a consultation to increase the minimum standards further to a rating of ‘C’ by 2025.
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Tenants in full-time education and their landlords are exempt from paying council tax on rental properties. However, it is your responsibility to prove that all of your tenants are in full-time higher education. If you can’t or don’t prove that your tenants are exempt, you may be left responsible for the bill.
Codes of good practice
Lettings agents and landlords can choose to work directly with universities to find tenants. It’s in the university’s interest to help their students find quality accommodation, after all. Most universities will provide guidelines or codes of practice that landlords and agents need to adhere to in order to be recommended. The criteria will differ from uni to uni.
Surrey University, for instance, allows landlords to advertise properties on their website as long as they’re part of a recognised landlord accreditation scheme. Learn more about how they work with trusted local landlords.
It’s worth researching the universities in your area to see if they have similar schemes and, if so, how you can get involved. Working with universities in this way may end up cheaper than finding tenants through lettings agents.
Tenant fee ban
The tenant fee ban came into effect in June 2019 and while it affected all landlords, the new regulation was particularly hard on those operating HMOs. The upshot of HMOs is obvious – more tenants usually equates to greater yields. However, more tenants also means more admin.
In the past, this extra admin time could be offset against tenant fees, but this is no longer the case.
The ban meant that charges for references, administration, inventories and credit and immigration checks all became prohibited payments, essentially overnight. In the months since the ban kicked in, there has been significant pushback from landlords and letting agents. Letting agents in particular were understandably displeased with the ban, as they felt they were being accused of and punished for unscrupulous behaviour.
Many landlords chose to offset the lost fees by increasing rental rates. In a report issued by the letting agent trade body ARLA Propertymark, it was found that rental rates hit an all-time-high in June 2019, up 22 per cent from May.
That high was beaten again a year later in June 2020, with the Office for National Statistics (ONS) finding that the average monthly rent recorded between 1 April 2019 and 31 March 2020 was a record high of £700. There are, of course, several mitigating factors here but it can’t be denied that the tenant fee ban played a major role in this price hike.
Ultimately, the revenue lost as a result of the ban needed to come from somewhere and a year later, the market appeared to have adjusted accordingly, regardless of the implications of COVID-19. For student landlords letting HMOs, however, with the extra time and effort being spent on multiple tenants in shared properties, it’s a balancing act that remains a little more complicated. As a result, student landlords might need to pay more attention to financial planning when considering the tenant fee ban and its implications.
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A lot of UK universities will have anti-social behaviour policies for their students. These are in place to ensure that students are able to live alongside non-students and help both sides to resolve disputes should they occur.
When students are drawn into an anti-social behaviour dispute, their landlords may become involved as well. The most common anti-social behaviour complaints are due to noise, but can include refusal to empty bins, intruding on others’ property or privacy, and abusive behaviour.
Landlords need to exercise careful judgment in disputes between their tenants and their tenants’ neighbours. As property owners, they are obliged to make sure that the occupants of their property don’t distress members of the community. However, they also need to maintain a good relationship with their tenants. Rather than picking sides, landlords should try to facilitate the discussion and encourage both sides to reach a resolution.
If landlords do decide to take action against tenants because of persistent anti-social behaviour, they have a number of options.
They can contact the university or local council. They can serve their tenants a Section 21 (eviction) notice. Or, in extreme cases, they can contact the police. Mediation is often the best solution, though. The Property Redress Scheme offers a tenancy mediation service for landlords.
Buy to let landlords are having to adjust to a raft of new regulation, and greater regulation may well be introduced over the coming years, particularly as the coronavirus pandemic continues to reshape the world around itself.
Indeed, the hastily enacted regulations addressing the constantly evolving pandemic have introduced fresh layers of complexity to lease agreements between students and their landlords and this could get more complicated in the months to come.
It’s up to every landlord to stay up-to-date or they could end up facing severe penalties. It’s also important to keep up with the changing tastes of tenants and their evolving wants and needs. You can learn more about what today’s student renters want from their accommodation here.